Workers and employers need each other to create economic value, but often disagree about how that value should be apportioned. Because owners of capital are typically much wealthier and often more powerful than individual suppliers of labor, such disagreements have historically tended to resolve in favor of capital.
Unions rose as an effort to correct this imbalance in leverage, and they played a key economic role for much of the 20th century. More recently the power of unions has declined, though the tight labor market in the wake of the COVID-19 pandemic aided high-profile unionization drives in services.
KEY TAKEAWAYS
- Unions are worker groups formed to negotiate pay and working conditions with employers.
- Collective bargaining helps employees increase their leverage in contract negotiations.
- Half of union members in the U.S. are public employees like teachers and firefighters.
- Union members tend to earn more than non-union workers, in the U.S. and globally
- 27 U.S. states bar unions from requiring workers covered by their collective bargaining agreements to pay union dues.
What Are Unions and What Do They Do?
Labor unions are voluntary, democratic associations of workers. Trade unions are organized for a specific trade or occupation, while industrial unions represent workers in a particular industry.2 National unions can have many local chapters.
U.S. workers can elect a union as their collective bargaining agent under the provisions of the National Labor Relations Act (NLRA).3
Collective bargaining is a negotiation in which a union and an employer or group or employers set pay and other working conditions for the union’s members.4
Unions dissatisfied with collective bargaining results may call a strike under certain conditions, just as employers can lock out their workers.5 The NLRA defines and prohibits «unfair labor practices» by unions as well as management and requires both sides to bargain in good faith.67 The NLRA’s terms are enforced by the National Labor Relations Board (NLRB).
Unions may also engage in politics. The American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) is a federation of 57 labor unions promoting laws and policies on behalf of union members.8
Who Belongs to Unions?
The proportion of workers in the national labor force covered by collective bargaining varies widely by country, from well over 50% in much of western Europe to less than 10% in many developing countries.9 In the U.S., the proportion of union workers has dropped from about 35% in the mid 1950s and 20% in 1983 to little more than 10% of the workforce as of 2021.1011
Half of the union members in the U.S. worked in the public sector, where more than a third of the workforce was unionized, compared with about 6% in the private sector. Teachers, police officers and firefighters are among public employees most likely to belong to a union.10
As manufacturing employment that once served as the mainstay of union membership has declined, organizing efforts have extended into the service and professional industries where unions have previously lacked a foothold. In 2022, unionization drives succeeded in organizing workers at some Amazon.com (AMZN) warehouses, Starbucks (SBUX) coffee shops, and in The New York Times Company’s (NYT) technology operations.121314
10.3%
The share of the U.S. working population who were members of unions in 2021.15
Who Opposes Unions?
In the U.S., industry groups often oppose unions and their legislative goals. The U.S. Chamber of Commerce says its goal on union issues is to «fight back against the one-sided, anti-employer agenda of special interest organizations.» The business group is strongly opposed to legislation providing additional protections for union organizers.1617
In 27 U.S. states, «right to work» laws allow non-union members to obtain the benefits of collective bargaining by unions without paying union dues.1819 The laws serve to undermine union financing and organizing.2021
Employers hostile to unions often assert a union could not secure better pay and working conditions than what they already provide for workers.22
In China, independent labor unions are illegal while official ones are controlled by a government-backed union not known for advocating on behalf of workers.23
Do Unions Work?
Union wages are generally higher than non-union wages globally. According to the U.S. Bureau of Labor Statistics, full-time union members had median weekly earnings of $1,095 in 2019, versus $892 for those who were not union members.24 There is also evidence unions increase the pay of non-union workers.25
Like any democratic institution, organized labor is focused on the needs of current union members. This focus can at times result in big increases in long-term costs for employers, both public and private.
It takes two sides to reach an economically unsustainable collective bargaining agreement, however. More often, collective bargaining leads to a compromise addressing the long-term economic needs of the employer as well as employees.
In 2021, a higher-paid unionized workforce turned into a competitive advantage for United Parcel Service Inc. (UPS) against non-union rival FedEx Corp. (FDX), resulting in lower employee turnover amid a labor shortage.26
The Bottom Line
Unions have left their mark on the economy and continue to be a significant force shaping business and politics. Unions in a wide variety of industries, from heavy manufacturing to the government, help workers secure higher wages and better working conditions.