Bargaining for Higher Wages Can Curb Income Inequality in Mountain State
On Friday, we co-released a report with the Center on Budget and Policy Priorities and the Economic Policy Institute on the rise of income inequality in West Virginia. Most striking in the report was the average drop in incomes among the bottom 20 percent of West Virginia households since the late 1970s. While the wealthiest 20 percent of households in the state have seen their incomes rise by over 60 percent - or from $83,936 to $134,464 in 2009 dollars - from the late 1970s to the mid-2000s, lower income households in the bottom 20 percent have witnessed a decline in real income growth of over 7 percent - from $17,163 to $15,917.
Looking at more recent trends reveals a lost decade for West Virginia's low income households. From the late 1990s to the mid-2000s, the top 20 percent and middle 20 percent of households witnessed modest real income growth of 9.2 percent and 8.8 percent, respectively, while low-income households saw a decline of nearly 12 percent.
As noted in the report, one of the causes of rising inequality has been the growth in wage inequality. As we noted in this year's State of Working West Virginia, over the last 30 years real wages at the top have grown substantially while those in the middle and bottom have seen no net wage growth. One reason for the lack of wage growth has been the declining share of workers in unions. For example, in 1977 nearly a third of all salary and wage workers in West Virginia were covered by a union contract compared to just 15 percent in 2011. The drop in union coverage is due to several factors, including the decline in manufacturing and coal mining, the shift toward a service-based economy, advances in technology, capital flight, the share of the workforce made up of women, and most importantly policies that have made it harder to unionize.
As we noted in a previous blog post, there are many tools at our disposal to help mitigate the growth in income inequality in the U.S. and in West Virginia. One of the most important steps we can take, however, would be to ensure that low-income workers can join unions and bargain collectively with employers to raise their wages. This is especially important in a state like West Virginia that has a disproportionally high share of low-wage jobs than traps many of our residents in poverty.