New research shows that labor unions can help reduce the risk of poverty

labor union protest
Participants carry signs during a march and rally by labor union supporters in Los Angeles.

  • Belonging to a labor union lowers the likelihood that you’ll fall into poverty, new research shows.
  • Living in a state with higher unionization rates even if you’re not a member also helps.
  • Had union membership not declined since the 1970s, we could expect poverty rates to be lower today.
  • See more stories on Insider’s business page.

Belonging to a union or living in a US state where organized labor is relatively strong helps lower the likelihood that you’ll fall into poverty, according to our new research.

In a peer-reviewed study, we examined how unionization is correlated with poverty. We analyzed data on poverty and unionization rates from 1975 through 2015 using the Panel Study of Income Dynamics, which is widely considered to be the gold standard for tracking individuals over time. We used a variety of poverty measures in our analysis.

We found that households in which there was at least one union member had an average poverty rate of 5.9%, compared with 18.9% for nonunion households, based on a relative measure of poverty rather than an absolute measure, by which what it means to be poor is fixed over time.

Read more: I rage-quit my job of 6 years when a new employee was promoted over me. I don’t regret leaving in such an emotional way, but there are a few things I should’ve done differently.

We also wanted to examine the impact of living in a state with a higher rate of unionization to see whether this broadly affected the likelihood that someone would be in poverty compared with states with lower union membership. Using the same relative measure of poverty, we found that states with higher unionization rates had average poverty levels about 7% lower than states with lower unionization rates.

Our findings imply that a 5% decline in union membership translates, on average, into a 2% increase in the probability that a resident of the state will fall into poverty.

Why it matters

When policymakers and academics develop plans to address poverty, they rarely, to our knowledge, consider the impact of labor unions.

And yet research across social science disciplines show time and again that labor unions have been central to bolstering the American middle class by raising wages and expanding access to fringe benefits.

Thus, it is logical, though rarely discussed, that unions would also reduce the risk that people become impoverished.

Our study also helps explain why the United States has a relatively high rate of poverty18% as of 2017 – compared with other rich democracies. France and the Norway, for example, boast poverty rates in the single digits as well as higher rates of union membership.

Our results suggest that had union membership not declined dramatically since the 1970s, we could reasonably expect poverty rates would be significantly lower.

What’s next

We intend to conduct additional research, both within the United States and among other countries, to better understand the mechanisms linking unionization to poverty.

More broadly, the biggest open question is whether US labor unions can expand their membership again and provide these types of protections against adverse economic forces.

Tom VanHeuvelen, assistant professor of sociology, University of Minnesota and David Brady, professor of public policy, University of California, Riverside

The Conversation
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60% of millennials earning over $100,000 say they’re living paycheck to paycheck

wealthy millennial
High-earning millennials are stretching their paychecks.

High-earning millennials are feeling broke.

Sixty percent of millennials raking in over $100,000 a year say they’re living paycheck to paycheck, according to a new survey by PYMNTS and lending company LendingClub which analyzed economic data and census-balanced surveys of over 28,000 Americans.

It found that the more than half (54%) Americans are living paycheck to paycheck. And nearly 40% of high-earners – those making more than $100,000 annually – say they live that way.

That means high-earning millennials aren’t the only ones feeling stretched thin, but they feel that way more than their six-figure making peers. Living on constrained budgets may therefore have less to do with income and more to do with expenses, the report says.

That’s partly due to lifestyle choices. Many of these millennials are likely HENRYs – short for high earner, not rich yet. The acronym that was invented back in 2003, but has come to characterize a certain group of 30-something six-figure earners who struggle to balance their spending and savings habits.

HENRYs typically fall victim to lifestyle creep, when one increases their standard of living to match a rise in discretionary income. They prefer a comfortable and often expensive lifestyle that leaves them living paycheck to paycheck.

Read more: Here’s why so many millennials making 6-figure salaries still feel broke

A $100,000 salary isn’t what it was

The economy is also a huge factor behind six-figure-earning millennials feel so broke.

As the report reads, “Living paycheck to paycheck sometimes carries connotations of barely scraping by and of poverty. The reality of a paycheck-to-paycheck lifestyle in the United States today is much more complex, and the current economic environment has made it even more complicated.”

It cited the example of a college-educated 35-year-old earning more than $100,000 while juggling a mortgage, student-loan debt, and a child, which could leave them with little savings for big purchases or unexpected emergencies.

The generation is facing an affordability crisis. Income increases simply have not kept up with an exponential increase in living costs, and the pandemic hasn’t helped matters by throwing job loss and pay cuts into the mix.

The cost of education has also more than doubled since the 1970s, leaving many millennials racked with student debt. Priya Malani, the founder of Stash Wealth, a financial firm that works with HENRYs, previously told Insider that 40% of her clients had student loans – they owe $80,000 on average.

As a byproduct of this increased cost in living, the middle class has been shrinking. Pew Research Center defines the US middle class as people earning two-thirds to twice the median household income, earning about $48,500 to $145,500 in 2018, per most recent data available.

That means a six-figure salary is no longer what it used to be. In today’s economy, $100,000 is considered middle class in the US.

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Even during the pandemic, the very high net worth population grew – and it could add a million more by 2025

woman atm credit card
  • A new Wealth-X report looks at very high net worth individuals, worth between $5 million and $30 million.
  • Their ranks still grew slightly in 2020, even during a global pandemic and economic turmoil.
  • The report estimates their ranks could grow even more by 2025, and add over $11 trillion in wealth.
  • See more stories on Insider’s business page.

A new report from Wealth-X found that, even during a pandemic, the very high net worth (VHNW) population grew.

Wealth-X defines the VHNW as those with a net worth between $5 million and $30 million. The report, called Very High Net Worth Handbook 2021, looks at where they are, who they are, and how big their ranks have grown.

In 2020, their global population increased “slightly,” by 1.3%, to around 2.7 million people. In 2019, by contrast, the population saw 10% growth.

“This was a sharp slowdown from double-digit growth a year earlier, and masked large regional differences, but was a resilient performance set against the backdrop of a global pandemic, national lockdowns, international travel bans, trade disruption and the deepest contraction in world economic output for a generation,” the report said.

Their total wealth also saw a similar increase, increasing by 1.2% to a total of $26.8 trillion.

Meanwhile, their global billionaire peers tacked on an additional $4 trillion to their wealth during the pandemic. That was a 54% increase for the world’s 2,365 billionaires, bringing their cumulative wealth to $12.39 trillion – a little under half of the VHNW’s cumulative wealthy.

But the VHNW class may be in for more growth than their smaller showing in 2020. The Wealth-X report anticipates that they’ll add around 1.2 million members, for a total population of 3.8 million. Wealth-X also predicts that their wealth will increase by $11.4 trillion to $38.2 trillion.

Those in the global middle class did not fare as well. A recent report from the Pew Research Center – which classifies the middle class as those who earn about $14,600 to $29,200 a year (or live on $10 to $20 a day) – found that 54 million fell out of the global middle class.

While the number of VHNW individuals grew, so did another group: A January report from Oxfam estimated between 200 million to 500 million people may have fallen into poverty during 2020.

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54 million people fell out of the global middle class last year as the K-shaped recovery went international

Brooklyn food pantry coronavirus
People line up outside a food pantry in Brooklyn on Nov. 12, 2020.

  • Roughly 54 million people fell out of the global middle class during the pandemic recession, Pew data shows.
  • About 152 million people sank into the lower-income class or into poverty, reversing years of improvement.
  • Poorer economies saw the biggest losses, adding to the global recovery’s K-shaped trend.
  • See more stories on Insider’s business page.

As economies turn toward reopening and recovery, the coronavirus’ economic toll is coming into focus. The picture is incredibly bleak.

The distribution of COVID-19 vaccines presents a clear end to the pandemic, but new data from the Pew Research Center suggests that returning to pre-pandemic unemployment levels is only the first step toward a full rebound. The firm estimates that 54 million more people fell out of the global middle class in 2020 than would have had the pandemic not emerged.

The classification includes people who live on $10 to $20 a day, or those who earn roughly $14,600 to $29,200 a year. That spread straddles the US poverty line and is well below median earnings in advanced economies.

That decline would’ve been larger had China, which is home to more than one-third of the world’s middle class, not avoided a recession, Rakesh Kochhar, senior researcher at Pew, said. Still, growth in that country has slowed significantly as it faces obstacles to vaccinating its huge population.

Separately, about 152 million people fell from the global upper and middle class into the lower class and poverty. Pew’s definition of global poverty encompasses those living on less than $2 a day, or earning less than $2,920 a year for a family of four.

Like other aspects of the economic downturn, the pandemic’s negative effects have driven an uneven, K-shaped recovery. Middle-class dropouts were most concentrated in South Asia, East Asia, and the Pacific, as those regions saw growth in that cohort stall well before the pandemic hit. The increase in those classified as “poor” was primarily seen in India and Sub-Saharan Africa, reversing years of progress and plunging the regions into new economic pain, Kochhar said.

The regional disparities reflect observations made by the International Monetary Fund in its latest economic projections. The organization expects emerging-market and low-income economies to “suffer more significant medium-term losses,” as they lack the fiscal firepower to power a stronger recovery. Countries with large dependencies on the tourism industry also risk prolonged downturns, the IMF said.

“Recoveries are diverging dangerously across and within countries,” wrote Gita Gopinath, chief economist for the IMF.

At the same time, data collected by Bloomberg show wealthier countries vaccinating 25 times faster than the world’s poorest nations. Advanced economies snapped up doses throughout the fall, creating a shortage that further inflames the recovery’s K-shaped trend.

To be sure, the pandemic only exacerbated trends seen for many years. Most of the world’s population landed in either the low-income or poor groups before the health crisis, while high-earners made up the smallest group. Yet the virus’s damage to service jobs, which are primarily staffed by minorities, low-earners, and women, widened the gaps.

That’s not to say progress can’t be made. The global middle-class population grew by 54 million people annually on average from 2011 to 2019. The pandemic only erased a year of gains at that pace.

Poverty, however, jumped by 131 million people in 2020 after falling at an average annual rate of 49 million people, according to Pew. The setback signals that, at the pre-pandemic pace of improvement, it will still take years to rebound.

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