Are labor unions good for workers and the economy?

This is a topic where economists and policymakers disagree, and the answer depends on which effects you weigh most heavily. Let me pull some current data to ground the discussion.# Are Labor Unions Good for Workers and the Economy?

This is a genuinely contested question among economists, and the honest answer is: it depends on who you ask and what you weigh most heavily. There's strong evidence on specific effects, but disagreement on how to interpret them overall.

What's well-established: Unions raise wages and benefits for their members

The research consensus is fairly solid here. Simple comparisons of the wages of union workers and nonunion workers find that union workers typically make about 20 percent more than nonunion workers. When economists control for other factors to isolate the causal effect, the evidence from these two approaches points to a union wage premium of around 10 to 15 percent, with larger effects for longer-tenured workers. More recent EPI analysis finds a worker covered by a union contract earns 12.8% more in wages than a peer in a nonunionized workplace in the same industry with a similar education, occupation, and level of experience.

Unions also improve non-wage compensation. Worker wellbeing is greatly affected by non-wage benefits—healthcare and retirement benefits are part of the compensation package and have substantial monetary value, and there is strong evidence that unions improve both fringe benefits and non-wage features of the workplace.

Spillover effects matter too: the positive effects of unions are not limited to union workers—nonunionized firms in competition with unionized workplaces may choose to raise wages, change hiring practices, or improve their workplace environment to attract workers. Quantitatively, each 1 percentage point increase in private-sector union membership rates translates to about a 0.3 percent increase in nonunion wages, with larger estimates for workers without a college degree.

Where it gets more nuanced: Productivity and firm effects

The productivity story is more complicated than either side's talking points suggest. One major synthesis found examining more than 300 studies on the effects of unionization on productivity, that unions do not, overall, reduce productivity, although there are variations in different countries and industries, with unionization associated with higher productivity in education and construction.

New research using matched employer-employee data adds an important wrinkle: much of the "union wage premium" may reflect that unions organize at more productive firms, not just bargaining power. A 2025 NBER study found that after controlling for year and worker-age effects, unionized firms pay about 15 percent more than nonunionized firms, but when controlling for value-added per worker, the estimated union premium falls to about 9 log points—meaning productivity disparities can account for about 40 percent of the union wage premium. In Canada specifically, about 60 percent of the union wage premium comes from unions' ability to negotiate higher wages, while the balance is from unionized firms being more productive than their nonunionized counterparts.

However, there's a real tradeoff for firm profits: unionization often hurts corporate profitability by forcing companies to share more of their revenues with their workers in the form of increased wages and benefits.

The case for broader economic benefits

Proponents argue unions address a specific market failure. Mounting evidence has shown there is a pervasive lack of competition across the labor market—monopsony—that leads to suboptimal wage and employment levels, resulting from corporate concentration, worker preferences for job attributes, and constraints on mobility that result in pay lower than a competitive market would predict. In this view, unions act as a counterweight. The U.S. Treasury Department has argued unions "contribute to more robust general economic growth and resilience" partly because "income inequality often feeds back into inequality of opportunity, which impedes growth if disadvantaged people cannot access the resources necessary to acquire job skills or start businesses."

There's also evidence unions reduce racial and gender wage gaps and improve job stability—unionization increases wages by 17.3% for Black workers and 23.1% for Latino workers.

The case against: Jobs, efficiency, and growth

Conservative economists and institutions push back hard. The Heritage Foundation's argument is essentially a labor-cartel model: unions function as labor cartels, restricting the number of workers in a company or industry to drive up the remaining workers' wages, and companies pass on those higher wages to consumers through higher prices, and often they also earn lower profits. In this framework, unions decrease the number of jobs available in the economy, hurting workers who can't get hired into union jobs in the first place.

There's also a genuine academic debate about whether higher union wages come at the cost of employment growth—if raised wages come at the expense of normal profits, this can damage the prospects of firms and employment growth—to the long-term detriment of... trade unions restrict employment flexibility. That said, even skeptical labor economists note the overall macro damage may be overstated: from a public policy perspective, it is not obvious from this evidence that unions, taken as a whole, operate to the detriment of the economy, and even the evidence on slower employment growth rates is open to criticism.

Bottom line