In Barack Obama’s recent Netflix documentary series about American jobs, viewers are introduced to Elba, a housekeeper at the Pierre Hotel in New York. Elba discusses the challenges of her job, such as back pain and dealing with misbehaving guests. She is portrayed as a symbol of the difficult service-industry work in today’s economy.
When Elba reveals her income, it surprises the audience. She earns approximately $4,000 per month, which is around $50,000 per year. While it may be modest, this income allows for a middle-class lifestyle, especially when combined with her husband Francisco’s earnings from his job in the hotel’s cafeteria.
Elba feels secure when it comes to money because she can rely on her paycheck. However, many other service workers earn far less. Full-time Starbucks baristas in New York City often make less than $35,000 a year, and many Walmart employees make even less. The median household income in New York City is about $75,000, which is lower than what Elba and Francisco earn.
So, why are they able to earn a living wage while so many other Americans cannot? The main reason is that Elba belongs to a labor union.
Unions play a smaller role in the American economy today, representing only 6% of private-sector workers. However, being a union member allows workers to earn significantly more than their non-unionized counterparts. According to data from the federal government, unionized workers earn 10% to 20% more than similar non-unionized workers.
When workers are not part of a union, employers have more leverage over them. They can easily outsource jobs or hold down wages to maximize profits. Economic theory suggests that market forces should determine fair wages, but reality shows that similar workers often earn different wages, and union status plays a major role in this disparity.
A detailed study conducted by economists from Columbia and Princeton found that the wage difference between unionized and non-unionized workers is largely due to unions shifting money from stock returns and top incomes into wages. This reduction in economic inequality benefits workers by giving them bargaining power during negotiations. Employers find it harder to reject the requests of a united group of workers.
It’s important to note that unions may occasionally demand wages or working conditions that are unsustainable for a company. However, these situations are the exception rather than the norm. In most cases, unions empower workers to negotiate fair pay and improve working conditions.
The decline of unions is a significant factor contributing to the rise of income inequality over the past few decades. As this chart shows, the share of workers belonging to a union has declined while the share of income going to high earners has increased.
This brings us back to Elba and her story. I wanted to share her tale because it connects to recent news in Southern California. Over 15,000 hotel workers from the same union Elba belongs to—Unite Here—voted to authorize a strike. These workers, including housekeepers and cafeteria staff, currently earn $20 to $25 per hour, which they argue is insufficient to afford housing. They demand an immediate $5 raise and annual raises in subsequent years, along with improved health coverage and pensions.
The hotels have countered with a smaller initial raise and smaller annual raises. The largest hotel in Los Angeles, the Westin Bonaventure Hotel & Suites, has already settled with its Unite workers, providing wage increases and pension improvements.
Unite officials anticipate that workers from other hotels may go on strike again soon. The July 4 strike already made history as the largest in the U.S. hotel industry in 50 years.
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