How Does Wage Inequality Affect the Labor Movement?

This paper provides the first causal evidence on how occupational wage inequality affects the labor movement, using three complementary research designs: a vignette experiment with union organizers, an information intervention during the 2023 Writers Guild of America strike, and a natural experiment following a Wisconsin reform that increased wage inequality among public school teachers. Across all studies, we find that occupational inequality undermines union strength, through multiple channels. First, workers with high individual bargaining power are more likely to withdraw support in unequal environments, preferring individual over collective bargaining. Second, union organizers strategically respond to inequality in ways that may preserve membership but limit redistribution. For instance, they shift away from campaigning on wages and choose smaller, more homogeneous bargaining units. Taken together, our findings highlight the potential for “inequality traps”, where rising inequality erodes the very institutions designed to counteract it.