Janet Yellen Argues Unions Help Reduce Income Inequality

Treasury Secretary Janet Yellen said Monday that labor unions serve as a pillar of the U.S. middle class and argued for making it easier for employees to bargain collectively to improve their pay and working conditions.

Yellen made her remarks as the Treasury Department released a new report analyzing the economic contributions of unions and making the case for a “reinvigorated labor movement.” The share of workers belonging to unions has been declining for decades — a fact the agency says has held wages down and made the economy less equal.

“These findings challenge arguments that unions hold back growth,” Yellen, a former chair of the Federal Reserve, told reporters. “Unions can contribute to reversing the stark increase in inequality we’ve seen in recent decades, promoting economy-wide growth.” 

She said the report was Treasury’s “first major effort to lay out the rationale for why we think this is so important.”

The report found that union workers earn wages that are 10% to 15% higher than non-union workers performing the same jobs, and are more likely to enjoy benefits like a retirement plan and subsidized child care. Yellen said the findings showed that unionization has a “spillover effect” in which workers at non-union firms see their wages go up as the firms compete in hiring. 

“Our research also finds that unions fuel equality,” Yellen said. “Today’s unions benefit all demographic groups and reduce race and gender wage gaps.”

Treasury Secretary Janet Yellen said unions could be
Treasury Secretary Janet Yellen said unions could be

Treasury Secretary Janet Yellen said unions could be "fuel equality" in the country's economy.

The Treasury report endorsed a number of pro-union proposals pushed by the Biden administration, including the Protecting the Right to Organize, or PRO, Act, a grab bag of labor law reforms that would remove barriers to forming unions. The legislation has stalled in Congress and stands virtually no chance of passing while Republicans control the House.

Vice President Kamala Harris, who heads up a White House task force on promoting collective bargaining, said the report was the first of its kind by the Treasury Department. She said the research “reinforces what President Biden and I always knew to be true: union workers make our middle class and our entire economy [stronger].”

Collective bargaining still has a robust role in U.S. government jobs, but union membership has fallen to a rate of just 6% in the private sector — down from more than 30% in the years following World War II. Although there are several reasons for the decline, research has shown that employers have grown more hostile to collective bargaining in recent decades.

Unions can contribute to reversing the stark increase in inequality we’ve seen in recent decades.Treasury Secretary Janet Yellen

The Treasury report argues that a more robust labor movement could “reverse some of the negative trends faced by the middle class since the 1970s: stagnating wages, deteriorated retirement preparedness, and decreased leisure time.”

The last couple of years have seen a surge in new organizing as workers at companies like Starbucks, Trader Joe’s and Apple seek to form new unions. 

The National Labor Relations Board has reported an increase in the number of union election petitions filed by workers compared to before the pandemic, though it’s still too early to say whether the boost in organizing will lead to lasting gains for the labor movement. 

Biden has cast himself as the “most pro-union” president in the office’s history, and the White House used the Treasury report to highlight some of his union-friendly moves. That includes reshaping the labor board with progressive appointees to support more organizing and crack down on illegal union-busting.

On Friday, the board released perhaps its most consequential decision of the Biden era, creating a new standard for when an employer must recognize and bargain with a union. NLRB members said it should remove some of the incentive for employers to use illegal tactics when resisting a union drive.