Labor unions remain a crucial institutional safeguard against rising income inequality in the United States, despite declining membership rates across states.

Data & Methods: Analysis of state-level data over three decades reveals that higher union density consistently correlates with lower within-market and post-transfer inequality. Effects demonstrate robustness to controls for state policies, demographics, economic conditions, and varying developmental levels.

Key Findings: States with stronger unions maintain more equitable distributions despite overall national trends toward less unionization. The persistence of this relationship underscores labor's enduring political influence on income distribution.

This finding carries significant implications for our understanding of how democratic institutions function in contemporary welfare states.