Are labor unions good for workers and the economy?

This question spans wages, jobs, and growth — I'll pull recent evidence on how unions affect workers and the economy.

Labor unions have both significant benefits and significant costs for workers and the economy. Research is extensive but generally finds a trade-off:

Benefits for Workers

1. Higher wages and benefits
Empirical research suggests unions raise wages of members by 10 to 15 percent. Data for 2025 shows median weekly wages of $1,404 for union members compared to $1,174 for nonunion workers, though when controlling for occupation, industry, firm size and region the premium is typically 10% to 15%. Similarly, unionized workers earn on average 11.2% more than similarly situated nonunion workers in the same industry.

Unions also improve fringe benefits and workplace procedures such as retirement plans, workplace grievance policies, and predictable scheduling.

The gap in benefits is large:

2. Reduced inequality
Unions benefit all demographic groups. By encouraging egalitarian wage practices, unions serve to reduce race and gender wage gaps.

For example, research has found women in union jobs earn roughly 94 cents for every dollar earned by unionized men, compared to 78 cents on the dollar for nonunion women relative to nonunion men.

Little empirical work has been done on inequality, but studies indicate unions tend to reduce inequality among wage earners, with declines in private-sector unionization accounting for as much as a fifth of the rise in male wage inequality.

3. Spillover effects to non-union workers
The positive effects are not only experienced by workers at unionized establishments. Other workers see increases in wages and improved work practices as their nonunionized workplaces compete with unionized ones for labor.

4. Voice, turnover, and safety
Economists describe a "voice effect": employees can resolve disputes through formal grievance procedures instead of quitting, which reduces expensive turnover. Some research indicates unions improve productivity by providing training, reducing turnover and improving labor-management communication, though other studies find a negative effect — about two-thirds show improvement and one-third show negatives.

Unions also push safety provisions. A study of Canadian construction firms found unionized companies had 25% fewer lost-time injury claims than nonunion counterparts.

Benefits for the Broader Economy

Proponents argue unions strengthen the economy by raising worker pay and cycling that money back into local spending, tax revenue, and long-term stability.

The U.S. Department of the Treasury's 2023 report summarized: middle-class workers reap substantial benefits, and unions raise wages, improve benefits, and also raise wages and practices in nonunion workplaces competing for labor, contributing to more stable housing and investment in education.

Costs and Criticisms

1. Higher labor costs, prices, and inflation
Unions can lead to higher labor costs for employers, which may result in fewer jobs or increased prices for consumers. When unions negotiate higher wages and benefits, businesses may respond by raising prices for goods and services, which can contribute to inflation.

Standard economic theory notes that a union slicing the pie to labor's advantage by constraining the labor market distorts factor costs and creates market inefficiencies that ultimately harm resource allocation, and most economists say the ability to raise wages above competitive levels has a net negative impact on society.

Other drawbacks cited include:

2. Employment effects
Although unions improve compensation for members, they tend to limit the number of jobs in an economy, either by enforcing constraints on entry or by pressuring employers to raise wages, which persuades employers to hire fewer workers.

Studies in Australia, Canada, Britain and the U.S. have estimated employment growth in union firms is 2 percent to 4 percent lower than in nonunion companies. Even studies showing productivity increases find higher wage costs exceed productivity increases, so profits fall.

If labor markets are competitive, higher wages will cause unemployment as producers cannot afford more workers, leading to layoffs.

3. Strikes and rigidity
Strikes — and all union-imposed monopoly prices for labor — are contrary to the public interest according to critics: if lost, they leave loss of production and income; if won, they lead to redistribution from non-union to union members without increasing income of workers as a whole.

Frequent strikes can disrupt operations, reduce output, increase costs and create uncertainty, and contracts can lock in work rules that reduce flexibility in hiring and management.

In special cases like a "company town" where employers have monopsony power, unions can counteract that power and improve efficiency, but such cases are less common today.

Bottom Line

For individual workers, especially middle-class, low-wage, women and Black workers, unions consistently provide higher pay, better benefits, more job security, and a formal voice for grievances and safety.

For the economy as a whole, the effect is mixed: unions tend to decrease income inequality, raise consumer spending power, improve training and reduce turnover, and increase tax revenues, which supports growth and resilience. On the other hand, they can increase costs for employers, reduce profitability and investment, slightly reduce employment growth, raise consumer prices, and cause economic disruptions during labor disputes.

Whether the net effect is viewed as positive often depends on whether one prioritizes wage equality and worker security or labor-market flexibility, competitiveness, and maximizing total employment.