Are labor unions good for workers and the economy?

Is a union premium worth it? I'll pull the latest research on how unions affect your pay, your workplace, and the broader economy.

Labor unions have mixed effects - strong benefits for members and some broader economy benefits, but also costs that can harm competitiveness, employment growth and prices. Research generally agrees on the following trade-offs:

1. Benefits for Workers

Higher wages and the "union premium":
Economists and the U.S. Treasury Department find that unions raise the wages of their members by 10 to 15 percent compared to similar nonunion workers. A similar summary finds labor unions raise wages for their members by roughly 10 to 15 percent compared to similar nonunion workers.

Raw Bureau of Labor Statistics data from 2025 shows the gap in raw numbers: union members earned median weekly wages of $1,404 compared to $1,174 for nonunion workers, though that figure does not adjust for occupation or region. Only about 10 percent of U.S. wage and salary workers belonged to a union in 2025.

Other studies find larger effects for lower-paid workers:

Better benefits and working conditions:
Unions also improve fringe benefits and workplace procedures such as retirement plans, workplace grievance policies, and predictable scheduling. CEPR and other sources note greater access to health insurance and pensions, paid sick leave, and more predictable hours. The Treasury fact sheet notes one study estimated the average worker values their ability to avoid short-notice schedule changes at up to 20 percent of their wages.

Reduced inequality:
By encouraging egalitarian wage practices, unions serve to reduce race and gender wage gaps.

More detailed estimates:

Standardized pay scales also tie compensation to job classification or seniority rather than individual negotiation, which compresses wages within firms.

Job security and turnover:
Most union contracts require "just cause" for termination, meaning an employer has to show a legitimate, documented reason before firing someone. This leads to longer tenure.

Lower turnover is one of the clearest productivity gains in unionized workplaces. Replacing a departed employee costs anywhere from half to double that worker's annual salary. Union workers quit less often because of grievance procedures and protections against arbitrary termination.

2. Spillover Effects Beyond Members

The Treasury Department's 2023 report — its most comprehensive ever look at the role that labor unions play in the American economy — found that unionization also has spillover effects that extend well beyond union workers.

Economists describe two mechanisms:

Research covering 1980 through 2010 found declining unionization accounted for roughly a third of the overall drop in average hourly wages, and about two-thirds of that decline came from weakened spillover pressure on nonunion employers.

Other spillovers cited include heightened workplace safety norms that can pull up whole industries, and heightened civic engagement, reducing staff turnover, providing training and encouraging innovation.

3. Benefits for the Broader Economy

Proponents and the Treasury report argue unions contribute to economic growth and resilience:

The Treasury report, released August 28, 2023 by the Office of Economic Policy, concluded that unions play an important role in addressing longstanding challenges faced by the middle class – including stagnant wages, high housing costs, and reduced intergenerational mobility. It found unions contribute to a more robust and resilient economy.

4. Costs and Downsides for the Economy

Critics and a separate body of economic research emphasize costs:

Labor cartel model:
Unions function as labor cartels. A labor cartel restricts the number of workers in a company or industry to drive up the remaining workers' wages, just as the Organization of Petroleum Exporting Countries (OPEC) attempts to cut the supply of oil to raise its price. Companies pass on those higher wages to consumers through higher prices, and often they also earn lower profits.

A broad survey of academic studies shows that while unions can sometimes achieve benefits for their members, they harm the overall economy.

Reduced investment, productivity and employment growth:

Flexibility and efficiency:
Union contracts typically base pay and promotions on seniority or detailed union job classifications and rarely allow pay based on individual performance, making firms less flexible and less competitive. Some studies find unions reduce the effectiveness of some managerial practices and that a poor labor-management relations climate also reduces productivity.

The traditional view is that labor unions have a negative impact on productivity and efficiency and drive an artificial wedge between the wages of comparable labor in the union and nonunion sectors.

Effects vary by competition and industry:
Unions in competitive markets have little power to raise wages because companies cannot raise prices without losing customers. Some research finds unions in construction and manufacturing tend to boost productivity, while the picture in service industries is more mixed.

Evidence on right-to-work laws illustrates the trade-off: Research consistently finds that right-to-work states have lower union density, and workers in those states earn less on average, with estimates ranging from roughly 2 to 8 percent lower wages after controlling for other factors, while supporters point to job growth and business relocation.

Bottom Line

Whether unions are "good" for the economy therefore depends on what is prioritized: broadly shared wage gains, equality, and stability versus maximal aggregate GDP growth, price competitiveness, and labor-market flexibility. Most modern economic assessments conclude unions are good for unionized workers and reduce inequality, but have both positive and negative effects on overall economic performance depending on industry, time period, and market conditions.