Are labor unions good for workers and the economy?
Heritage and Mercatus say unions retard growth and can reduce productivity, while EPI, CAP, TCF and The Conversation say unions do not reduce productivity and help growth and equality.
This is a genuinely contested question in economics, with substantial evidence on both sides. Here's a balanced summary of what the research shows:
The Case For Unions
Higher wages for members. The core, most well-established finding is the "union wage premium." According to a Treasury Department report, unions raise the wages of their members by 10 to 15 percent. Recent Bureau of Labor Statistics data confirm this: after controlling for factors such as race, gender, age, occupation, and education, among others, the union wage premium for all workers is 10 percent. This premium is often largest for groups that otherwise face pay gaps—the union wage premium is highest for Hispanic workers (12.0 percent) and workers without a college degree (11.9 percent).
Better benefits and working conditions. Beyond wages, unions improve fringe benefits and workplace procedures such as retirement plans, workplace grievance policies, and predictable scheduling, and these workplace improvements contribute substantially to middle-class financial stability and worker well-being.
Reduced inequality and spillover effects. Unions' influence extends beyond their own membership. Research comparing states finds that states with higher union density have consistently better outcomes for working people across measures like inflation-adjusted wages, retirement plan access, the productivity-pay gap, household income, and unemployment insurance recipiency. Notably, in high-union-density states, 2023 median household income was on average more than $12,000 higher than in low-union-density states.
Productivity effects are largely neutral-to-positive, not negative. This is one of the more surprising findings in labor economics. A landmark analysis by Harvard economist Richard Freeman and colleagues surveyed more than 300 studies on the economic impact of unionisation and found unions do not, overall, reduce productivity. In fact, Freeman and his coauthors found that in the United States, unionization appears to be associated with higher productivity in the education and construction sectors specifically.
Macroeconomic growth arguments. Some economists argue unions help address demand-side weaknesses in the economy. By raising wages and reducing income inequality, unions also spur the nation's economic growth, and research has shown that the decline of unions over the past few decades may have contributed to slower economic growth.
The Case Against (or Cautions)
Lower corporate profits, higher prices. It's well documented that unionization often hurts corporate profitability by forcing companies to share more of their revenues with their workers in the form of increased wages and benefits. Critics argue this cost gets passed on: companies pass on those higher wages to consumers through higher prices, and often they also earn lower profits.
The "labor cartel" critique. More free-market-oriented economists (e.g., at the Heritage Foundation) argue unions function as labor cartels, restricting the number of workers in a company or industry to drive up the remaining workers' wages, and contend they retard economic growth and delay recovery from recession.
Potential trade-offs when unions are very powerful. A more nuanced recent view suggests union benefits aren't automatic or unlimited. Research from the Mercatus Center argues that while powerful unions with monopolistic characteristics can achieve significant gains at the bargaining table, these victories often come with trade-offs that can negatively impact unionized workers and the economy. This paper points to specific 2024 examples, noting the International Longshoremen Association's demands for a "total ban of automation," which it warned could "cripple the economy", as an example of how unions pressing for reduced work intensity can diminish overall productivity.
Job losses in specific sectors. Critics also point out that the vast majority of manufacturing jobs lost over the past three decades have been among union members, though correlation vs. causation is heavily disputed here (globalization and automation are major confounding factors).
Bottom Line
The empirical consensus among mainstream labor economists leans toward: unions reliably raise wages and improve benefits/working conditions for their members, generally don't harm (and sometimes help) productivity, and correlate with lower income inequality — but they can reduce corporate profits and, when wielding significant market power, can create genuine trade-offs (e.g., resisting productivity-enhancing automation). The debate over their aggregate macroeconomic effect is more ideologically contested than the wage-premium finding, with free-market economists emphasizing cartel-like inefficiencies and progressive economists emphasizing demand-boosting and inequality-reducing effects.
Citations (17)
- Press Releases
Source excerpt: “Unions raise the wages of their members by 10 to 15 percent. ”
statistic, official document, points to yes. Claim: Treasury report says unions raise members' wages by 10 to 15 percent.
- 4 Ways Unions Make Our Economy and Democracy Stronger - Center for American Progress
Source excerpt: “After controlling for factors such as race, gender, age, occupation, and education, among others, the union wage premium for all workers is 10 percent...”
statistic, article, points to yes. Claim: After controls, BLS data show a 10 percent union wage premium for all workers.
- 4 Ways Unions Make Our Economy and Democracy Stronger - Center for American Progress
Source excerpt: “The union wage premium is highest for Hispanic workers (12.0 percent) and workers without a college degree (11.9 percent), meaning union membership ca...”
statistic, article, points to yes. Claim: Union wage premium is highest for Hispanic workers (12.0 percent) and workers without a college degree (11.9 percent).
- Press Releases
Source excerpt: “Unions also improve fringe benefits and workplace procedures such as retirement plans, workplace grievance policies, and predictable scheduling. These...”
evidence, official document, points to yes. Claim: Unions improve fringe benefits and workplace procedures like retirement plans, grievance policies, and predictable scheduling.
- Unions aren’t just good for workers—they also benefit communities and democracy
Source excerpt: “We look at the relationship between union density and a wide variety of indicators related to economic security and stability including inflation-adju...”
evidence, article, points to yes. Claim: States with higher union density have better outcomes for working people across multiple measures.
- Unions aren’t just good for workers—they also benefit communities and democracy
Source excerpt: “In high-union-density states, 2023 median household income was on average more than $12,000 higher than in low-union-density states. ”
statistic, article, points to yes. Claim: In high-union-density states, 2023 median household income was over $12,000 higher than in low-density states.
- 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: Survey of more than 300 studies found unions do not, overall, reduce productivity.
- How Unions Work for the Economy
Source excerpt: “Freeman and his coauthors found that in the United States, unionization appears to be associated with higher productivity in the education and constru...”
attribution, article, points to yes. Claim: Freeman and coauthors found unionization associated with higher productivity in US education and construction.
- How Unions Work for the Economy
Source excerpt: “By raising wages and reducing income inequality, unions also spur the nation’s economic growth. In fact, research has shown that the decline of unions...”
evidence, article, points to yes. Claim: Unions raise wages, reduce inequality and spur growth; union decline may have contributed to slower growth.
- How Unions Work for the Economy
Source excerpt: “(Studies have found, however, that unionization often hurts corporate profitability by forcing companies to share more of their revenues with their wo...”
evidence, article, points to no. Claim: Unionization often hurts corporate profitability by forcing companies to share more revenue with workers.
- What Unions Do: How Labor Unions Affect Jobs and the Economy | The Heritage Foundation
Source excerpt: “Companies pass on those higher wages to consumers through higher prices, and often they also earn lower profits. ”
attribution, article, points to no. Claim: Companies pass higher union wages to consumers through higher prices and often earn lower profits.
- 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 argues unions function as labor cartels restricting workers to drive up remaining workers' wages.
- What Unions Do: How Labor Unions Affect Jobs and the Economy | The Heritage Foundation
Source excerpt: “They also retard economic growth and delay recovery from recession. ”
attribution, article, points to no. Claim: Heritage contends unions retard economic growth and delay recovery from recession.
- Do More Powerful Unions Generate Better Pro-Worker Outcomes? | Mercatus Center
Source excerpt: “Research shows that while powerful unions with monopolistic characteristics can achieve significant gains at the bargaining table, these victories oft...”
attribution, article, points to no. Claim: Mercatus argues powerful monopolistic unions gain at the bargaining table but with trade-offs hurting workers and the economy.
- Do More Powerful Unions Generate Better Pro-Worker Outcomes? | Mercatus Center
Source excerpt: “In 2024 the International Longshoremen Association (ILA), the only labor union controlling all major 36 ports on the East and Gulf Coasts, made demand...”
evidence, article, points to no. Claim: 2024 ILA demands for a total ban on automation illustrate union power trade-offs.
- Do More Powerful Unions Generate Better Pro-Worker Outcomes? | Mercatus Center
Source excerpt: “Labor unions often press for reduced work intensity, which necessitates employing more workers but can also diminish overall productivity.”
evidence, article, points to no. Claim: Unions pressing for reduced work intensity can diminish overall productivity.
- What Unions Do: How Labor Unions Affect Jobs and the Economy | The Heritage Foundation
Source excerpt: “The vast majority of manufacturing jobs lost over the past three decades have been among union members. ”
evidence, article, points to no. Claim: Most manufacturing jobs lost over three decades were among union members, though causation is disputed.