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This study explains why American labor unions are even more doomed than they look

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Labor union membership in the United States keeps dropping as older unionized firms shed jobs over time, while newer firms tend to be non-unionized and extremely difficult to organize given the prevailing legal framework in the United States. Lydia DePillis's story on the (lack of) union organizing at digital native media outlets is emblematic of the trend.

But a question that doesn't get asked enough is what would happen if you saw more successful organizing drives. A recent paper by Brigham Frandsen asks the question and delivers a pretty depressing answer for anyone hoping more vigorous organizing efforts will transform the fate of the American middle class.

What happens at newly organized firms

Most of the research that's out there on the economic impact of unionization simply compares unionized workplaces to non-union ones. Given the long-term decline in private sector union membership, this actually doesn't tell us much about what newly organized companies would be like.

What Frandsen did was specifically look at the outcomes of close unionization elections. That let him compare, not union companies to non-union ones, but companies that unionized to companies whose workforces had similar attitudes toward unionization but didn't quite get over the line. It's a look, in other words, not at the characteristics of union membership — which is often a long legacy — but of the characteristics of unionization.

The bad news

He found three big things:

  1. Recently unionized firms employ fewer people
  2. Recently unionized firms pay lower average wages
  3. Recently unionized firms are more likely to go out of business

The idea that a successful unionization drive would reduce wages and salaries seems paradoxical. Delve deeper into the numbers and the solution emerges. It's not that unionization leads to wage cuts. It's that unionization leads to a change in the composition of the workforce. Older and better-paid staff are disproportionately likely to leave a newly unionized shop, which brings average pay levels down even without anyone actually having their wages cut.

This is because one of the things research constantly finds is that labor unions reduce wage inequality by raising the floor and lowering the ceiling of pay scales at unionized firms.

Limiting the pay of the highest-earning members of a particular company in the context of a marketplace where most companies aren't unionized naturally has the effect of inspiring many of those higher-earning workers to seek new jobs elsewhere. This plausibly also explains the finding that recently unionized companies are more likely to go out of business. If you lose your star performers to the competition, you put your business at risk.

You can't get there from here

Frandsen's findings don't in any way undermine the conclusion that there are viable economic models built around strong private-sector labor unions — look at Germany or the Nordic countries. But they do raise doubts about the idea that there's any feasible path whereby a series of incremental changes could move the United States off its current path of low and shrinking levels of private sector unionization.

In the context of a workforce with very low union density, unionization at one particular company doesn't actually give workers much bargaining power. But it does create significant competitive disadvantages. The exact opposite is true of a system in which unionization is widespread — in that case there is no competitiveness disadvantage, but workers have more clout systematically.

(Richard Freeman)

The notion that there may be no clear path from the low-unionization equilibrium to the high-unionization equilibrium is bolstered by leading labor scholar Richard Freeman's famous observation that union growth in the United States was essentially one giant spurt. The Great Depression and World War II produced a dramatic upward surge in union membership, and at all other times it has trended downward. Frandsen's account of what happens at newly organized workplaces in contemporary America helps explain why that downward trend is overwhelmingly likely to continue, absent some new enormous shock to American society. Given their current level of weakness, unions at newly organized private sector workplaces aren't really able to deliver the goods in terms of higher pay and job stability.

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