Strong unions, strong productivity

See Snapshots archive.

Snapshot for June 20, 2007.

Strong unions, strong productivity

by Ross Eisenbrey

Unionization in the United States has declined since the late 1970s, when 27% of U.S. workers were covered by union contracts, to today, when only about 12% are covered.  This has had substantial adverse effects on inequality, the wages of typical workers, and pension and health benefit coverage.

By contrast, most of the major continental European countries have maintained strong unions, and most of their employees are covered by collectively bargained contracts, ranging from 68% in Germany to over 90% in Belgium, France, and Sweden (see the first chart below). 

There is a common myth that unions hurt productivity, supposedly because they impose work rules that make their employers less efficient.  The evidence from industrial relations studies does not support this myth.  A broad study of the economics literature found "a positive association [of unions on productivity] is established for the United States in general and for U.S. manufacturing" in particular (Doucouliagos and Laroche 2003, 1).1   And as the second chart below reveals, international comparisons suggest that high productivity and very high union density are entirely compatible.

The dramatic drop in unionization in the United States from 1979 to 2005 did not lead to faster productivity growth than in the seven largest European countries with union density greater than 60%.  In fact, those countries' average annual labor productivity growth of 1.7% equaled productivity growth in the United States.  Output per hour worked is higher in the Netherlands, France, and Belgium,2 where more than 80% of employees have union contracts (compared to the United States' 12% unionization).3

If Congress is concerned about protecting middle-class incomes, it should pass measures to facilitate union organizing and collective bargaining coverage, including the Employee Free Choice Act.  There is no reason to fear that higher rates of unionization will impede efficiency or labor productivity.

Notes
1. Doucouliagos, Christos, and Patrice Laroche. "What do unions do to productivity? A meta-analysis." Industrial Relations. Vol. 42, No. 4 (2003). Cited in Shaiken, Harley, "Unions, the Economy, and Employee Free Choice,"  Economic Policy Institute (2007).
2. OECD estimates of labour productivity for 2005 (September 2006).
3. Mishel, Bernstein, and Allegretto, The State of Working America 2006/2007, Table 8.5, p.332, Economic Policy Institute 2007.