U.S. Labor Unions

(Bloomberg) -- Their influence is felt from factory floors to major ports and modern newsrooms. Politicians either condemn their demands or crave their endorsements. And their membership today sits at a historic low. Ever since the U.S. industrialized in the late 1800s, unions have been organizing workers in search of better wages, benefits and employment conditions, and scholars have been arguing about their social and economic impact. Do they enhance or impede productivity? Strengthen or distort labor markets? Improve state and local governments, or saddle them with debt? As American workers face stagnant wages and widening income inequality, those debates are intensifying.

The Situation

In 2017, 10.7 percent of wage and salary workers in the U.S. belonged to a union. That’s almost half the rate in 1983. It’s also low compared with peers: Among 31 OECD countries reporting union membership rates in 2012, the U.S. ranked 27th. So-called right-to-work laws, which ban any requirement for employees to pay union dues or fees, are in place in more than half the states, including the traditional union strongholds of Michigan, Indiana and Wisconsin. In the public sector, where the membership rate has hovered at about 35 percent, unions are feeling pressure to agree to pay, pension and health-care cuts. And it’s a time of uncertainty as members disagree on how President Donald Trump’s pro-working-class rhetoric will translate into action. In December, the Trump administration called on the U.S. Supreme Court to let millions of public-sector workers refuse to pay union fees. The Supreme Court had deadlocked in 2016 over whether government workers should be compelled to pay union fees even if they aren’t members, leaving intact a previous ruling that lets more than 20 states continue to require public-sector workers to help fund union representation. Yet there have been a string of recent successful unionization campaigns by journalists at the Los Angeles Times, Vox Media and MTV News

U.S. Labor Unions

The Background

Mass production technology transformed American workplaces, widening the power gap between labor and management and inciting workers to unify in their push for shorter working hours, safer workplaces and higher pay. At steel mills, coal mines and rail yards, strikes devolved into bloody riots, drawing meager, if any, gains for workers. It wasn’t until 1935 that the National Labor Relations Act codified workers’ rights to unionize and engage in collective bargaining. As the U.S. emerged from the Great Depression, unions grew in strength and number. By the time the American Federation of Labor, established in 1886, merged with the Congress of Industrial Organizations to form the AFL-CIO in 1955, more than 1 in 3 American workers had union jobs. But as the U.S. economy shifted from manufacturing to services, unions gradually lost ground. Their membership took a blow in 1981 after President Ronald Reagan fired more than 11,000 air traffic controllers for violating federal laws against striking. That began a slump in workplace walkouts. From 1970 to 1980, there were an average of 280 work stoppages per year in the U.S. involving 1,000 workers or more; in 2016, there were 15.

U.S. Labor Unions

The Argument

Union workers earn about $200 more per week on average than non-union workers, and have better retirement pay and health insurance. These compensation premiums hold up even after controlling for factors like age and education. Studies have shown that unions also help raise pay for non-union workers by setting a higher prevailing wage. This has caused some economists to link today’s wage stagnation, broadening income inequality and lack of economic mobility to the decline in unions. Critics of unionization say that the inflated salaries of union members come at the expense of fewer overall jobs, and that the outsized pensions and benefits of public-sector union employees have drained state budgets. They say that seniority-based raises and work rules often outlined in union contracts hamper productivity and protect incompetent employees. Supporters counter that unions build workplace trust and transparency to reduce employee turnover and enhance performance. And unions help shrink the gender wage gap. In 2016, women who were union members made an average of 90 percent of men’s weekly earnings, while women not represented by a union made 81 percent. 

The Reference Shelf

  • The Bureau of Labor Statistics releases an annual report on Union Membership in the United States.
  • AFL-CIO timeline on the history of organized labor in the United States.
  • National Bureau of Economic Research paper argues that technological change has played a role in both the rise and fall of unions in the U.S.
  • Economist Barry Hirsch examines the wage differential between union and non-union workers, while economist David Branchflower compares the role of trade unions in the U.S. with those in eighteen other OECD countries.
  • Former Federal Reserve chairman Alan Greenspan said the firing of air traffic control workers in 1981 was President Ronald Reagan’s “most important domestic initiative” for its impact on private employer hiring decisions.
  • In 2015, former U.S. Treasury Secretary Larry Summers wrote  that “stronger unions are not just good for their members, they are good for our country and our descendants.”
  • A Bloomberg Brief StoryChart shows the impact of states’ right-to-work laws on union membership, unemployment and pay.

First published Oct.

To contact the writer of this QuickTake: Jordan Yadoo in Washington at jyadoo@bloomberg.net.

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