Last week, Vox's Matt Yglesias examined a study that had a depressing outlook for the labor movement. Companies that had recently unionized, economist Brigham Frandsen found, had lower average wages, employed fewer people and were more likely to go belly-up. Yikes!
But it’s not usually a good idea to look at studies in isolation. There’s a lot of other research that complicates the picture. And it’s actually an important question: What good are unions, really? Are dues worth the investment?
Although there’s not a lot of evidence on freshly organized firms specifically, which Frandsen focuses on, there's no clear reason why newly unionized firms shouldn't grow to resemble those that have had unions for a long time (granted, in some sectors with very low union density, being unionized could put a firm at a disadvantage -- but there can be productivity gains as well, so death isn't inevitable). And the research there suggests that you’re still better off as a union member than not.
First, let’s take a look at that Frandsen study (as well as a later version, which dropped in December). Frandsen looks at very close elections to create a comparable set of unions, and finds that wages declined a year after an election (or, more precisely, the average of the period between six and 18 months after an election). He hypothesizes that’s because the higher-paid workers leave to avoid being subject to a contract that might confine how high their salaries can go — which would mean that unions drive away top talent.
But that approach has some blind spots. The people leaving the firm, for example, might actually be high-paid managers who opposed the union drive. They resign in order to avoid dealing with the new reality.
Also, measuring change over such a short time means that you cut out a large chunk of the progress unions can make — only 38 percent of newly unionized firms have a contract in place within a year, according to a 2008 study, and 56 percent within two years. Negotiated wage increases often don’t kick in for a couple of years after that. Finally, measuring only close elections means you cut out those in which the union won more decisively — and strong support tends to make for better contracts.
So maybe let’s not take the Frandsen study as the only indicator of how unions affect workers and their employers. Here’s some other research to keep in mind:
- In 2012, researchers from Princeton found that unionization lowered the stock market value of publicly traded firms by 10 percent, through a mix of inefficiencies caused by the union and the transfer of value from investors to workers in the form of higher compensation. In other words, unions do work for workers, as long as the firm doesn’t go out of business because of it.
- A 2011 study of teachers unions found that collective bargaining increased starting salaries by 3.9 percent, and added an additional 5.4 percent over the first five years of a teacher’s career. Teachers unions also support higher wages for input, such as education levels, rather than measures of output, such as test scores.
- A 2003 review of the seminal 1984 book “What Do Unions Do?” found that, since its publication, the union wage premium — how much more union members make than non-union members — has declined along with union density. However, in the industries where unions still have a presence, the wage premium remains substantial (more updated data puts it at 13.6 percent). Unions also insulate workers against downturns in the business cycle, when firms are tempted to cut down on labor costs.
- As the Vox post mentioned, unions serve as a bulwark against wage inequality — which now can be illustrated mostly in the negative. A 2011 study attributed a fifth to a third of increased income inequality among men to the decline in union representation between 1973 and 2007. That’s about as much as the contribution of increased college education to raising wages at the top.
- A forthcoming paper from researchers at the National Institute of Economic and Social Research and the University of Oxford, confirming a previous study from the Center for Economic and Policy Research, shows that the wage premium is largest for Hispanics in the United States — particularly in low-wage sectors.
Unions have many effects other than wages, of course. But those are more difficult to measure, so wages are a good stand-in — and by that metric, a union membership card still has significant benefits, if you can get past the increasingly high hurdle of organizing a workplace.