Are unions good for corporations, the economy, and society?
This Labor Day was a moment to step back and look at the forces that have led to the decline in labor union membership. Currently, only 6% of private sector employees belong to a union. They are concentrated in motor vehicle-related manufacturing, oil and gas, and mining. We also want to acknowledge the successes of SEIU 32BJ, the hospital workers’ unions, and the American Federation of Teachers (AFT).
A recent Gallup poll survey reported that 70% of people in the United States had a favorable opinion of unions—60% percent would join a union if the option was available at work. Yet, there is a strong anti-union sentiment among Republicans and near-fanatical opposition by corporations.
The deeper answer to the question is: Yes, unions work, just not for businesses and corporations. In the traditional economic science of efficiency, unions create inefficiency: They increase costs and someone else pays. They misallocate resources.
Unions are different from corporations and consumers. They are a third power group representing workers. Consumers want the cheapest price, businesses want the cheapest labor cost, and unions want higher pay and benefits. It’s an inherent conflict. But the ultimate power broker in the U.S. economy—the consumer—has decided in favor of cheaper prices.
What is the actual cost to the economy of labor unions? Estimates are in the 3/10 of 1% or 0.3% range.
But the question of whether unions are good is really a trap. It might be the wrong question to ask. To understand why, you have to take a step back—a big step back. You have to look at how the U.S. political economy is organized.
Power in the U.S. economy is organized into five basic groups: consumers, corporations and small businesses, government, finance and capital, and labor (workers). Since 1980, each group in the U.S. economy has performed differently: Consumers, business, and finance have done well; government has modestly shrunk; and unions––which represent the bargaining power of workers––have been crushed.
To judge the power of each group over the past 60 years, let’s look at the success and failure of each.
The same way there is inefficiency in any business, like CEO pay being 600 times average worker pay, there are economic inefficacies in unions, like higher wages and bargaining power.
That is the playing field that unions confront.
The U.S. economy has been through three dramatic changes: the shift from an agricultural economy to an industrial economy, and then industrial to service during the 1970s, and finally the growth of high-skilled service workers during the 1990s.
What can unions offer high-skilled workers? To start, unions offer decent working conditions and overtime pay; vacations; job stability; and protections against unfair employment practices. They help balance the power of corporations and promote social justice and worker rights. Their benefits spill over into the larger economy for non-union workers. They promote stability, trust, and productivity in the workplace.
Union myths and facts
Ongoing myths about unions claim they are all corrupt. In the past, unions were corrupt, but union corruption is mostly a thing of the past. Unions are governed by democratic principles, unlike businesses. They elect their leaders in elections that are monitored by the NLRB.
Another myth is that union workers do not work hard. Again, this is far from the truth. They do their job: They are skillful and knowledgeable workers who get the job done safely and on time. In many cases, the real issue is poor management. Corporations often limit overtime, but when problems arise, they blame unions for asking for overtime. They say that unions are inflexible and against bonuses or merit pay.
Corporations also say that unions do not care about the companies they work for. Nothing could be further from the truth. Unions know who is paying their salaries; they simply want to share in the success. During the 1990s, there was a record number of givebacks by unions.
The facts are, though, that some unions were and still are racist. Until recently, many construction unions, police, and fire unions restricted Black membership. Many unions have no Black leadership, and Black people and other minorities have had difficulty with enrolling in apprenticeship programs.
Unions have been known to inflate the cost of infrastructure projects. Over-specialization has hampered projects like the Second Avenue Subway and East Side access. Teacher unions have resisted educational reforms; police unions have resisted reforms like wearing bodycams; and some public sector unions, like fire services, EMS, and government employees, could be more efficient.
Corporation myths and facts
Corporations reportedly hate unions. But it’s only U.S. companies that hate unions. Mercedes Benz and other companies that are not based here are all unionized in their home countries.
Sadly, U.S. corporations have waged a long, vigorous, and successful campaign against private sector unions. They view it as a cost of doing business to hire the best anti-union consultants and lawyers to fight unions tooth and nail.
They have positioned themselves as taking over the moral high ground in the media ever since Ronald Reagan broke the Professional Air Traffic Controllers Association when he fired striking air traffic controllers in 1981. Today they use Fox News to promote anti-union views. They have lobbied for and promoted an anti-union stance under “right-to-work” laws which allow free riders on union contracts. They have used corporate lobbying power to weaken union organizing laws, and they have labeled unions as anti-competitive while they seek monopolies themselves.
Interestingly, some corporations like unions. They like the rules, stability, and predictability of a union contract.
In summary, unions are good for society and the economy. The decline in union power or worker power relative to corporations is not good for society. There has to be some balance or it’s a race to the bottom.
Chris Lee is founder of the Black Economics and Business (BEBN) website, https://blackeconbiz.com, which is designed to promote Black economic success and happiness.
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