Given that Labor Day was this past Monday, it is a time of introspection.  The war on unions has had, according to at least one study, a significant impact on the U.S. economy and worker wages.  Has it been good or bad?

According to the Economic Policy Institute, the average weekly earnings for nonunion private-sector male workers would have been 5% ($52) higher in 2013 if the share of union workers had remained at 1979 levels.  This translates to an annual wage loss of $2,704.  Employers who are nonunion and want to remain that way generally try various incentives to decrease the likelihood of unionization by raising wages and enriching benefits.  According to the study, those most affected by decreasing union membership have been the private-sector male workers who lack a Bachelor's degree. Wages would have been 8% higher in 2013 if union membership had stayed at 1979 levels, translating into an annual wage loss of $3,016.

The percentage of workers belonging to a union in the United States peaked at 35% in 1954, and the total number of union members peaked in 1979 at an estimated 21 million.  Today, union membership is approximately 11.1% and around 14.8 million workers.  The largest percentage of union workers is in the public sector, although the private sector has the higher headcount by 600,000 workers.

There are a number of reasons for the decline of unions over time.  First, the evolving nature of work and composition of the workforce has impacted union membership.  In the private sector, for example, manufacturing employment, long a union stronghold has declined dramatically over time, especially with technological changes and efficiencies.  The public sector, although generally remaining steady, has experienced many layoffs.  Various governmental employers have lost revenue sources since the Great Recession.  Further, the benefits negotiated by the public sector unions were so rich that a number of governmental entities are considering bankruptcy to avoid the liabilities. 

Second, unions lost their way.  In a number of situations they forgot who they serve.  Nepotism and corruption were rampant.  They lost the trust of their members.  Moreover, they didn’t recognize the evolving nature of work and were Luddites fighting these inevitable changes.  When pushed to the corner by employers, they tried to save face by saving some jobs and arguing that all jobs could have been lost.  Now unions are viewed as out-of-touch entities trying to gain membership simply to pay for themselves.

Third, the Obama Administration has become a union buster administration.  Obamacare has caused much frustration with multi-employer plans.  For example, a common reason for a construction worker to join a union was for the medical benefits.  Now there is an alternative which is cheaper and often offers better benefits.  Union plans cannot compete without greatly increasing costs to their members.  In addition, the National Labor Relations Board (NLRB) has, in effect, become the union representatives for most of the nonunion workforce.  If a nonunion worker has a complaint or is terminated for some reason, the employee can appeal to the NLRB, which has greatly expanded its jurisdiction.  Further, the quickie election rule may have sped up the election process, but it has not yet significantly changed the results.   According to Fisher & Phillips, organized labor won 67% of elections in the first six months under the new rule, compared to 65% during the same period in 2014—prior to the rules changes. 

So are wages suppressed?  Maybe.  ASE’s 2016/2017 Salary Budget Survey has shown that despite economic growth and continued low unemployment, 3% remains the amount Michigan employers are budgeting for employee pay raises in 2017.  This corresponds with WorldatWork’s 2016/2017 Salary Budget National Survey. Here in the Detroit, employers of engineers and technicians are struggling with attracting and retaining employees due to salary requirements.  Various studies show that fewer college students are studying STEM subjects, which in the long run could heavily affect salaries in most technical fields.

Unions do have value.  In the long-run they push management to be innovative in their management policies and workforce strategies (see Amazon’s new 30-hour work week strategy).  So although it’s not the end of unions, the traditional approach of unions needs to evolve faster.  Unions have an opportunity to grow according to a 2013 Pew Foundation study.  Millennials hold a much more favorable view of labor unions than do older Americans. 61% of respondents aged 18 to 29 held a favorable view of labor unions.   However, Millennials are less likely to join a union.  Unions need to study these opportunities and learn new responses.  The same is true of employers.  Perhaps the influx of Millennials and Generation Z into the workforce will result in increased wage growth.

Sources: USAToday 8/30/16, Fisher & Phillips 1/4/16, Bureau of Labor Statistics, Wikipedia, The Motley Fool 8/26/13