Research Handbooks in Law and Economics series
Edited by Cynthia L. Estlund and Michael L. Wachter
Chapter 4: Unions, dynamism, and economic performance
The relationship between unions and economic performance is necessarily central to understanding changes in union membership, the role of unions in the workplace, and public policy. It is central first because union impacts on performance enter into the policy calculus of costs and benefits associated with policies that enhance or constrain union organizing and collective bargaining coverage. Second, whatever the publicly desired level and role for unions in the workplace, the realized level of coverage is heavily influenced by how unionized businesses perform in an increasingly competitive and dynamic global economy. Maintaining a large union workforce in the US requires financially healthy unionized employers. Competitive pressures limit the size of the union sector if higher union compensation is not fully offset by higher productivity. Compared to nonunion workplace governance, where there is substantial managerial discretion constrained by market forces and law, union governance is more formal, deliberate, and often sluggish. Union companies, therefore, often fare poorly in highly dynamic and competitive economic settings. Union density, defined as the percentage of employees who are union members, has declined sharply in the US private sector, from just over a third in the mid-1950s to only 6.9 percent in 2010. Among a host of reasons for declining private sector union density, the most fundamental explanation appears to be an increasingly dynamic US economy coupled with the relatively poorer economic performance among union than nonunion establishments and firms.
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