This week, in honor of Labor Day, the Maine Center for Economic Policy’s James Myall published an article claiming that unions “promote [a] stronger, fairer economy for all workers.” The piece makes three main claims, all of which omit key information or gloss over important distinctions.
Unions combat income inequality
To demonstrate that unions reduce income inequality, Myall presents a graph showing that since the 1960s, unionization rates in Maine have exhibited a fairly strong negative correlation with the ratio of earnings between the rich and poor. Of course, this is a mere correlation, and drawing causal inferences from it — as Myall does — is inappropriate.
The seminal 1998 paper on the topic, which used econometric techniques to isolate the causal impact of unions on wage inequality, concluded that the decline of unions accounted for only 10 to 20 percent of the rise in wage inequality among men, and had virtually no effect among women. Another analysis published last year suggests that unions reduce economy-wide wage inequality by less than 10 percent.
Many other forces — such as the increasing importance of specialized education in the modern economy and globalization — have contributed to rising wage inequality in Maine over the last half-century. By ignoring these factors, Myall conveys the impression that declining union membership is largely responsible for growing income inequality, when research suggests it has only a marginal impact.
Unions boost wages and benefits
There is no doubt that unions improve the salaries and working conditions of union members. The evidence on that is clear. Collective bargaining boosts workers’ market power, enabling them to negotiate compensation above what a fully competitive environment would allow. Myall correctly points out that the median hourly wage for unionized Mainers is $22.79, compared to $17.11 for non-union workers. On top of higher pay, labor contracts often include provisions to enhance job security, guarantee advancement, and bestow other advantages on union members.
But what about the vast majority of Maine workers — more than 85 percent, according to official statistics — who aren’t represented by a union? Does unionization help or hurt them?
Myall insists that strong unions are good even for non-union workers. “Mainers do better when workers are empowered to negotiate fair wages and working conditions with their employers. Salaries and benefits are higher for everyone, and inequalities are reduced,” he writes.
Here, Myall’s case falls apart. By raising the cost of labor above market rates, limiting employers’ discretion in hiring and firing decisions and dictating other aspects of how firms operate, unions reduce the number of workers employers are willing to hire and make it more difficult to run a profitable business.
As a result, non-union workers find it harder to find well-paid jobs, and businesses face bankruptcy more often. Several studies in Australia, Canada, Britain and the United States have estimated that employment growth in unionized firms is 2 to 4 percent lower than that in nonunion companies.
A longitudinal study of 48 U.S. states found that “unions adversely affect unemployment rates and the growth rates of gross state product (GSP), productivity, and population.” Unions’ negative effects on the rate of economic growth is particularly noteworthy, since nothing improves the lives of Mainers — whether union members or not — more than rapid economic growth.
The gains enjoyed by union members translate to heavy losses for the rest of the workforce and the overall economy.
Unions reduce the wage gap for women and people of color
Finally, Myall writes, “union membership reduces the ability of employers to discriminate against individuals, and results in fairer wage levels than those produced by one-on-one negotiations.” He includes a graph comparing the median hourly wages of union and non-union workers, broken down by sex and differentiating whites from people of color.
But the data directly contradict Myall’s claim. According to his own figures, union women of color make 84 cents for every dollar a union man of color earns. But among non-union workers, women of color make 84.2 cents for every dollar a man of color earns. So, according to Myall’s own logic, unionization actually exacerbates wage inequality among people of color.