Are labor unions good for workers and the economy?

Are Labor Unions Good for Workers and the Economy?

The research is substantial but the conclusions depend on who you ask and what you measure. Here's a balanced look at the evidence:

The Case For Unions

Higher wages for members. Research consistently finds a "union wage premium." Simple comparisons of the wages of union workers and nonunion workers find that union workers typically make about 20 percent more than nonunion workers, though when economists control for factors like age, education, and industry, the evidence points to a union wage premium of around 10 to 15 percent, with larger effects for longer-tenured workers. More specific recent data shows workers who join a union can expect to see a 10 percent increase in their weekly earnings, with the union wage premium highest for Hispanic workers (12.0 percent) and workers without a college degree (11.9 percent).

Benefits beyond wages. Unions raise wages of unionized workers by roughly 20% and raise compensation, including both wages and benefits, by about 28%, with the most sweeping advantage for unionized workers being in fringe benefits.

Spillover effects for non-union workers. One of the more compelling arguments is that unions raise standards industry-wide. When union density is high, nonunion workers benefit too, because unions effectively set broader standards—including higher wages—which nonunion employers must meet to attract and retain workers they need. Quantitatively, each 1 percentage point increase in private-sector union membership rates translates to about a 0.3 percent increase in nonunion wages.

Reducing inequality. About a third of the growth in the 90/50 wage gap and other key inequality measures can be explained by the decline of unions. Relatedly, from 1948 to 1979, worker productivity and compensation rose at roughly the same rate, but in the four decades after 1979, as union density fell, productivity has risen 3.9 times as fast as worker pay.

Productivity isn't necessarily hurt. Contrary to a common assumption, a broad study of the economics literature found a positive association of unions on productivity is established for the United States in general and for U.S. manufacturing in particular. Similarly, in the United States, unions generally have a positive impact on productivity, and this effect is particularly strong among manufacturing firms.

Macroeconomic growth argument. Some economists argue unions help overall growth because inequality harms overall economic growth by putting more money into the hands of the wealthy, who tend to save it, versus lower- and middle-income people, who are likely to spend it and thus spur the economy.

The Case Against / Caveats

Lower profits and possible job losses. Critics argue there's a real tradeoff. Economic research shows that union wage gains come from redistributing abnormal profits that firms earn from competitive advantages, as well as profits that stem from R&D and capital investments. Some analyses go further, arguing the balance of economic research shows that unions don't just happen to organize firms with more layoffs and less job growth—they cause job losses.

Mixed productivity evidence internationally. A global review found the picture isn't uniform: evidence is mixed—in Britain, union influence has reduced company productivity; in the US, unionization is associated with higher productivity in construction and education but made no difference in manufacturing; in developing countries, the effect is generally positive.

Lower profits can discourage investment. The evidence shows unionization is associated with lower profits because unions secure higher wages and benefits, and by reducing profitability, unions may discourage further investment as capital owners seek higher profits elsewhere.

Short-run vs. long-run tradeoffs. Some researchers argue that powerful labor unions have increased wages of unionized workers in the short run, but that has led to unemployment and reduced work opportunities in the long run. Conversely, when union power weakens, workers may see a short-run wage decrease while unemployment stays unchanged, but in the long run firms experience higher profits, leading to more competition, new firm entry, and lower unemployment with wages returning to initial levels.

Bottom Line

There's strong consensus that unions raise wages and benefits for their members and likely create modest spillover benefits for non-union workers, while also reducing wage inequality. Where economists disagree most is on:

In short, unions appear to reliably help their own members' pay and conditions, and the weight of evidence suggests meaningful spillover and equality benefits for the broader workforce — but their net effect on aggregate economic growth, profits, and employment remains genuinely contested among economists and tends to split along ideological lines.