December 2018

Racial and ethnic disparities in wealth in the United States are enormous. In 2016, the median non-Hispanic white household held over $150,000 more net worth than the median non-Hispanic black household and the median Hispanic household.

But the gaps are much smaller among young adults, who tend to have little wealth regardless of race or ethnicity. To understand how today’s middle-aged black, Hispanic, and white adults achieved widely divergent wealth levels, we need to look to the past, as these households either built their nest eggs or faced barriers to accumulating wealth.

In a recent study, we examine how individuals entering adulthood in the United States around 1980 accumulated wealth through their 20s, 30s, and 40s. We find that about half of the accumulation gap can be explained by a legacy of disadvantage for blacks and Hispanics, while the rest of the accumulation gap is created fresh in the current generation.

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In the labor movement’s heyday during the 1950s, about one-third of American workers in the private sector belonged to a union. By the late 1970s, that fraction had fallen to roughly 1 in 5. Today, about 1 in 20 private sector workers belong to a union.

This level of unionization places the U.S. near the bottom among advanced democracies. In France, Sweden, and Denmark, over 80 percent of the total workforce is covered by union-negotiated agreements. Over half of the German workforce is covered, and Canada’s coverage rate is roughly double that of the U.S.

Because unions garner generally higher wages for their members – roughly 10 to 25 percent higher than for non-union members – their erosion has meant that workers who may have once belonged to one miss out on this premium.

Strong unions boost the wages of workers who don’t belong to one, too.

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