OPINION:
High-profile strikes in Hollywood and now Detroit have raised unions’ profile in America recently. They should also raise the question: Why unions?
Unions make no sense economically.
Unions will immediately claim that they can extract higher wages for their members. But looked at economically, this is easily debunked.
How in a capitalist system can unions extract more than their labor product is worth? All else being equal, raising the cost of a product means decreased demand for it. For the employer, this will mean less investment in an enterprise that is now yielding a rate of return below the prevailing rate. Less investment means less productivity, which in turn means that the workers employed there will see a diminishing rate of pay over time compared with enterprises that make those investments.
Raising the cost of employees also means fewer employees will be hired. Over time, there will be fewer jobs than there would have been otherwise.
Raising the cost of the enterprise’s product means there will be less demand for the product. Consumers will find substitutes for the product and buy less of it.
But unions will parry that they offer employers something in return. Is it the ease of dealing with a large workforce? The ability to reach an agreement with large numbers of workers all at once instead of individually? Today’s strikes would seem to answer that question.
Do they offer a uniquely skilled workforce? If this were true and such skills translated to higher profits for those that hired them, then there would be an attraction for employers. But this is not the case.
Clearly, employers want skilled workers who add value and returns for their products; similarly, workers want to learn such skills and reap the higher wages they bring. But neither employers nor employees need unions to obtain these.
Outside the workplace, schools do this, while inside the workplace, enterprises can and do see to this themselves. It is not as though there were some secret union skills that only they could impart, as did the guilds of the Middle Ages.
As proof of both points, is the low percentage of the nation’s private sector workers who are union members. According to the latest Bureau of Labor Statistics study, just 6% of American private sector workers are union members.
Perhaps unions will say let the employers be damned; it is their members who really benefit.
Is that benefit job security? If so, then why has union membership plummeted over the decades? According to the government report, America’s rate of unionization is half that of 40 years ago: 10.1% versus 20.1% in 1983.
Is it the desire to have an added layer of bureaucracy in the workplace? It is hard to see this as an attraction.
Take-home pay would seem to be unions’ most likely benefit to cite. But look again at the economics. Unions can extract above-average pay only over the short term. Once they have raised wages to an uncompetitive level, the effects of competition play out to eliminate the uncompetitive discrepancy: fewer jobs, less investment and fewer customers.
Nor when talking about increased wages do unions go beyond talking about the gross increases they extract. They do not mention that this must be netted against the wages lost during a strike or the dues that members must pay when they return to work. It is only the net— the gross minus these costs — that union members actually get to keep.
Unions exist best where competition exists least. Such a lack of competition begins with the government. It is no mystery that union participation is lowest where right-to-work laws exist. Nor is it a mystery that the unionization rate is higher among public sector workers (33.1%) — more than five times as high as the rate of public sector workers (6.0%).
Viewed from every angle, unions struggle where economics prevail. In such an environment, it is difficult to show how unions add value to employees, consumers or employees. That leaves only union officials and their political supporters to benefit. And they do — mightily— at everyone else’s expense.
No wonder President Biden is such a strong union supporter: “I’m proud to say “union.” I’m proud to be the most pro-union president.” Even as unions have sunk to their lowest point during his presidency: “The 2022 unionization rate (10.1%) is the lowest on record.”
• J.T. Young was a professional staffer in the House and Senate from 1987 to 2000, served in the Department of Treasury and the Office of Management and Budget from 2001 to 2004, and was director of government relations for a Fortune 20 company from 2004 to 2023.
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