Are Labor Unions a Good Thing?
Overview/BackgroundLabor unions are binding agreements between workers where a selected group of representatives speak and negotiate with management on behalf of all employees. They usually require some periodic fee ("union dues"), with some professions or companies requiring membership in order to take a position. A "closed shop" requires union membership to obtain the job. An "open shop", which is more rare nowadays, gives an option of joining.
Labor unions exist all over the world. They became popular in the era of the Great Depression, when companies regularly abused workers with low pay, long hours, unsafe working conditions, few (if any) fringe benefits, and condescending treatment. The Knights of Labor, Railroad Brotherhood, and Teamsters are among the unions from our history. Despite efforts of many business owners such as Henry Ford to squash their creation, labor unions grew as a way for employees to collectively bargain for better pay, benefits, and working conditions. Unions have always been able to use the ultimate power play--a strike--which can effectively shut down all production.
Unions have largely been successful in their efforts to help workers. Nowadays a host of labor laws exist, such as a minimum wage, mandatory overtime pay, and minimum breaks. However, unions have had a host of negative impacts on society, as are discussed below. The issue of unions has become particularly important nowadays as governments all over the world try to rein in unsustainable spending by cutting back benefits of mostly unionized government employees. The governments of France and Greece are recent examples. In the U.S., the standoff between Scott Walker of Wisconsin and the state unions there touched off a controversy that dominated the national news.
- Unions protect workers from various company abuses such as unsafe/uncomfortable working conditions, long hours, arbitrary hiring & firing, and so on. In a rough economy, with workers needing their paychecks to pay for mortgages, food, car payments, etc., employers hold a lot of power in the employer-employee relationship. Consequently, management can pretty much set the rules on work environment. They can set impractical hours, create unrealistic work quotas, require work on holidays, fire & hire based on personalities, and so on. One individual often has very little bargaining power since they can easily be replaced. However, a group of abused employees can ban together to prevent management from carrying out such abuses. Unions became popular during the Great Depression, when a terrible economy allowed employers to essentially treat employees however they wanted. One of the most terrible work environments in American history was the result before unions came along.
- They give workers a chance to speak at the same negotiating & power levels of the managers and owners. One employee in a company of hundreds, if not thousands, of employees, usually has very little bargaining power. This is especially true when you consider the widespread unemployment around the world, along with the decline of wages. For most positions, one employment position is just an interchangeable part where another person can be brought in to fill the gap if a person quits. Thus, management doesn't always see the need to create a work environment that's favorable for employees. However, when workers ban together, they can wield the ultimate labor weapon--a strike. If one person walks off the job, it may be no big deal. If everyone walks off the job, it more or less shuts down production and incoming-generating ability of the company. Even if all the striking employees can be replaced, it's costly and time-consuming to do so. Thus, labor can talk at the same negotiating level as management. Both sides need each other equally, and both sides will be equally hurt by a dispute.
- They allow workers to collectively bargain for wages, benefits, an acceptable work environment, and more. Unions allow employees to appoint or elect representatives that go to management and negotiate for all workers at once. Union reps can meet regularly to talk about wage levels, fringe benefits, and so on. The union also allows management and labor to sign contracts which put their negotiations on paper, a step that may be impractical on an employee-by-employee basis.
- Unions prevent managers from having to address worker grievances one-by-one. Managers have their hands full trying to take care of marketing, production, competitor analysis, accounting, taxes, and so many other items. It's often unrealistic to take the time to address each employee grievance with wages, benefits, work atmosphere, etc.. A union allows management to address grievances of employees as a group, reducing time and stress on both sides.
- Unions give workers more job security and piece of mind, reducing the stress of possible layoffs & wage/benefit cuts. Members of unions are usually your every-day, middle-class individuals trying to make a living. Among other costs, they must pay mortgages & car payments, put food on the table, and pay to send their kids through college. It's difficult and stressful to plan for the future when you're not sure if you may lose your job in the near future, or if your wages, health care benefits, or whatever may be cut unexpectedly. A union allows contracts to be signed to give employees piece of mind that such things won't happen. Management can't just change employment on a whim when union power is protecting the workers.
- Unions create a stable, long-term employment relationship between company and employee, which is good for both. Union positions are usually stable and secure; thus, employees have more incentive to stay, to develop solid relationships with co-workers, and to do their best to make sure the company thrives. On the employer side, more stable employment means less time training new employees and less time recruiting replacements.
- Unions lead to higher prices for consumers since companies must pay more for wages & benefits, which are then passed on to customers. The cost of labor is like any other for a business. It must be added to the expenses part of the income statement, which leads to reduced profit margins or losses unless prices can be raised to pass the costs onto consumers. Thus, when we buy American cars, purchase plane tickets, or buy any other product that comes from a unionized business, we all pay more at the cash register.
- Unions make the country less competitive since non-unionized companies in India, China, Taiwan, etc. can pay workers far less and therefore charge less and/or assign more workers per unit of product. We're no longer in a national economy, we're in a global one. Products & services which could be developed in America are now being made more cheaply in foreign countries, most notably India and China, which have vast pools of cheap labor. Saddling an American company with an unrealistic and inflexible labor cost per hour effectively makes it impossible for some companies to compete. For example, American automakers now must pay two-three times that of automakers in Japan, mostly because of union-required wages and benefits. In fact, China is now predicted by the IMF to pass the U.S. in economic power within 10 years. It's no wonder, when the American versions of the companies cannot compete on cost control.
- Unions often prevent more qualified workers from getting the jobs. Less proficient workers are often protected from layoffs or firing; thus, new positions open less frequently. Union contracts and protections often tie managements hands when it comes to replacing workers. Many employees are simply inferior at their job, whether it's lack of motivation, education, or natural abilities. Given the huge unemployment & underemployment rate of today, there is always a pool of potentially more talented or motivated workers that may be able to do the job better. Consider one of the most obvious examples--teachers. Teaching unions and the "tenure" system keep many poorly performing professors on the job far too long. This is only one of the reasons, despite leading the world in educational investment dollars, the U.S. has fallen behind much of the world in academic achievement. Meanwhile, every year colleges graduate tens of thousands of bright, motivated, technologically savvy, and well-trained Education graduates who can't find jobs. It's not only affecting the teachers but the ultimate product in this equation--the students and future of the country! On a lesser scale, the inability to replace less proficient workers hurts the U.S. in global competition since it drives up costs and decreases quality of products and services.
- Society and companies are often held hostage to the essential services of certain unions (e.g. teachers, police, construction workers, air traffic controllers, etc.); thus, negotiation becomes less about fairness to workers than about companies meeting the demands of union extortion. Certain unions yield way more power than that of shutting down for-profit production. That is, they can hurt society as a whole if they stop working. Imagine major highways under construction being shut down by striking workers. Imagine the crime and rioting if police walked off the job. Imagine all air traffic coming to a halt if controllers held out for more pay. The bargaining then becomes less about giving employees' deserved wages & benefits and more about paying off extortion. Companies or government offices have little choice but to concede to the demands, or society as a whole suffers the consequences. And who do you think the media will portray as the "victim" and the "evil, greedy" sides? The police, teachers, and other essential workers on strike, or the deep-pocketed companies & government officials trying to balance budgets or sustain minimal profit levels? In other words, responsible government officials or managers trying to keep their businesses from collapsing are the ones blamed, regardless of the cause or outcome, adding even more fire to the extortion racket. This is one key reason of many why government spending all over the world is completely out of control and unsustainable.
- The State and Federal labor/discrimination laws, the threats of lawsuits, and the avoidance of poor publicity all make unions largely unnecessary nowadays. Unions were definitely a necessary & useful part of society back in the early part of the 20th century when companies routinely paid employees low wages and did little to curb brutal working conditions. However, in the 21st century, unions have become outdated, burdensome, and unnecessary. Labor & discrimination laws at both the state and federal level nowadays provide all the worker protections that are needed. Consider all the laws that protect workers: minimum wage; mandatory vacation, breaks, overtime pay; anti-discrimination & disability laws; mandatory family leave; COBRA health care for laid-off workers; unemployment insurance, and so on. Plus, where state & federal laws fail, each individual has yet another option--lawsuits. Ask any human resources professional of any business of significant size if they have controls in place to prevent possible lawsuits. It's a worry all corporations must deal with. Lastly, corporations must also worry about their reputation. If their company gets a reputation as a sweat shop, as discriminatory, as greedy profiteers, etc., it hurts their bottom line. Management is smart enough to know that happy workers lead to more productivity and better sales. They don't need the union waving a stick at them to get them in line.
- Unions lead to job losses to India, China, and other overseas companies. Non-union shops have a major cost advantage in hiring. Plus, in unionized companies, owners & managers may simply choose not to hire at all since the cost of maintaining or laying off a new employee is too great. Due to lower standards of living and higher unemployment, many overseas companies are starting to take jobs from America, Europe, and Japan. Average hourly wages in India and China are already 10-25 percent that of most Western Nations, and union-enforced wage floors only make matters worse. No wonder China and India are growing so quickly! The high costs of hiring and maintaining unionized employees often simply becomes a deterrent to hiring. Despite economic recovery in 2010 and 2011, hiring remains slow in America, in large part due to the high cost of bringing on new workers.
- Unions have become a source of political power and corruption. Since unions can offer a large block of voters, politicians will often curry favor from unions and screw over the taxpayers. Consequently, union representatives concentrate on helping their favorite politicians and political party rather than doing what's best for the members. It's no secret that unions are regular contributors to all levels of the Democratic, Communist, Labor, and Green political parties. Union leaders have the ability to convince their members to support certain candidates, as well as the organization structure to get groups of voters to booths on election day. Thus, certain politicians go out of their way to court unions. President Obama's connections to SEIU are well-known, and his governing reflects it. As an example, consider recent union exemptions in the health care bill. Countless books have been written about the political corruption of unions. Taxpayers, consumers, and often the union members themselves are the victims.
- It prevents the firing of clearly incompetent workers. Several poorly-performing teachers on tenure as well as most government workers are clear examples. Have you ever been waiting in line at a government office while three workers laugh & talk amongst themselves? Have you ever had a teacher who uses videos to do all their teaching, or does nothing more than read from the text for his or her "lectures"? These are only a couple of the examples of clearly incompetent employees with low motivation who remain on the job because union rules make them too difficult to fire. Is it any wonder why governments continue to waste endless sums of taxpayer money on programs that show little or no results? Is it any wonder why the U.S. is so far behind academically behind many Asian nations despite spending far more on education?
- Unions lead to less productivity and job motivation since pay levels are usually determined by seniority rather than performance. The lack of incentives such as increased pay or promotion, as well as the lesser threat of losing their jobs, leads to workers putting out less effort than they otherwise would.
By lobbying for better working conditions, employee/employer relations, and fair wages, labor unions strive to protect the welfare of working class individuals. With the goal of making work environments fair for their employees, labor unions push forward for progress, fighting for the rights of working class individuals who may not have voices of their own. An individual lobbying for an overdue raise may feel intimidated in front of an employer, backing down for fear of losing his job or drawing undue ire. Labor unions exist to take the pressure off the employees, serving as third parties and go-betweens to help working class individuals fight for their rights in their respective places of work.
Most employees will agree that working under labor unions provides security and job protection. Employers reserve the right to bargain with unions and initiate negotiations to persuade their employees to avoid unionizing, but many employees appreciate the security they receive from their unions and remain with them accordingly. However, it is important to remember that employees must contribute to their unions to protect themselves. Furthermore, unions can occasionally bring more harm than good. To understand labor unions and how individuals may receive them, it is important to examine both sides of the situation to uncover the pros and cons of keeping and operating under labor unions.
One of the most gleaming attributes of a labor union is the protection of a group. A labor union provides a wall of support in the form of paid staff and volunteers who fight for the rights of hard-working employees. A common complaint among employees is money, and labor unions lobby to fight for overdue raises by putting the pressure on employers. In 2011, the American Federation of Labor and Congress of Industrial Organizations reported that union workers made an average of 30% more than workers who did not belong to any union, making them some of the best paid individuals in the working class.
In addition to helping provide better pay for the working class, labor unions make employees more aware of their rights as workers. Not every individual who wanders onto a job is fully aware of all the rights and privileges that come with the position. For example, a greedy employer may try to exploit employees by denying them appropriately timed breaks in stressful work environments, and many employees will tolerate the abuse for fear of losing their jobs. Labor unions exist to protect employees from this kind of abuse by informing them of their legal rights. Furthermore, labor unions will make employers liable in the event of injury or illness because of workplace abuse or neglect.
Nonetheless, the power of a labor union can also present considerably large drawbacks. Labor unions have the power to press employers for raises, but their zeal may be misplaced. Fighting for the working class is one thing, but pushing an employer for an unrealistic pay raise is another. Some companies simply do not have the money to spend on salary bumps, but pressure from labor unions can force them into submission, and the pressure a labor union places behind an employer does not only affect the company.
By forcing a company to provide pay raises, the cost of productivity goes up, and the difference comes directly out of the consumers’ pockets. This is often referred to as the “trickle down” effect. If Company X must pay its employees unrealistic wages because of pressure from a labor union, Company X must raise the cost of Product Y to balance the books, causing the cost of the salary bump to “trickle down” to consumers.
Pushing for unrealistic wages is only one way that labor unions can exploit their power. Unions have influence over companies, and they can become very greedy. This greediness can lead to a lack of trust between an employee and his employer, contributing to a hostile work environment. This is not to say that employees should avoid joining unions for fear of creating distrust between themselves and their employers. Nonetheless, it is important for employees to know that although unions can bring job security and protection, they can also bring distrust and controversy to work environments.
Labor unions have power, and they know how to use it. By pushing for equal opportunity workplaces and safe work environments, labor unions can help employees to know their rights and receive fair treatment. However, they can also push employers too far and give the wrong impression. Not every employee requires union representation. For this reason, employees may want to examine their work environments carefully and decide whether or not they require protection from labor unions. In more stressful, risky work environments, unions may be useful, but individuals with less demanding jobs may want to steer clear of labor unions and eliminate the clutter.
Filed Under: Business & Economics, Economics