Are labor unions good for workers and the economy?

Leans yesSays it is contestedSources conflict

The Treasury sources conclude unions raise wages, reduce inequality and support growth, while the Heritage report argues unions act as cartels that cut jobs, investment and competitiveness.

Exploring whether unions help workers and the economy — I'll gather the latest evidence on wages, benefits, and broader impacts.

Labor unions have both benefits and costs, and economic research is divided on net effect - though recent government and academic work emphasizes positive effects for workers and for reducing inequality.

For Workers: Largely Positive

Most research finds unions improve wages, benefits and working conditions for members:

•Wage premium: While simple comparisons show union workers make about 20 percent more than nonunion workers, more rigorous approaches that control for worker characteristics or compare workplaces that barely passed vs. barely failed union elections point to a union wage premium of around 10 to 15 percent. Other estimates find:

•13.6 percent overall (17.3 percent for men and 9.1 percent for women)

•Treasury fact sheet summary: Unions raise the wages of their members by 10 to 15 percent

•Comparisons holding age, gender, education constant typically find roughly 15 percent more, and 20-25 percent after correcting for data errors

•Benefits and work environment: Unions also improve fringe benefits and workplace procedures such as retirement plans, workplace grievance policies, and predictable scheduling. Studies find the average worker values avoiding short-notice schedule changes at up to 20 percent of their wages, and Treasury notes strong evidence that unions improve both fringe benefits and non-wage features.

•Reduced inequality and discrimination: Unions promote within-firm equality by adopting anti-discrimination measures and egalitarian wage practices like single-rate or automatic progression structures. Empirical studies have confirmed unions have reduced race and gender gaps. The Treasury notes union membership is now roughly equal across men and women, with Black men at 13 percent union representation vs 10 percent population average in 2021, and that benefits would be felt across the population due to diverse demographics.

•Public perception: Most Americans believe unions increase workers' wages (67%), job security (63%), negotiation power (63%), and job satisfaction (51%). As of recent Pew surveys, 55% of U.S. adults say labor unions have a positive effect on the way things are going in the country.

The decline in union membership is seen as economically important because unions lift wages, reduce inequality, and shape how work is organized. Government data show union membership has fallen from 20.1% in 1983 to 11.9% in 2010, and Treasury shows union membership peaked at one-third of workforce in 1950s while inequality was near lowest, then declined as inequality rose after the 1970s.

For the Economy: Mixed Evidence

Arguments that unions help the economy

•Spillover effects: Nonunionized firms in competition with unionized workplaces may raise wages to attract workers. Each 1 percentage point increase in private-sector union membership translates to about a 0.3 percent increase in nonunion wages, larger for workers without a college degree. Treasury summarizes: Competition means workers at nonunionized firms see increased wages too.

•Equity, growth and resilience: By raising middle-class incomes and reducing inequality, unions can alleviate borrowing constraints, allowing workers to start businesses and build human capital, reducing financial fragility and economic volatility. The fact sheet concludes: unions contribute to economic growth and resilience in part simply by reducing overall inequality.

•Productivity and civic engagement: Treasury argues unions can have a positive effect on productivity through employee engagement and voice effects, and can boost businesses' productivity by improving working environments and giving experienced workers input into workplace procedures. Union members also vote, donate and volunteer at higher rates.

The Treasury report concludes the evidence challenges the view that worker empowerment holds back economic prosperity.

Arguments that unions hurt competitiveness and growth

•Labor cartel view: Heritage Foundation and other critics argue unions function as labor cartels that restrict labor supply to drive up wages, as OPEC cuts oil supply to raise prices. They function like any other cartel and have the same effects, raising wages at the cost of lower profits and fewer jobs, causing businesses to invest less.

•Higher costs, fewer jobs, less investment: Unions effectively tax investments by negotiating higher wages, lowering profits, causing unionized companies to reduce investment and become less competitive. Economists consistently find that unions decrease the number of jobs available in the economy, and unions benefit members but hurt consumers generally through higher prices.

•Competitiveness: This view is reflected in public opinion and research that labor unions are seen as good for workers, not U.S. competitiveness. Other analyses note unions raise employers’ labor costs and make them less competitive, hastening outsourcing overseas, and that institutional contexts can amplify negative impact on employment, productivity, and investments. Management literature notes unions can result in lower employee turnover but can increase labor costs that lead to employer becoming less competitive, and some studies conclude unions may be responsible for slower work process and reduced productivity.

Some empirical work even finds that forming a union does not raise workers' wages when comparing plants where organizing drives barely succeeded vs. barely failed, because in competitive markets companies cannot raise prices without losing customers.

Bottom Line

•For individual workers who are members, evidence strongly shows higher wages, better benefits (paid sick leave, retirement, health), more predictable scheduling, greater job security, and reduced race/gender gaps.

•For non-members and the broader economy, effects are more debated:

•Positive channel: Higher wages via threat effects, reduced inequality, more stable middle-class spending and civic engagement.

•Negative channel: Higher prices for consumers, reduced profits and investment, fewer jobs in unionized firms/industries, and less flexibility to adapt.

Whether the net effect is positive often depends on the industry, the level of competition, how unions bargain (firm-level vs. centralized), and whether productivity gains from voice and lower turnover outweigh monopoly costs.

Citations (3)

1treasury.govGovernment
Labor Unions and the U.S. Economy
Backs: “Labor unions have both benefits and costs, and economic research is divided on net effect - though recent government and academic work emphasizes positive effects for workers and for reducing inequality. For Workers: Largely Positive. Most research finds unions improve wages, benefits and working conditions for…”
evidence, article, points to yes. Claim: Most research finds unions improve wages, benefits and working conditions for members.
2treasury.govGovernment
FACT SHEET: Treasury Department Releases First-Of-Its-Kind Report on Benefits of Unions to the U.S. Economy
Backs: “barely failed union elections point to a union wage premium of around 10 to 15 percent. Other estimates find: 13.6 percent overall (17.3 percent for men and 9.1 percent for women)”
statistic, official document, points to yes. Claim: Union wage premium estimates of 13.6 percent overall, and Treasury's summary that unions raise members' wages by 10 to 15 percent.
3heritage.orgNonprofits and think tanks
What Unions Do: How Labor Unions Affect Jobs and the Economy
Backs: “13.6 percent overall (17.3 percent for men and 9.1 percent for women). Treasury fact sheet summary: Unions raise the wages of their members by 10 to 15 percent. Comparisons holding age, gender, education constant typically find roughly 15 percent more, and 20-25 percent after correcting for data errors”
attribution, official document, points to no. Claim: Heritage Foundation and other critics argue unions act as labor cartels that raise wages at the cost of fewer jobs and less investment.