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Con: Labor unions add to costs and discourage productivity

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James Sherk
April 6, 2008
EDITOR’S NOTE: The writer is addressing the question, Do Americans today still need labor unions?

Would you want to work for a company that treats all workers exactly the same, no matter how hard they work? What about one that promotes only on the basis of seniority and not merit?


Few Americans want a job with an employer who ignores their individual efforts. Yet that’s what labor unions offer employees today. Small wonder membership is steadily declining.


The premise of collective bargaining is that by representing all employees a union can negotiate a better collective contract than each worker could get through individual negotiations. But because the union negotiates collectively, the same contract covers every worker, regardless of his or her productivity or effort.


In the manufacturing economy of the 1930s, this worked reasonably well. An employee’s unique talents and skills made little difference on the assembly line.


In today’s knowledge economy, however, collective representation makes little sense. Machines perform most of the repetitive manufacturing tasks of yesteryear. Employers now want employees with individual insights and abilities. The fastest-growing occupations over the past quarter-century have been professional, technical, and managerial in nature. The jobs of the future include Web designers, interior decorators, and public-relations specialists, among others.


These jobs depend on the creativity and skills of individual employees. Few workers today want a one-size-fits-all contract that ignores what they individually bring to the bargaining table. Union-negotiated, seniority-based promotions and raises feel like chains to workers who want to get ahead.


Additionally, economic changes mean unions can no longer deliver large gains to their members. Unions boast that their members earn higher wages than non-union workers. But they don’t create money out of thin air. They use their bargaining power to take it from someone else. Contrary to popular impression, that someone is usually not business owners. It is consumers, who pay higher prices when companies pass on the added cost of the union-wage bill.


But companies can pass union costs on only when customers cannot shop elsewhere. Deregulation and free trade have increased competition and benefit both consumers and the economy. NAFTA alone saves a typical family $2,000 a year. But increased competition also means unions cannot win above-market wages through collective bargaining. Companies no longer have monopoly profits to afford those inflated wages.


Take General Motors, which used to pay its janitors and security workers the union rate of $75 an hour. When Toyota and Honda started selling better cars for less, they drove GM to the brink of bankruptcy and forced the United Auto Workers to agree to new contracts paying market rates. As this has happened at company after company, the difference between union and non-union wages has steadily shrunk.


The average union member still earns more than the average non-union member, but not because unions are skilled negotiators. It’s because unionized companies become very selective about whom they hire.


Since unions make it virtually impossible to lay off under-performing workers, unionized companies take pains to hire more productive workers in the first place. The typical union member naturally earns higher wages—with or without general representation. New workers who vote to join a union, however, do not earn more than they would have if they had stayed non-union.


These modern realities are colliding with problems that have long turned off workers—corruption, unaccountable leadership, and members’ dues funding union bosses’ lavish salaries. Not to mention excessive political activism.


Unions have announced plans to spend $300 million to defeat John McCain.


That’s great news if you’re a partisan Democrat—less so if you’re a rank-and-file worker whose dues foot the bill.


The one sector where unions remain relevant is the government. Almost half of all union members now work in the public sector. The typical union member today works for the DMV, not on the assembly line.


Unions fit more comfortably into government workplaces than the private sector. Government employees are used to bureaucracy that does little to reward individual initiative. And the government faces no competition.


A state won’t go bankrupt, no matter how much public-sector unions ask for in wages. The state can just raise taxes on everyone else. It’s no accident that the typical government employee earns substantially more than an equivalently skilled private-sector worker. Whether it is fair that government unions push for higher taxes to pay their inflated salaries is another question.


The upshot is that unions today have little to offer workers outside of government. By a more than 3-to-1 margin, non-union workers tell pollsters they are happy to stay that way, and union membership has fallen steadily over the past generation.


Unions naturally want to reverse their decline. But rather than reform to become relevant, unions want to take away a worker’s right to vote on joining a union.


Currently workers join unions through secret-ballot elections. If a majority of employees votes in privacy for a union, their company is organized, but neither their employer nor the union knows how each employee voted. This allows workers to vote their convictions.


Now organized labor has thrown its weight behind the little-known “Employee Free Choice Act.” This misnamed bill abolishes secret-ballot organizing elections and allows unions to press workers to publicly sign a union representation contract.


Where no-vote unions are allowed, unions do not take “no” for an answer.


Unions train organizers to give workers a high-pressure sales pitch and push them to immediately sign on. If a worker refuses, organizers return again and again to press him to change his mind. Some organizers threaten workers who will not join.


Not surprisingly, unions can organize most workplaces where workers are denied a vote. But making it difficult for workers to refuse to join will not make unions more attractive. Nor will it change the competitive realities that prevent unions from raising wages by passing on costs to consumers. Unless unions rethink how they represent workers they will remain irrelevant to 21st-century employees.


James Sherk is the Bradley Fellow in Labor Policy in the Center for Data Analysis at The Heritage Foundation. He wrote this for the Fredericksburg (Va.) Free Lance-Star.

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