Balancing the union debate — I'll gather recent research on what they mean for workers and the broader economy.
Labor unions have both benefits and costs for workers and the economy, and research finds the net effect depends on industry, employer market power, and union-management relations.
Benefits for Workers
Trade unions are organisations representing the interests of workers formed to counter-balance the monopsony power of employers and seek higher wages, better working conditions and a fairer share of the company's profits.
•Higher wages and benefits: Industries with trade unions tend to have higher wages than non-unionised industries. Trade unions can pursue collective bargaining giving workers a greater influence in negotiating a fairer pay settlement.
•The U.S. Treasury Department report found unions raise the wages of their members by 10 to 15 percent, improve fringe benefits such as retirement plans and improve workplace grievance policies and scheduling
•A Joint Economic Committee brief found unionized workers earn 10.2% more than their non-union peers, while also raising wages and benefits for all workers in their industry
•Other research found labor unions raise average wages by 8% nationally
•Workers represented by unions get higher wages, and are also more likely to enjoy benefits like paid sick days, paid holidays, and paid vacation than their non-union counterparts
•Reduced inequality and discrimination: Unions encourage egalitarian wage practices and reduce racial and gender wage gaps and contribute to economic growth and resilience by reducing income inequality. Unionization increases wages by 17.3% for Black workers and 23.1% for Latino workers. Historically, from the late 1890s to 1980s, the UK saw a growth in trade union membership. This was also a period of falling inequality and a reduction in relative poverty.
•Spillover benefits: Unionization has spillover effects that extend beyond union workers through heightened civic engagement and workplace safety norms. Unionization boosts wages for workers industry-wide, even if their workplaces are not unionized. Nonunion employers in highly unionized industries, for example, often raise the wages they pay to avert organizing efforts.
•Worker protections and productivity: Trades Unions can also protect workers from exploitation, and help to uphold health and safety legislation and create a formal dispute resolution process for workers. The efficiency wage theory states that higher wages can also lead to increased productivity. If workers feel they are getting a higher wage, they can feel more loyalty towards the firm. Trades unions can help to negotiate and implement new working practices which help to increase productivity. Research has also found benefits can extend beyond individual organizations, boosting sectors and even the economy by reducing staff turnover, providing or promoting training and encouraging innovation.
Costs and Disadvantages for Workers and the Economy
•Higher labor costs and reduced competitiveness: On the negative side, unions can lower the hours that employers demanded of their employees due to higher wages, limits the growth in the labor supply and can increase labor costs that lead to employer becoming less competitive, such as by requiring pensions. The evidence shows unionisation is associated with lower profits, because unions secure higher wages and benefits for their members.
•Employment and output effects: If labour markets are competitive, and trade unions are successful in pushing for higher wages, it can cause disequilibrium unemployment. Also finds that unions reduce employment between 3 percent and 6 percent at companies that organize relative to those in which workers vote down the union. One statistical review concluded that labor unions have reduced U.S. output by significant amounts -- trillions of dollars over time. Additionally, the employment-population ratio and the unemployment rate have been adversely affected by the presence of unions. Another think-tank study finds that the decline in union membership has led to an additional $115 billion in economic growth.
•Strikes, productivity and flexibility: Critics argue unions can be disruptive to firms, discouraging investment and improved working practices. Furthermore, powerful unions can lead to macroeconomic problems such as wage inflation and lost productivity due to strike action. If unions go on strike and work unproductively it can lead to lost sales and output. Unions in competitive markets can cause higher labor costs, reduced profitability, market rigidity, disruptions from strikes, and decreased innovation and productivity. Other listed disadvantages include increased inefficiencies, decline in competitive advantage for American companies, potential decrease in productivity and that unions can make it harder to fast-track promotions for high-performing workers and/or get rid of low-performing ones and workers are required to pay union dues/fees that some might rather not pay.
•Inflation and investment: If unions become too powerful they can bargain for higher wages above the rate of inflation. If this occurs it may contribute to wage-inflation. Powerful trades unions were a significant cause of the UK's inflation rate of 25% in 1975. By reducing the profitability of an investment, unions may discourage further investment as owners of capital seek higher profits elsewhere. It is also argued that if unions are very powerful and disruptive, it can discourage firms from investing and creating employment.
Are Unions Net Good?
Academic assessments are mixed:
•The Treasury and Joint Economic Committee emphasize that unions play an important role in addressing longstanding challenges faced by the middle class – including stagnant wages and supporting workers' right to organize is a key way to help boost wages and support quality jobs.
•The Harvard meta-review concluded the evidence base rejects the neoclassical economics view that unions are invariably harmful to productivity or its growth.
•Conservative analyses argue no economic theory posits that cartels improve economic efficiency. Nor has reality ever shown them to do so. Union cartels retard economic growth and delay recovery.
Economics Help summarizes the evaluation: The benefits of trades unions also depend on their circumstances. If they face a monopsony employer they can help counterbalance the employers market power. In this case, they can increase wages without causing unemployment. If unions become too powerful and they force wages to be too high, then they may cause unemployment and inflation. It also depends very much on the nature of the relationship between trade unions and employers. If relations are good and constructive, the union can be a partner with the firm in maintaining a successful business, which helps protect jobs and higher wages.
In short, for individual workers - especially low- and middle-wage, blue-collar, Black, Latino and women workers - union membership is consistently associated with higher pay, better benefits, greater job security and safer conditions. For the broader economy, unions can reduce inequality and set wage norms that lift non-union pay, but can also raise costs, reduce profits and investment, and create unemployment or inflation if wage demands exceed productivity growth or if relations become confrontational and strike-prone.