Unions in the 21st Century: Will They Survive?
March 28, 2014
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.
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.
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