Are labor unions good for workers and the economy?
Heritage and Mercatus say unions cut jobs, investment and growth, while EPI, Treasury, CAP and WorkRise say unions raise wages, reduce inequality and help productivity and the economy.
This is a genuinely contested question in economics, with credible research and advocacy on multiple sides. Here's a balanced summary of the evidence:
Where research broadly agrees
Unions raise wages for their members. On average, a worker covered by a union contract earns 12.8% more in wages than a peer in a nonunionized workplace in the same industry with a similar education, occupation, and level of experience, according to EPI's analysis of BLS data. Other estimates put the raw premium even higher: simple comparisons of the wages of union workers and nonunion workers find that union workers typically make about 20 percent more than nonunion workers.
Unions reduce inequality. Most importantly, from a societal point of view, unions reduce pay inequalities—they increase the relative pay of lower skilled workers, and help to establish pay norms that extend beyond unionised companies. Research by Bruce Western and Jake Rosenfeld found the decline of unions from 1973 to 2007 explains up to one-third of rising wage inequality among men and one-fifth of rising wage inequality among women.
The productivity effect is mostly neutral-to-positive. In the most comprehensive review of the literature — a survey of over 300 studies by Harvard economist Richard Freeman and colleagues — the global evidence from more than 300 studies on the economic impact of unionisation shows unions do not, overall, reduce productivity, though it varies according to specific circumstances. Separate research finds in the United States, unions generally have a positive impact on productivity, and this effect is particularly strong among manufacturing firms, partly because they are avenues for workers to express wage and benefit preferences, but they can also allow employees to notify managers about inefficiencies within company policies and the production process.
Unions cut into profits. Even researchers sympathetic to unions acknowledge unionisation does make businesses less profitable for the owners, since higher wages come at the expense of the surplus otherwise captured by shareholders.
Non-wage benefits are real. There is strong evidence that unions improve both fringe benefits and non-wage features of the workplace... unions have had a large hand in improving work environments on many dimensions and, in doing so, raise the wellbeing of workers and their families.
Where researchers disagree sharply
Employment effects. Critics argue unions act like cartels that price some workers out of jobs. The Heritage Foundation contends unions function as labor cartels, restricting the number of workers in a company or industry to drive up the remaining workers' wages... they benefit their members but hurt consumers generally, and especially workers who are denied job opportunities... unions decrease the number of jobs available in the economy. NBER research on international data supports part of this concern, finding that more union involvement in wage setting significantly decreases the employment rate of young and older individuals relative to the prime-aged group.
On the other side, defenders argue this cartel framing is outdated. Heritage's own analysis notes that the economy has become more competitive over the past generation... consequently, unions do not negotiate higher wages for many newly organized workers... these days, unions win higher wages for employees only at companies with competitive advantages — suggesting the "cartel tax" story may apply less broadly than it once did.
Investment and growth. The Heritage Foundation argues unions tax investments by negotiating higher wages, thus lowering profits — unionized companies respond to this union tax by reducing investment, making unionized companies less competitive. A more recent Mercatus Center review reaches a similar conclusion about powerful unions specifically, citing the Rust Belt as a cautionary case: unions, while boosting wages in the short term, inflicted long-term economic damage — bloated labor costs and relentless strikes strangled productivity and investment, prompting manufacturers to flee... leaving workers worse off and communities struggling to recover. That paper's authors trace 55 percent of the decline in the Rust Belt's share of US manufacturing employment to union-related conflict.
Pro-union economists counter that these harms are avoidable design flaws, not inherent to unions: while stronger union power can bring long-term drawbacks... these effects are often tied to union models built around exclusive representation and limited competition rather than to collective bargaining itself.
Macroeconomic/political-economy case. The U.S. Treasury Department has argued the broader macro story favors unions: over the last half century, middle-class households have experienced stagnating wages, rising income volatility, and reduced intergenerational mobility, even as the economy as a whole has prospered... pro-union policy can make a real difference to middle-class households by raising their incomes, improving their work environments, and boosting their job satisfaction — in doing so, unions can help to make the economy more equitable and robust.
Bottom line
There's fairly strong consensus that unions raise wages and benefits for their own members and reduce wage inequality, without clearly hurting (and sometimes helping) firm-level productivity. The genuine debate is over second-order effects: whether those gains come partly at the expense of non-union workers' job opportunities, and whether strong, monopoly-style union power can drag down investment and long-run growth in specific industries (the Rust Belt being the classic contested case). Economists on the left (EPI, CAP, Treasury under the Biden administration) tend to emphasize the equality and middle-class benefits; economists on the right and some industry-focused analysts (Heritage, Mercatus) emphasize job losses and competitiveness costs from concentrated union power. Most serious empirical reviews land somewhere in between — unions are neither a costless win for the economy nor a pure economic drag, and outcomes depend heavily on industry, country, and how union bargaining power is structured.
Citations (22)
- Unions aren’t just good for workers—they also benefit communities and democracy
Source excerpt: “On average, a worker covered by a union contract earns 12.8% more in wages than a peer in a nonunionized workplace in the same industry with a similar...”
statistic, article, points to yes. Claim: Union-covered workers earn 12.8% more than comparable nonunion peers, per EPI analysis of BLS data.
- Labor Unions and the U.S. Economy | U.S. Department of the Treasury
Source excerpt: “While simple comparisons of the wages of union workers and nonunion workers find that union workers typically make about 20 percent more than nonunion...”
statistic, article, points to yes. Claim: Simple comparisons find union workers typically make about 20 percent more than nonunion workers.
- Unions do hurt profits, but not productivity, and they remain a bulwark against a widening wealth gap
Source excerpt: “Most importantly, from a societal point of view, unions reduce pay inequalities. They increase the relative pay of lower skilled workers. ”
evidence, article, points to yes. Claim: Unions reduce pay inequalities by raising the relative pay of lower-skilled workers.
- Unions do hurt profits, but not productivity, and they remain a bulwark against a widening wealth gap
Source excerpt: “They help to establish pay norms that extend beyond unionised companies. ”
evidence, article, points to yes. Claim: Unions help establish pay norms that extend beyond unionised companies.
- 4 Ways Unions Make Our Economy and Democracy Stronger - Center for American Progress
Source excerpt: “As Bruce Western of Harvard University and Jake Rosenfeld of the University of Washington found when looking at the effect of union density on rising ...”
statistic, article, points to yes. Claim: Western and Rosenfeld found union decline explains up to one-third of rising male wage inequality and one-fifth of female.
- Unions do hurt profits, but not productivity, and they remain a bulwark against a widening wealth gap
Source excerpt: “The global evidence from more than 300 studies on the economic impact of unionisation shows unions do not, overall, reduce productivity. ”
evidence, article, points to yes. Claim: Evidence from over 300 studies shows unions do not, overall, reduce productivity.
- Unions do hurt profits, but not productivity, and they remain a bulwark against a widening wealth gap
Source excerpt: “... To answer this question, my colleagues Richard Freeman and Patrice Laroche and I surveyed the global evidence from more than 300 studies on the ec...”
attribution, article, neutral. Claim: Survey of 300+ studies conducted by Richard Freeman, Patrice Laroche and colleagues.
- How Unions Can Increase Firm Productivity and Strengthen Economic Growth | WorkRise
Source excerpt: “In the United States, unions generally have a positive impact on productivity, and this effect is particularly strong among manufacturing firms. ”
evidence, article, points to yes. Claim: In the US unions generally have a positive productivity impact, especially among manufacturing firms.
- How Unions Can Increase Firm Productivity and Strengthen Economic Growth | WorkRise
Source excerpt: “Often, they are avenues for workers to express wage and benefit preferences. But they can also allow employees to notify managers about inefficiencies...”
evidence, article, points to yes. Claim: Unions let workers express preferences and notify managers about inefficiencies, aiding productivity.
- Unions do hurt profits, but not productivity, and they remain a bulwark against a widening wealth gap
Source excerpt: “Unionisation does make businesses less profitable for the owners. ”
evidence, article, points to no. Claim: Unionisation makes businesses less profitable for owners.
- Labor Unions and the U.S. Economy | U.S. Department of the Treasury
Source excerpt: “There is strong evidence that unions improve both fringe benefits and non-wage features of the workplace. ”
evidence, article, points to yes. Claim: Strong evidence that unions improve fringe benefits and non-wage workplace features.
- Labor Unions and the U.S. Economy | U.S. Department of the Treasury
Source excerpt: “While these simple comparisons reflect correlations only, studies that use more robust empirical approaches find the same: unions have had a large han...”
evidence, article, points to yes. Claim: Unions have improved work environments on many dimensions and raised worker and family wellbeing.
- What Unions Do: How Labor Unions Affect Jobs and the Economy | The Heritage Foundation
Source excerpt: “Unions function as labor cartels, restricting the number of workers in a company or industry to drive up the remaining workers' wages. ”
attribution, article, points to no. Claim: Heritage contends unions function as labor cartels restricting workers to raise wages for the remainder.
- What Unions Do: How Labor Unions Affect Jobs and the Economy | The Heritage Foundation
Source excerpt: “Unions benefit their members but hurt consumers generally, and especially workers who are denied job opportunities. Unions decrease the number of jobs...”
attribution, article, points to no. Claim: Heritage argues unions hurt consumers and job-seekers and decrease the number of jobs.
- Whose Employment is Affected by Unions? | NBER
Source excerpt: “The researchers find that, for both men and women, more union involvement in wage setting significantly decreases the employment rate of young and old...”
evidence, article, points to no. Claim: NBER finds more union wage-setting involvement lowers employment of young and older individuals relative to prime-aged.
- What Unions Do: How Labor Unions Affect Jobs and the Economy | The Heritage Foundation
Source excerpt: “The economy has become more competitive over the past generation. Companies have less power to pass price increases on to consumers without going out ...”
evidence, article, points to yes. Claim: Heritage notes a more competitive economy means unions win higher wages only at firms with competitive advantages.
- What Unions Do: How Labor Unions Affect Jobs and the Economy | The Heritage Foundation
Source excerpt: “Unions effectively tax these investments by negotiating higher wages for their members, thus lowering profits. Unionized companies respond to this uni...”
attribution, article, points to no. Claim: Heritage argues unions tax investment via higher wages, leading unionized firms to invest less.
- Do More Powerful Unions Generate Better Pro-Worker Outcomes? | Mercatus Center
Source excerpt: “It serves as a cautionary tale: Unions, while boosting wages in the short term, inflicted long-term economic damage. Bloated labor costs and relentles...”
attribution, article, points to no. Claim: Mercatus cites the Rust Belt as showing unions inflicted long-term economic damage despite short-term wage gains.
- Do More Powerful Unions Generate Better Pro-Worker Outcomes? | Mercatus Center
Source excerpt: “A once-thriving industrial heartland hollowed out, leaving workers worse off and communities struggling to recover. ”
evidence, article, points to no. Claim: Rust Belt industrial heartland hollowed out, leaving workers worse off and communities struggling.
- Do More Powerful Unions Generate Better Pro-Worker Outcomes? | Mercatus Center
Source excerpt: “We also look at an in-depth case study of the Rust Belt that illustrates how unions wielding monopoly privileges and fueling strikes and conflicts wer...”
statistic, article, points to no. Claim: Authors attribute 55 percent of Rust Belt manufacturing employment share decline to union-related conflict.
- Do More Powerful Unions Generate Better Pro-Worker Outcomes? | Mercatus Center
Source excerpt: “While stronger union power can bring long-term drawbacks—such as reduced economic efficiency, lower firm output, and decreased employment—these effect...”
evidence, article, neutral. Claim: Harms of strong unions are tied to exclusive representation and limited competition rather than collective bargaining itself.
- Labor Unions and the U.S. Economy | U.S. Department of the Treasury
Source excerpt: “Over the last half century, middle-class households have experienced stagnating wages, rising income volatility, and reduced intergenerational mobilit...”
attribution, article, points to yes. Claim: Treasury argues pro-union policy can raise middle-class incomes and make the economy more equitable and robust.