• <div class="header-image" style="background-image: url(/live/image/gid/4/2756_V6N7Web_Header_small.rev.1533574420.jpg);">​</div><div class="header-background-color"/>

Unions in the 21st Century: Will They Survive?

March 28, 2014
Unions are relics of a time when the American economy could afford to be protectionist and uncompetitive.  Unions have no place in the lean and efficient American economy of a successful tomorrow.

Author: Benjamin Droz, C’15

From 1953-1954, the percentage of private-sector employees that belonged to a union peaked at 36% (Griswold).  In 2006, this figure was south of 8% (Griswold).  Many claim that the rise of globalization has: decimated American worker’s competitiveness, undermined wage growth, and hurt Americans overall.  In addition, the debate over so-called right-to-work legislation has further raised unions’ prominence in the modern economy.  Insufficient attention, however, has been paid to the normative value of unions in the modern economy.

Right-to-work legislation allows states to enact laws prohibiting union membership or fair share fees as conditions of employment.  Such laws, however, are controversial.  Right-to-know proponents argue that these laws only protect the freedom of association for individuals.  They further argue that a private body should not have the right to levy fees on lawfully employed individuals.  Opponents to the legislation, argue that all employees of a firm gain the benefit of collective bargaining arrangements.  As a result, the ability to opt out of financially supporting the bargaining body creates the ability and incentive for free riding.

While the economic effects of these laws are unclear, there are clear arguments on both sides of this issue.  Although proponents show employment rising faster in right-to-work states (Newman), opponents cite slower rising wages (Garofalo & Malhotra). Numerous studies have focused on the economics of right-to-work laws.  But, academic results are mixed and relatively unreliable since it has proven near impossible to parse out the effects of right-to-work from the various states’ “pro-business packages.”  Indeed, some research suggests that the passage of right-to-work laws has not decreased union membership beyond the existing anti-union preferences of the regions in which the unions operate (Farber).

Even though the economic effects of right-to-work legislation are yet to be fully determined, the intent behind right-to-know laws is clear— to make compulsory unionization undesirable.  Still, it is not clear whether these “right-to-work states” believe that unionization itself is normatively undesirable, or merely disagree with compulsory union dues.  It is also unclear whether the decline of unions is primarily due to right-to-know laws, or other economic and cultural changes.

For example, there tends to naturally be less unionization in more competitive industries.  This makes sense.  Unionization depends upon the “uncompetitiveness” that allows firms to earn economic profits.  Unions arise in order to negotiate the distribution of the surplus between labor and management.  In turn, the market structures pass the added cost onto the consumer.  In a more competitive market, unions have less power to negotiate with employers because profits are reduced due to empowered consumers.  A quintessential example is the U.S. Postal Service (USPS)- where an uncompetitive market guarantees a substantial economic profit.  There, four unions represent over eighty percent of USPS postal workers (Wachter et al.).

It may be natural for some to expect unions in competitive markets to falter while unions in uncompetitive markets thrive.  But, University of Wisconsin-Madison economist Robert E. Baldwin’s work has shown that this is not always the case.  Union membership has declined across all sectors and regions, including some “uncompetitive” industries (Baldwin).  In fact, the decline of union membership is uncorrelated to the industry’s connection with globalization.

One theory explaining the decline of unions in the wake of globalization is the so-called “demonstration effect,” which states that the entrance of foreign investment demonstrates to employees of all sectors that capital is mobile enough to enter and exit a market.  As a result, laborers generally feel less secure, and opt against unionizing (Slaughter).  On the contrary, Princeton economist Henry S. Farber posits that unionization’s decline is highly attributable to increased employer resistance, which is caused by increased competition, and the declining belief among workers that unions could improve their buying power (Farber).

While globalization has certainly had some negative effects on unionization, it is possible that globalization has also positively impacted union trends.  For example, globalization often lends more leverage to unions.  When firms practice “just-in-time” manufacturing, they become extremely vulnerable to disruptions like employee strikes.  These vulnerabilities often give unions the upper hand, and more leverage at the negotiation table.

Recent changes in unionization have caused people to wonder, “what is the normative value of unions in a globalized society?”  Although it is not entirely clear the role unions will play in the modern globalized labor market, it is clear that managers and workers seem less interested in union membership.  While tighter manufacturing and distribution schedules give unions higher bargaining power when they do survive, it seems that the American worker needs unions far less now.  And, from a normative perspective, it does not appear that there will be any detrimental effects if they fade away.  Unions are relics of a time when the American economy could afford to be protectionist and uncompetitive.  Unions have no place in the lean and efficient American economy of a successful tomorrow.

Works Cited

Baldwin, Robert E. The Decline of U.S. Labor Unions and the Role of Trade. Washington, DC: Institute for International Economics, 2003.

Christensen, Sandra, and Dennis Maki. “The Wage Effect of Compulsory Union Membership.” Industrial and Labor Relations Review 36, no. 2 (January 1983): 230-38. Accessed November 28, 2013. http://www.jstor.org/stable/2523074.

Farber, Henry S. “The Decline of Unionization in the United States: What Can Be Learned from Recent Experience.” Journal of Labor Economics 8, no. 1 (January 1990): S75-S105. Accessed November 28, 2013. ttp://www.jstor.org/stable/2535208.

_____. “Right-To-Work Laws and the Extent of Unionization.” Journal of Labor Economics 2, no. 3 (July 1984): 319-52. Accessed November 28, 2013. http://www.jstor.org/stable/2534945.

Garofalo, Gasper A., and Devinder M. Malhotra. “An Integrated Model of the Economic Effects of Right-to-Work Laws.” Journal of Labor Research 13, no. 3 (Summer 1992): 293-305. Accessed March 16, 2014. doi:10.1007/BF02685487.

Griswold, Daniel. “Unions, Protectionism, and U.S. Competitiveness.” Cato Journal 30, no. 1 (Winter 2010). Accessed November 28, 2013. http://citeseerx.ist.psu.edu/viewdoc/download?rep=rep1&type=pdf&doi=10.1.1.215.728.

Newman, Robert J. “Industry Migration and Growth in the South.” The Review of Economics and Statistics 65, no. 1 (February 1983): 76-86. Accessed March 16, 2014. doi:10.2307/1924411.

Wachter, Michael L., Jeffrey M. Perloff, and Frank Rodriguez. “A Comparative Analysis of Wage Premiums and Industrial Relations in the British Post Office and the United States Postal Service.” In Topics in Regulatory Economics and Policy Series, edited by Michael A. Crew and Paul R. Kleindorfer, 115-40. Vol. 8. Competition and Innovation in Postal Services. N.p.: Springer U.S., 1991. Accessed March 16, 2014. doi:10.1007/978-1-4757-4818-5_6.

 

 

Student Blog Disclaimer
  • The views expressed on the Student Blog are the author’s opinions and don’t necessarily represent the Penn Wharton Public Policy Initiative’s strategies, recommendations, or opinions.

PENN WHARTON PPI
RESOURCE SPOTLIGHT:

  • <h3>MapStats</h3><p> A feature of FedStats, MapStats allows users to search for <strong>state, county, city, congressional district, or Federal judicial district data</strong> (demographic, economic, and geographic).</p><p> Quick link: <a href="http://www.fedstats.gov/mapstats/" target="_blank">http://www.fedstats.gov/mapstats/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>USDA Nutrition Assistance Data</h3><p><img width="180" height="124" alt="" src="/live/image/gid/4/width/180/height/124/485_usda_logo.rev.1407789238.jpg" class="lw_image lw_image485 lw_align_right" srcset="/live/image/scale/2x/gid/4/width/180/height/124/485_usda_logo.rev.1407789238.jpg 2x, /live/image/scale/3x/gid/4/width/180/height/124/485_usda_logo.rev.1407789238.jpg 3x" data-max-w="1233" data-max-h="850"/>Data and research regarding the following <strong>USDA Nutrition Assistance</strong> programs are available through this site:</p><ul><li>Supplemental Nutrition Assistance Program (SNAP) </li><li>Food Distribution Programs </li><li>School Meals </li><li>Women, Infants and Children </li></ul><p> Quick link: <a href="http://www.fns.usda.gov/data-and-statistics" target="_blank">http://www.fns.usda.gov/data-and-statistics</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Congressional Budget Office</h3><p><img width="180" height="180" alt="" src="/live/image/gid/4/width/180/height/180/380_cbo-logo.rev.1406822035.jpg" class="lw_image lw_image380 lw_align_right" data-max-w="180" data-max-h="180"/>Since its founding in 1974, the Congressional Budget Office (CBO) has produced independent analyses of budgetary and economic issues to support the Congressional budget process.</p><p> The agency is strictly nonpartisan and conducts objective, impartial analysis, which is evident in each of the dozens of reports and hundreds of cost estimates that its economists and policy analysts produce each year. CBO does not make policy recommendations, and each report and cost estimate discloses the agency’s assumptions and methodologies. <strong>CBO provides budgetary and economic information in a variety of ways and at various points in the legislative process.</strong> Products include baseline budget projections and economic forecasts, analysis of the President’s budget, cost estimates, analysis of federal mandates, working papers, and more.</p><p> Quick link to Products page: <a href="http://www.cbo.gov/about/our-products" target="_blank">http://www.cbo.gov/about/our-products</a></p><p> Quick link to Topics: <a href="http://www.cbo.gov/topics" target="_blank">http://www.cbo.gov/topics</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Federal Aviation Administration: Accident & Incident Data</h3><p><img width="100" height="100" alt="" src="/live/image/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg" class="lw_image lw_image80 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg 2x, /live/image/scale/3x/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg 3x" data-max-w="550" data-max-h="550"/>The NTSB issues an accident report following each investigation. These reports are available online for reports issued since 1996, with older reports coming online soon. The reports listing is sortable by the event date, report date, city, and state.</p><p> Quick link: <a href="http://www.faa.gov/data_research/accident_incident/" target="_blank">http://www.faa.gov/data_research/accident_incident/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>HUD State of the Cities Data Systems</h3><p><strong><img width="200" height="200" alt="" src="/live/image/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg" class="lw_image lw_image482 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg 2x, /live/image/scale/3x/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg 3x" data-max-w="612" data-max-h="613"/>The SOCDS provides data for individual Metropolitan Areas, Central Cities, and Suburbs.</strong> It is a portal for non-national data made available through a number of outside institutions (e.g. Census, BLS, FBI and others).</p><p> Quick link: <a href="http://www.huduser.org/portal/datasets/socds.html" target="_blank">http://www.huduser.org/portal/datasets/socds.html</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>The Penn World Table</h3><p> The Penn World Table provides purchasing power parity and national income accounts converted to international prices for 189 countries/territories for some or all of the years 1950-2010.</p><p><a href="https://pwt.sas.upenn.edu/php_site/pwt71/pwt71_form.php" target="_blank">Quick link.</a> </p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>NOAA National Climatic Data Center</h3><p><img width="200" height="198" alt="" src="/live/image/gid/4/width/200/height/198/483_noaa_logo.rev.1407788692.jpg" class="lw_image lw_image483 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/200/height/198/483_noaa_logo.rev.1407788692.jpg 2x, /live/image/scale/3x/gid/4/width/200/height/198/483_noaa_logo.rev.1407788692.jpg 3x" data-max-w="954" data-max-h="945"/>NOAA’s National Climatic Data Center (NCDC) is responsible for preserving, monitoring, assessing, and providing public access to the Nation’s treasure of <strong>climate and historical weather data and information</strong>.</p><p> Quick link to home page: <a href="http://www.ncdc.noaa.gov/" target="_blank">http://www.ncdc.noaa.gov/</a></p><p> Quick link to NCDC’s climate and weather datasets, products, and various web pages and resources: <a href="http://www.ncdc.noaa.gov/data-access/quick-links" target="_blank">http://www.ncdc.noaa.gov/data-access/quick-links</a></p><p> Quick link to Text & Map Search: <a href="http://www.ncdc.noaa.gov/cdo-web/" target="_blank">http://www.ncdc.noaa.gov/cdo-web/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>National Bureau of Economic Research (Public Use Data Archive)</h3><p><img width="180" height="43" alt="" src="/live/image/gid/4/width/180/height/43/478_nber.rev.1407530465.jpg" class="lw_image lw_image478 lw_align_right" data-max-w="329" data-max-h="79"/>Founded in 1920, the <strong>National Bureau of Economic Research</strong> is a private, nonprofit, nonpartisan research organization dedicated to promoting a greater understanding of how the economy works. The NBER is committed to undertaking and disseminating unbiased economic research among public policymakers, business professionals, and the academic community.</p><p> Quick Link to <strong>Public Use Data Archive</strong>: <a href="http://www.nber.org/data/" target="_blank">http://www.nber.org/data/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Federal Reserve Economic Data (FRED®)</h3><p><strong><img width="180" height="79" alt="" src="/live/image/gid/4/width/180/height/79/481_fred-logo.rev.1407788243.jpg" class="lw_image lw_image481 lw_align_right" data-max-w="222" data-max-h="97"/>An online database consisting of more than 72,000 economic data time series from 54 national, international, public, and private sources.</strong> FRED®, created and maintained by Research Department at the Federal Reserve Bank of St. Louis, goes far beyond simply providing data: It combines data with a powerful mix of tools that help the user understand, interact with, display, and disseminate the data.</p><p> Quick link to data page: <a href="http://research.stlouisfed.org/fred2/tags/series" target="_blank">http://research.stlouisfed.org/fred2/tags/series</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Internal Revenue Service: Tax Statistics</h3><p><img width="155" height="200" alt="" src="/live/image/gid/4/width/155/height/200/486_irs_logo.rev.1407789424.jpg" class="lw_image lw_image486 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/155/height/200/486_irs_logo.rev.1407789424.jpg 2x" data-max-w="463" data-max-h="596"/>Find statistics on business tax, individual tax, charitable and exempt organizations, IRS operations and budget, and income (SOI), as well as statistics by form, products, publications, papers, and other IRS data.</p><p> Quick link to <strong>Tax Statistics, where you will find a wide range of tables, articles, and data</strong> that describe and measure elements of the U.S. tax system: <a href="http://www.irs.gov/uac/Tax-Stats-2" target="_blank">http://www.irs.gov/uac/Tax-Stats-2</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>The World Bank Data (U.S.)</h3><p><img width="130" height="118" alt="" src="/live/image/gid/4/width/130/height/118/484_world-bank-logo.rev.1407788945.jpg" class="lw_image lw_image484 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/130/height/118/484_world-bank-logo.rev.1407788945.jpg 2x, /live/image/scale/3x/gid/4/width/130/height/118/484_world-bank-logo.rev.1407788945.jpg 3x" data-max-w="1406" data-max-h="1275"/>The <strong>World Bank</strong> provides World Development Indicators, Surveys, and data on Finances and Climate Change.</p><p> Quick link: <a href="http://data.worldbank.org/country/united-states" target="_blank">http://data.worldbank.org/country/united-states</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>National Center for Education Statistics</h3><p><strong><img width="400" height="80" alt="" src="/live/image/gid/4/width/400/height/80/479_nces.rev.1407787656.jpg" class="lw_image lw_image479 lw_align_right" data-max-w="400" data-max-h="80"/>The National Center for Education Statistics (NCES) is the primary federal entity for collecting and analyzing data related to education in the U.S. and other nations.</strong> NCES is located within the U.S. Department of Education and the Institute of Education Sciences. NCES has an extensive Statistical Standards Program that consults and advises on methodological and statistical aspects involved in the design, collection, and analysis of data collections in the Center. To learn more about the NCES, <a href="http://nces.ed.gov/about/" target="_blank">click here</a>.</p><p> Quick link to NCES Data Tools: <a href="http://nces.ed.gov/datatools/index.asp?DataToolSectionID=4" target="_blank">http://nces.ed.gov/datatools/index.asp?DataToolSectionID=4</a></p><p> Quick link to Quick Tables and Figures: <a href="http://nces.ed.gov/quicktables/" target="_blank">http://nces.ed.gov/quicktables/</a></p><p> Quick link to NCES Fast Facts (Note: The primary purpose of the Fast Facts website is to provide users with concise information on a range of educational issues, from early childhood to adult learning.): <a href="http://nces.ed.gov/fastfacts/" target="_blank">http://nces.ed.gov/fastfacts/#</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>