Unions Continue To Drive Themselves Out Of Business

It is good news for Americans that labor union membership fell to an historic low in 2011—11.8% of the wage and salary workforce. There are now only 14.8 million union members in the U.S. “In 1983, the first year for which comparable union data are available, the union membership rate was 20.1% and there were 17.7 million union workers.” On an historical basis, union membership is on a steady decline. This chart is from Professor Mark Perry’s blog, Carpe Diem, with data as of 2010:

The states with the most unions, in the public and private sectors are:

The largest numbers of union members lived in California (2.4 million) and New York (1.9 million). Over half of the 14.8 million union members in the U.S. lived in just seven states (California, 2.4 million; New York, 1.9 million; Illinois, 0.9 million; Pennsylvania, 0.8 million; Michigan 0.7 million; and New Jersey and Ohio, 0.6 million each) …

The most growth has been in the public sector (SEIU and others) where union membership is at 37% while private sector membership is only 6.9%.

The wages of union members are substantially higher than for non union workers: “In 2011, among full-time wage and salary workers, union members had median usual weekly earnings of $938, while those who were not union members had median weekly earnings of $729.”

One might be tempted to say that being a union member is a good thing, and in some cases it certainly is because they keep wages and benefits much higher than would a competitive market. Unfortunately there are good reasons why union membership has collapsed, and the main reason is that they destroy jobs. 

Unions are coercive organizations in that they exist only by reason of government force in the marketplace. I am sure unions could exist without the coercive power of government, but their clout and economic harm would be far less. One may wish to argue that unions were necessary during the period of “laissez faire capitalism” but nothing could be farther from the truth. Companies resisted unions by the force of government power, just as all organizations resist competition. Assuming you are right and I am wrong about history, you still have to ask why unions have declined.

The purpose of unions is not to better the lot of workers but to gain an anti-competitive advantage for their members to keep wages above the market rate. And those are the seeds of their downfall. It is simple economics. If you have a competitive economy with international trade, a system which creates jobs, and you establish wage controls forcing companies to pay wages above the market rate, companies will become uncompetitive and either go out of business, fire employees, or go abroad to remain. This is not some act of greed by employers, but an economic necessity forced on them by consumers who dictate prices by everyday market choices.

There are currently major battles going on in Wisconsin and Illinois about closed shops. That is where state law mandates that when unions are voted in, all employees of that company are forced to become members. Turning around these laws and establishing “right to work” legislation will help employers, especially governments who pay higher wages than comparable private sector jobs. Less unionization will create more employment and greater wealth, something that unions try to prevent.