Unions Don’t Benefit Nonunion Workers

After years of helping unions take credit for every worker gain and offering unionization as the answer to every worker complaint, that effort has escalated under “union man,” Joe Biden. Now, his Treasury Department has released “its most comprehensive ever look at the role that labor unions play in the American economy,” just before Labor Day. Included near the top of its cheerleading litany of the supposed advantages to unions is that higher union wages “means workers at nonunionized firms see increased wages too,” which is central to their assertion that unions benefit all workers, not just union workers.

However, that claim is false.

It is true that unions enjoy a host of special government-granted powers and treatment (e.g., unique exemptions from antitrust laws) to prevent other workers willing to do the same work for less from competing with union employees. That is a form of collusion that, done by any business, would be legally prosecuted. And there is no real reason that collusion should be feared as harmful in business but endorsed and supported in the labor market, which is the probable reason for unions claiming to raise nonunion members’ well-being as well as that of union members.

The mechanism unions cite for providing wage gains to nonunion workers is that increased union wages force up nonunion employers’ wages to keep their workers from leaving for those better-paying alternatives.

However, higher union wages would force other employers to pay more only if they increased the number of those high paying job openings. If there are no additional jobs created in industries due to increased union wages, no new job openings are created for current nonunion workers. If anything, there will be fewer such openings, so that nonunion workers actually face worsened employment alternatives. So, by artificially forcing up the cost of hiring their workers, unions reduce rather than increase the number of such jobs offered by employers, reflecting the reduced output consumers will buy at the higher costs and prices that result (that is, reflecting the law of demand).

With fewer jobs available for nonunion workers, some are displaced to elsewhere to compete with others for nonunion jobs. That increases the labor supply for such nonunion employment, which reduces rather than increases wages for all workers in those areas (not just workers newly forced into them). Consequently, not only do union wage premiums fail to benefit all workers, they come in large part from picking other workers’ pockets.

Given that the Treasury Report was supposedly comprehensive, I read it to see what argument it made for why unions benefit nonunion workers, despite the adverse effects that result from the law of demand. It presented a “union threat effect” that found that an increase in unionization efforts increased the odds that some nonunion workers in those industries would be paid more to avoid unionization. Then they generalized their argument to what would happen if that effect occurred nationwide due to a return to the rates of unionization in 1979.

However, that argument does not offset the effect of the law of demand. All it means is that some nonunion workers can gain from unionization efforts in their industries. But the even higher costs and prices that would result from any such knock-on effects means buyers will buy still less, reducing the total number of available industry jobs even more, displacing more workers to less attractive jobs. In addition, it raises the costs that must be borne by all workers in their role as consumers. With below 10% of American private sector workers unionized, that alone harms over 90% of workers, beyond the harm to those forced to move to less attractive job opportunities.

Unions’ and now the Treasury Department portray their self-seeking agenda as providing benefits for all. But reality reverses unions’ Labor Day story. They worsen, rather than improve, the options of virtually everyone except union members.

Instead of asserting a questionable and over-generalized “union threat effect” which ignores the adverse effects of higher union wages decreasing available jobs and increasing output prices to claim unions benefit nonunion workers, there is a far more direct way to consider that question. Ask how many special privileges unions enjoy that others are denied. Then go further, and ask what added special privileges are being proposed by the administration whose comprehensive evaluation fails to mention them.

Unions, which never stop asserting freedom of association as justification of everything they wish to do, inflict a “significant impingement on associational freedoms that would not be tolerated in other contexts,” according to the Supreme Court’s Janus decision.

Union “rights” already remove workers’ freedom to associate with a different union, to choose alternative forms of group representation, such as voluntary unions, and to represent themselves in negotiations with employers, even for those who opposed joining the union selected. They remove workers’ freedom to associate with nonunion employers or to resolve workplace issues directly with employers, by forcing arrangements exclusively through unions. They remove employers’ freedom to not associate with unions or to solely employ workers who have no union involvement. They undermine consumers’ freedom to associate with lower cost, nonunion producers and force taxpayers to face higher-cost government services as a result of government employee unions. In each of these ways, freedom of association is applied only as a special privilege for unions and denied to others.

Unions even violate the most basic freedom of association of many current union members, because once a majority of the workers for an employer votes to certify a particular union, it becomes the monopoly negotiator for all workers. No further elections need ever be held, and efforts to try are strewn with roadblocks. So workers added after a union is certified need never be given a vote on the union, and those who voted for it need never be given a chance to reconsider, sacrificing their own workers’ freedom of association to union interests.

The PRO Act, heavily backed by unions and their Democrat allies, would go further to benefit unions at the expense of nonunion workers. It would repeal right-to-work laws, which 27 states have to protect workers from being forced to join a union and pay union dues involuntarily. It would require employers to provide private employee information (including cell phone numbers, email addresses, and work schedules) to union organizers, violating the associational rights of those who don’t want to join or be approached by unions. It would allow unions to initiate snap elections in nonunion workplaces more rapidly, limiting opponents’ ability to present opposing positions. And it would codify “card check” elections, eliminating the protections against coercion provided by a secret ballot.

It would allow the current far-from-nonpartisan National Labor Relations Board (NLRB) to invalidate a vote against unionization for virtually whatever it decides was “employer interference.” It would require contractors and franchisees to bargain with unions, regardless of whether they have control over wages, benefits, etc., outlaw employment arbitration clauses, authorize “secondary boycotts” by unions against companies maintaining a business relationship with a target company, and more.   

The targets of all of unions’ special privileges are not just nonunion employers (who really represent consumers’ interests in facing lower prices). They also include many rights of nonunion workers (who, despite all the advantages to them unions claim, don’t believe the benefits exceed the costs) and even the rights of many union workers. If we recognized just how many ways unions help themselves by taking rights and choices away from nonmembers as well as employers, we would not believe their claims to benefit them. And without that, union claims to be anything more than collusions that we would prosecute in any other context come into serious doubt. Perhaps then we could actually celebrate the contributions of all Americans as workers on Labor Day, instead of just those “with the union label.”

Gary M. Galles is a professor of economics at Pepperdine University.