Are labor unions good for workers and the economy?

Leans yesSays it is contestedSources conflict

The Treasury report presents unions as boosting workers and the economy, while the Heritage Foundation piece argues unions reduce jobs, investment and hurt consumers.

I'll search recent evidence on how unions affect workers and the broader economy.

Labor unions have mixed but generally positive effects for workers, and more debated effects for the overall economy. Research points to clear trade-offs:

1. Effects for Workers - Generally Positive

Most economic research finds unions raise compensation and working conditions for members, with spillover effects for non-members:

•Higher wages: The U.S. Treasury Department's 2023 report "Labor Unions and the Middle Class" found unions raise the wages of their members by 10 to 15 percent. Similarly, the Joint Economic Committee found unionized workers earn 10.2% more than their non-union peers, while also raising wages and benefits for all workers in their industry.

•Bureau of Labor Statistics data for 2024 shows among full-time wage and salary workers, nonunion workers had usual median weekly earnings that were 85 percent of earnings for workers who were union members ($1,138 compared with $1,337). In the private sector, nonunion workers had median weekly earnings that were 90 percent of union members' earnings ($1,131 versus $1,258).

•Recent wage growth has been strong for union members: Wages of private sector union workers rose 6.3% in the year ended in March, the largest increase in data back to 2001.

•Better benefits and working conditions: Unions also improve fringe benefits and workplace procedures such as retirement plans, workplace grievance policies, and predictable scheduling. These workplace improvements contribute substantially to middle-class financial stability and worker well-being.

•Reduced inequality: Unions lift wages, reduce inequality, and shape how work is organized, among other effects. By encouraging egalitarian wage practices, unions serve to reduce race and gender wage gaps. By boosting wages industry-wide, narrowing the gender and racial wage gaps and improving job quality, unions generate benefits that are economy wide.

•The "Union Effect" report shows clear evidence that unions raise workers' wages and benefits, and reduce the use of public assistance, benefiting both the states economy and worker well-being.

Polling reflects this perception: At least half of Americans believe that labor unions increase workers' wages (67%), job security (63%), negotiation power (63%), and job satisfaction (51%).

Spillover benefits are also documented:

•Competition means workers at nonunionized firms see increased wages too. Research shows their benefits can extend beyond individual organizations, boosting sectors and even the economy by reducing staff turnover, providing or promoting training and encouraging innovation.

2. Effects for the Economy - Positive Arguments

Proponents argue unions contribute to broader economic health:

•Unions increase the bargaining power of labour, which enables workers to negotiate a larger slice of the economic pie. In addition, coordinated wage bargaining can impede cost competition strategies and encourage productivity enhancing measures, thereby pushing the economy towards a high wage and high productivity equilibrium.

•They also generate more disposable income and consumer spending: Trade unions help create a more equal and prosperous society. A prosperous society is the basis of strong consumption in an economy and this helps to drive economic growth. Higher wages mean that the workers pay more income tax to the government, which can be used to further fund public and merit goods.

•The Treasury report argues that in addition to supporting the middle class, unions contribute to economic growth and resilience. They do so in part simply by reducing overall inequality. Income inequality often feeds back into inequality of opportunity, which impedes growth if disadvantaged people cannot access the resources necessary to acquire job skills or start businesses.

•And unions can boost businesses' productivity by improving working environments and by giving experienced workers more of an input into decisions that design better and more cost-effective workplace procedures. Other reviews conclude We conclude that unions do not, overall, reduce productivity, though it varies according to specific circumstances, while noting Unionisation does make businesses less profitable for the owners. But importantly, it also reduces income inequality.

3. Negative / Mixed Effects for the Economy

Critics and some economic studies emphasize costs:

•Labor cartel view: Heritage Foundation and other economists argue Unions function as labor cartels, restricting the number of workers in a company or industry to drive up the remaining workers' wages and Unions benefit their members but hurt consumers generally, and especially workers who are denied job opportunities.

•Jobs and investment: Unions decrease the number of jobs available in the economy. The vast majority of manufacturing jobs lost over the past three decades have been among union members. Economists consistently find that unions decrease the number of jobs available in the economy.

•Over time, unions destroy jobs in the companies they organize and have the same effect on business investment as does a 33 percentage point corporate income tax increase.

•Research summarized by the Fraser Institute indicates that unions tend to increase wages but not productivity, reduce profitability, reduce investment in physical capital and R&D, and, most importantly, lower the rate of employment growth.

•On balance, critics argue: Some unions win higher wages for their members, though many do not. But with these higher wages, unions bring less investment, fewer jobs, higher prices, and smaller 401(k) plans for everyone else.

•Related trade-offs include: Potential higher labor costs for employers, Distortions in the labor market, and that around half of Americans say unions increase the cost of goods and services (47%).

•Economic research finds that unions benefit their members, but hurt consumers generally, and especially workers who are denied job opportunities, partly because Companies pass on those higher wages to consumers through higher prices, and often they also earn lower profits.

Bottom Line

•For workers — especially members: The evidence is strong that unions raise wages (10-15% premium), improve benefits, job security, safety, and grievance procedures, and reduce racial and gender pay gaps, with spillover wage gains in non-union firms in the same industry.

•For the economy as a whole: The effect is more contested. Supporters point to reduced inequality, higher consumer spending, lower turnover, training, and potentially higher productivity and more resilient growth. Critics point to lower profits, reduced business investment and R&D, higher consumer prices, and slower employment growth in unionized firms or industries, and argue unions retard economic growth and delay recovery from recession.

Whether unions are "good" therefore depends on the timeframe and perspective: they tend to be good for the well-being and bargaining power of workers in unionized workplaces (and often for workers in the same labor market), but they can create costs for employers, non-union job seekers, consumers, and investment that economists weigh differently.

1.[Full text of

Press Releases of the United States Department of the Treasury :
FACT SHEET: Treasury Department Releases First-Of-Its-Kind Report on Benefits of Unions to the U.S. Economy

FRASER	St. Louis Fed](https://fraser.stlouisfed.org/title/press-releases-united-states-department-treasury-6111/fact-sheet-treasury-department-releases-first-kind-report-benefits-unions-us-economy-647242/fulltext)

Citations (3)

1stlouisfed.orgGovernment
Full text of Press Releases of the United States Department of the Treasury : FACT SHEET: Treasury Department Releases First-Of-Its-Kind Report on Benefits of Unions to the U.S. Economy | FRASER | St. Louis Fed
Backs: “Most economic research finds unions raise compensation and working conditions for members, with spillover effects for non-members: Higher wages: The U.S. Treasury Department's 2023 report "Labor Unions and the Middle Class" found unions raise the wages of their members by 10 to 15 percent.”
evidence, official document, points to yes. Claim: Treasury's 2023 report found unions raise members' wages by 10 to 15 percent and contribute to economic growth and resilience.
2bls.govGovernment
Weekly earnings of nonunion workers were 85 percent of union members’ earnings in 2024 : The Economics Daily : U.S. Bureau of Labor Statistics
Backs: “Similarly, the Joint Economic Committee found unionized workers earn 10.2% more than their non-union peers, while also raising wages and benefits for all workers in their industry. Bureau of Labor Statistics data for 2024 shows among full-time wage and salary workers, nonunion workers had usual median weekly earnings…”
statistic, data page, points to yes. Claim: 2024 BLS data: nonunion workers' median weekly earnings were 85% of union members' ($1,138 vs $1,337); private sector 90%.
3wabteccorp.comCompanies
6/20/24, 11:44 AM What Unions Do: How Labor Unions Affect Jobs and the Economy \| The Heritage Foundation
Backs: “Negative / Mixed Effects for the Economy. Critics and some economic studies emphasize costs: Labor cartel view: Heritage Foundation and other economists argue Unions function as labor cartels, restricting the number of workers in a company or industry to drive up the remaining workers' wages and Unions benefit their…”
attribution, article, points to no. Claim: Heritage Foundation and other economists argue unions function as labor cartels, restricting workers and hurting consumers and jobs.