Sector-by-Sector Breakdown

This 14.7 percent figure is an average across all sectors of the U.S. economy, and a more detailed look at the CPS data suggests that there are important variations from this across-the-board estimation. I calculated the average union wage premium in seven different industries defined by the Census Bureau that have traditionally had a strong union presence: construction, nondurable goods manufacturing, durable goods manufacturing, wholesale trade, retail trade, transportation and warehousing, and education and healthcare. According to the Bureau of Labor Statistics, these seven sectors comprised 47 percent of total private employment in December 2014. Graphic 1 below provides some of the businesses and jobs that would fall into these categories.

Graphic 1: Selected Businesses and Activities in Census Bureau Industry Codes

Graphic 1: Selected Businesses and Activities in Census Bureau Industry Codes - click to enlarge

Source: U.S. Census Bureau.

The findings from this sector-by-sector analysis produce a more nuanced view of the impact of unionization on average worker wages, according to government data. For instance, in two entire sectors — nondurable goods manufacturing and wholesale trade — the union wage premium is zero, or, technically, not statistically different from zero. This means that nonunion workers in these industries, on average, earn about the same as unionized workers. These industries comprise about 8 percent of the U.S. economy.

Although the union wage premium is not statistically different from zero in these industries based on 2014 government data, historical data show that a union wage premium used to exist. For example, the union wage premium in nondurable goods manufacturing declined significantly since 1985, falling from 14.5 percent in 1985 to 8.6 percent in 1990. It fell to not statistically different from zero in 1995 and largely remained that way until 2014. So in this sector, average nonunion wages have grown faster than union wages over time.

The pattern is roughly the same in the wholesale trade industry. Here the union wage premium was 19.2 percent and statistically significant in 1985. It then fell to 8.0 percent in 1990, became statistically insignificant in 1995, and averaged -2.0 percent from 2000 to 2014, but was never statistically significant. Again, as is the case in the nondurable goods manufacturing sector, these data suggest that in wholesale trade sector, average nonunion wages rose faster than average union wages over time.

In the durable goods manufacturing and retail trade industries, the union wage premium is below 10 percent. Based on the 2014 data, the average union wage premium was 9.4 percent in durable goods manufacturing, although the 15-year average from 2000-2014 was lower, at 6.8 percent. The wage premium in retail trade was just 4.9 percent, but the 15-year average was 10.0 percent.

A significant decline in the average union wage premium occurred in the retail trade sector, which includes workers in electronic, hardware, grocery and clothing stores. It was 39.8 percent in 1985, dropped to 24.4 percent in 1990, and then continued to fall to 17.5 percent in 1995. It continued falling steadily from then until 2014, where it was 4.9 percent. As is the case a few other industries, average union wages are growing more slowly than nonunion wages over time and this is causing the union wage premium to shrink significantly.

Meanwhile, the largest union wage premiums are in the construction, transportation and warehousing, and education and health care sectors. The construction sector maintains the largest measured union wage premium at 37.0 percent in 2014. However, this was down 21 percent from the 1985 figure of 47.0 percent (although it is up slightly from 2000). The transportation and warehousing sector’s union wage premium in 2014 was 27.3 percent, but this too has decreased since 1985, falling by 38 percent. Finally, the average union wage premium in the education and health sector was smaller than these other two sectors, but, unlike most all other sectors, it has actually risen slightly over time. It was 17.8 percent in 2014, up 25 percent from 1985. Over the last 15-year period, it remained between 17.8 and 15.0 percent each year.

Graphic 2 below shows the details from this regression analysis of 15 years’ worth of wage data, with snapshots of 1985, 1990 and 1995 included as well.

Graphic 2: Union Wage Premium by Sector, 1985-2014

Graphic 2: Union Wage Premium by Sector, 1985-2014 - click to enlarge

U.S. Census Bureau Current Population Survey. Asterisks indicate statistical significance at the 0.05 level.