Unions' impact on workers and the economy is debated — I'll survey the latest research to weigh both sides.
Labor unions have both benefits and costs for workers and for the economy as a whole, and research is mixed on net effects.
For Workers: Generally Positive on Wages, Benefits and Conditions
The most cited benefit is a wage premium. Simple comparisons find union workers typically make about 20 percent more than nonunion workers, while more rigorous analyses that control for worker characteristics or use regression discontinuity find a causal union wage premium of around 10 to 15 percent, with larger effects for longer-tenured workers. Other estimates report:
•Unionized workers earn 10.2% more than their non-union peers, while also raising wages industry-wide
•On average, unionization raises service sector workers' wages by over 10% – about $2.00 per hour
•For Black workers wage increase is 17.3% and for Latino workers 23.1%
Unions are also associated with better benefits and working conditions:
•Unions are associated with higher productivity, lower employee turnover, improved workplace communication, and a better-trained workforce
•Data from the Bureau of Labor Statistics show that 85 percent of unionized workers have access to paid sick leave, while only 62 percent of non-union workers have access
•There is strong evidence that unions improve both fringe benefits and non-wage features of the workplace, including retirement plans, workplace grievance policies and predictable scheduling
•Workers now enjoy better pay, more reasonable hours, safer working conditions, health benefits, and assistance for retirement or injury thanks to the efforts of labour unions
Research also emphasizes spillover and equality effects:
•Each 1 percentage point increase in private-sector union membership rates translates to about a 0.3 percent increase in nonunion wages
•Unions promote within-firm equality by adopting explicit anti-discrimination measures and egalitarian wage-setting practices, and have been found to have closed race and gender gaps within firms
•Unions can improve well-being in ways such as raising wages, improving work environments, and promoting demographic equality
Potential downsides for workers include:
•Union dues and fees can be a financial burden, particularly for low-wage earners
•In a competitive labour market, trade unions pushing wages above the equilibrium point can lead to unemployment
•Unions can bargain for higher wages without lowering employment in some models, but unsuccessful negotiation may end up in workers' strikes
•On the negative side, unions can lower the hours that employers demanded, limit the growth in the labor supply, restrict non-union workers from depressing the wage rate, and create walkouts or strikes that shut down production
For the Economy: Debated
Arguments that unions help the economy:
The U.S. Treasury Department's 2023 report "Labor Unions and the Middle Class" concluded that unions serve to strengthen the middle class and grow the economy at large, addressing challenges of stagnating wages, rising income volatility, and reduced intergenerational mobility.
Treasury argued increased financial stability to those in the middle or bottom of the income distribution could allow workers to start businesses, build human capital, and exploit investment opportunities, and reducing inequality can promote economic resilience, and that "All in all, the evidence... challenges the view that worker empowerment holds back economic prosperity".
Other pro-union economic arguments:
•Unions contribute to economic stability by ensuring fair wages and working conditions, which can boost consumer spending and stimulate economic growth, and promote worker training and education which can enhance productivity
•According to a study by the International Monetary Fund (IMF), labor unions can promote economic growth by improving productivity through better working conditions and training and advocating for policies that support economic development
•Stable labor relations reduce disruptions and uncertainty, encouraging investment, while unions contribute by advocating for fair wages (increasing consumer spending)
•Unions can have a positive effect on productivity through employee engagement and union voice effects, for example patient outcomes improved in hospitals where registered nurses unionized
Arguments that unions hurt economic growth or competitiveness:
•One of the primary concerns is the potential for increased labor costs. Unionized workers often have higher wages and benefits compared to their non-unionized counterparts, which can increase operating expenses for businesses. This can make it difficult for businesses to compete in the marketplace, especially in industries with tight profit margins
•Another potential drawback is the potential for labor disputes and strikes. When negotiations break down, it can lead to work stoppages that disrupt business operations and negatively impact productivity. These disruptions can be costly for businesses, both in terms of lost revenue and potential damage to reputation
•Unions can increase wages which leads to inflation
•Opponents argue unions can stifle economic growth by increasing labor costs and hindering business flexibility, contending they can lead to job losses and reduced investment
•Lower profitability among unionized firms is well established
•An American Action Forum study found the long-term decline in union membership has had a positive impact on the economy, including greater economic growth, faster job creation, and greater earnings, leading to an additional $115 billion in economic growth, 393,189 jobs and $35.1 billion in additional total wage earnings
•Research on productivity is mixed: meta-analysis concluded unions have no effect on productivity in manufacturing in the United States, a moderate negative effect in the United Kingdom, a moderate positive effect in developing countries, and a small positive effect in Italy and France
Conclusion
For individual members, evidence strongly shows unions are good for workers in terms of higher pay, better benefits, greater job security and improved safety and voice. Effects on non-members can also be positive through spillovers.
For the economy, the effect depends on how it is measured:
•If the goal is reduced inequality, higher middle-class incomes, more stable consumer demand, and better working standards, Treasury and other research finds unions beneficial.
•If the goal is maximizing firm flexibility, minimizing labor costs and maximizing short-term profitability and job creation, some studies find union decline associated with growth.
Most balanced assessments conclude labor unions have a mix of advantages and disadvantages for employees, employers, and society, and effectiveness depends on the specific industry, the bargaining power of both unions and employers, and the overall economic climate