Employers and workers seem to approach employment from vastly different

perspectives. So how can the two sides reach an agreement? The answer lies
in unions. Unions have played a role in the worker-employer dialogue for
centuries, but in the last few decades, many aspects of the business environment
have changed. With this in mind, it's important to understand how unions fit into
the current business environment, and what role unions play in the modern
economy.

What Are Unions?

Unions are organizations that negotiate with corporations, businesses and other
organizations on behalf of union members. There are trade unions, which
represent workers who do a particular type of job, and industrial unions, which
represent workers in a particular industry. The American Federation of Labor-
Congress of Industrial Organizations (AFL-CIO) is a trade union, while the United
Auto Workers (UAW) is an industrial union.

What Do Unions Do?

Since the Industrial Revolution, unions have often been credited with securing
improvements in working conditions and wages. Many unions were formed in
manufacturing and resource companies, companies operating in steel mills,
textile factories, and mines. Over time, however, unions have spread into other
industries. Unions are often associated with the "old economy": companies that
operate in heavily regulated environments. Today, a large portion of membership
is found in transportation, utilities, and government. (Learn more about economic
history, see: An Exploration Of The Development Of The Market.)

The number of union members and the depth at which unions penetrate the
economy varies from country to country. Some governments aggressively block
or regulate a union's formation, and others have focused their economies in
industries where unions have not traditionally participated.

Industry deregulation, increased competition, and labor mobility have made it

more difficult for traditional unions to operate. In recent decades, unions have
experienced limited growth due to a shift from "old economy" industries, which
often involved manufacturing and large companies, to smaller and medium-sized
companies outside of manufacturing. In the recent past, potential union members
have spread into a larger set of companies. This makes collective bargaining a
more complicated task, as union leaders must work with a larger set of managers
and often have a harder time organizing employees.

The evolution of the modern worker has also changed the role of unions. The
traditional focus of union leaders has been representing workers when
negotiating with managers, but when developed economies shift away from a
reliance on manufacturing, the line between manager and worker becomes
blurred. Also, automation, computers and increased worker productivity results in
fewer workers being needed to do the same job.

How Do Unions Affect the Labor Environment?

The power of labor unions rests in their two main tools of influence: restricting
labor supply and increasing labor demand. Some economists compare them
to cartels. Through collective bargaining, unions negotiate the wages that
employers will pay. Unions ask for a higher wage than the equilibrium
wage(found at the intersect of the labor supply and labor demand curves), but
this can lower the hours demanded by employers. Since a higher wage rate
equates to less work per dollar, unions often face problems when negotiating
higher wages and instead will often focus on increasing the demand for labor.
Unions can use several different techniques to increase the demand for labor,
and thus, wages. Unions can, and do, use the following techniques:

 Push for minimum wage increases. Minimum wage increases the labor
costs for employers using low-skilled workers. This decreases the gap
between the wage rate of low-skilled and high-skilled workers; high-skilled
workers are more likely to be represented by a union.
 Increase the marginal productivity of its workers. This is often done
through training.
 Support restrictions on imported goods through quotas and tariffs. This
increases demand for domestic production and, therefore, domestic labor.
 Lobbying for stricter immigration rules. This limits growth in the labor
supply, especially of low-skilled workers from abroad. Similar to the effect
of increases in the minimum wage, a limitation in the supply of low-skilled
workers pushes up their wages. This makes high-skilled laborers more
attractive.

Unions have a unique legal position, and in some sense, they operate like
a monopoly as they are immune to antitrust laws. Because unions control or can
exert a good deal of influence on, the labor supply for a particular company or
industry, unions can restrict non-union workers from depressing the wage rate.
They can do this because legal guidelines provide a certain level of protection to
union activities.

What Can Unions Do During Negotiations?

When unions want to increase union member wages or request
other concessions from employers, they can do so through collective bargaining.
Collective bargaining is a process in which workers (through a union) and
employers meet to discuss the employment environment. Unions will present
their argument for a particular issue, and employers must decide whether to
concede to the workers' demands or to present counterarguments. The term
"bargaining" may be misleading, as it brings to mind two people haggling at a flea
market. In reality, the goal of the union in collective bargaining is to improve the
status of the worker while still keeping the employer in business. The bargaining
relationship is continuous, rather than just a one-time affair.

If unions are unable to negotiate or are not satisfied with the outcomes of
collective bargaining, they may initiate a work stoppage or strike. Threatening a
strike can be as advantageous as actually striking, provided that the possibility of
a strike is deemed feasible by employers. The effectiveness of an actual strike
depends on whether the work stoppage can force employers to concede to
demands. This is not always the case, as seen in 1984 when the National Union
of Mineworkers, a trade union based in the United Kingdom, ordered a strike
that, after a year, failed to result in concessions and was called off.

Do Unions Work?
Whether unions positively or negatively affect the labor market depends on
whom you ask. Unions say that they help increase the wage rate, improve
working conditions and create incentives for employees to learn continued job
training. Union wages are generally higher than non-union wages globally.
According to a 2013 study, by the Bureau of Labor Statistics, " Salaries for
private industry union workers averaged $18.36 per hour while those for
nonunion private industry workers averaged $14.81 per hour." As well, the study
found that union workers have more access to employee benefits than nonunion
workers.

Critics counter the unions' claims by pointing to changes in productivity and a

competitive labor market as some of the primary reasons behind wage
adjustments.

If the labor supply increases faster than labor demand, there will be a glut of
available employees, which can depress wages (according to the law of
supplyand demand). Unions may be able to prevent employers from eliminating
jobs through the threat of a walkout or strike, which will shut down production, but
this technique does not necessarily work. Labor, like any other factor of
production, is a cost that employers factor in when producing goods and
services. If employers pay higher wages than their competitors, they will wind up
with higher-priced products, which are less likely to be purchased by consumers.

Increases in union wages can come at the expense of non-unionized workers,

who lack the same level of representation with management. Once a union is
ratified by the government, it is considered a representative of the workers,
regardless of whether all workers are actually part of the union. Additionally, as a
condition of employment, unions can deduct union dues from employee
paychecks without prior consent.

Whether unions were a primary cause of a decline in labor demand by "old

economy" industries is up for debate. While unions did force wage rates upward
compared to non-union members, this did not necessarily force those industries
to employ fewer workers. In the United States, "old economy" industries have
declined for a number of years as the economy shifts away from heavy
industries. (To learn more about economic terms and theories, see
the Economics Basics Tutorial.)

The Bottom Line

Unions have undoubtedly left their mark on the economy, and continue to be
significant forces that shape the business and political environments. They exist
in a wide variety of industries, from heavy manufacturing to the government, and
assist workers in obtaining better wages and working conditions.
What Unions Do: How Labor Unions Affect Jobs and the Economy
May 21, 2009 35 min read Download Report

James Sherk

@JamesBSherk

Research Fellow, Labor Economics

As research fellow in labor economics at The Heritage Foundation, James Sherk researched ways to
promote competition and mobility.

SUMMARY

Unions function as labor cartels, restricting the number of workers in a company or industry to drive up
the remaining workers' wages. They also retard economic growth and delay recovery from recession.
Over time, unions destroy jobs in the companies they organize and have the same effect on business
investment as does a 33 percentage point corporate income tax increase.

KEY TAKEAWAYS

Unions benefit their members but hurt consumers generally, and especially workers who are
denied job opportunities.

Unions decrease the number of jobs available in the economy. The vast majority of
manufacturing jobs lost over the past three decades have been among union members.

Congress should remember that union cartels retard economic growth and delay recovery when
considering legislation that would force workers to join unions.
I. LABOR UNIONS AND THEIR EFFECTS

Workers who join labor unions expect an improvement in their utility, typically
manifested in the form of higher wages and benefits. Indeed, there is a substantial
literature that suggests that, other things equal, unionized workers do receive higher
rates of compensation than their nonunion counterparts (Lewis, 1963, 1985). At the
same time, however, it is possible that unions have longer-term detrimental effects on
the economy as a whole and, arguably, therefore, unionized workers. Labor unions
may promote practices that reduce hours worked or productivity growth (from union
rules, reduced capital formation, barriers to resource mobility, etc.). A number of
studies observe a negative relationship between the incidence of union membership
and economic performance (Vedder and Gallaway, 1986; Pantuosco et al., 2001). On
the other hand, proponents of the concept of efficiency wages and others might argue
that the positive effect of unionization on worker morale might raise productivity and
possibly economic growth (Krueger and Summers, 1988; Katz, 1986; Altenburg and
Straub, 1998).

Of course, the impact of unions on the aggregate performance of the economy would
depend in part on their relative importance in labor markets and that has changed
dramatically over time. To roughly summarize the 20th century experience, during the
first one-third of the century, union membership tended to be small (usually 10
percent or less of employment), in the middle third of the century it tended to be much
larger (reaching one-third or so of the labor force), and in the last third of the century
the "market share" of labor unions in the private sector was falling rather steadily, by
century's end approaching the levels of the earlier part of the century. Thus if unions
on balance had adverse effects on the rate of economic growth as some have
suggested, those impacts would have been growing in mid-century (when unions were
at their peak), but diminishing in the latter part of the century.
Unions are good for the country because they enable decent hard working and courageous
people to achieve good jobs with decent pay and benefits. How is this good for the country?
Well, a worker with a decent paycheck spends his money, and in doing so, creates demand
which in turn creates more jobs for other people. A well paid “working class” is the
backbone of any economy.

Workers with rights, good pay, and benefits enjoy a higher standard of living than non
union workers. That higher standard of living contributes much more to the economic well
being of the country, than the poor worker who only receives the minimum wage with no
benefits. Prosperity is better than poverty if you want a decent economy to live in. It is the
height of ignorance to suggest that stomping the working class down into poverty is good for
the economy, and that is just what employers who oppose unions do. They stomp their own
workers into poverty.

This isn’t rocket science.

Back in the 50’s and 60’s, we had something like 30% of our workers covered by union
contracts, and those were the most prosperous times in our history for the average citizen.
Economic growth which benefited the entire country, was literally record breaking. Now,
with something like only around 10% of our workers under union contract, our economy
only rewards the wealthy, and everyone else is either working poor, or stagnating at wages
that might have been adequate a generation ago, but no longer are.

Do the math. Prosperous working class citizens mean more customers for goods and
services, which translates into economic growth.
Labor Union
REVIEWED BY WILL KENTON

Updated Mar 14, 2019

What Is a Labor Union?

A labor union, also called a trade union, is an organization that represents the
collective interests of workers. The labor union helps workers unite to negotiate
with employers over wages, hours, benefits, and other working conditions. Labor
unions are often industry-specific and tend to be more common in manufacturing,
mining, construction, transportation, and the public sector. However—while
beneficial to members—labor union representation in the United States has
declined significantly in the private sector over time.

How a Labor Union Works

Labor unions protect the rights of workers in specific industries. A union works
like a democracy, holding elections to appoint officers. The union officers are
charged with the duty of making decisions beneficial for union participants. The
structure of a union is as a locally based group of employees who obtain
a charter from a national-level organization. Employees pay dues to the national
union. In return, the labor union acts as an advocate on the employees’ behalf.

The National Labor Relations Act, also known as the Wagner Act, guarantees
private sector employees the right to form labor unions. The act also gives
unionized employees the right to strike and to jointly bargain for working
conditions.

Two large organizations oversee most of the labor unions in the U.S.: the
Change to Win federation (CtW) and the American Federation of Labor and
Congress of Industrial Organizations (AFL-CIO). The AFL-CIO formed in 1955
after the two groups merged and has nearly 20 million members. The CtW spun
off from the AFL-CIO in 2005. Labor unions exist in many nations around the
globe, including Sweden, Germany, France, and the United Kingdom. Many large
unions will actively lobby legislators—on both a local and federal level—to
achieve goals they see as beneficial to their membership.

An Example of a Labor Union

Nearly all unions are structured the same way and carry out duties in the same
manner. The National Education Association (NEA) is a labor union of
professionals that represents teachers and other education professionals in the
workplace. The NEA is the largest labor union in the United States, with nearly
three million members. The union’s aim is to advocate for education
professionals and unite its members to fulfill the promise of public education.

The NEA works with local and state educational systems to set adequate wages
for its members, among other things. When negotiating salaries on behalf of its
teachers, the NEA starts with a bargaining unit. This unit is a group of members
whose duty it is to deal with a specific employer. The bargaining unit, as its name
implies, works with an employer to negotiate and assure that its members are
properly compensated and represented.

U.S. law requires the employer—in this case a school district—to actively bargain
with the union in good faith. However, the employer is not required to agree to
any specific terms. Multiple negotiation rounds are conducted between the
bargaining party and the employer, after which a collective bargaining
agreement (CBA) is agreed upon and signed. The CBA outlines pay scales and
includes other terms of employment, such as vacation and sick days, benefits,
working hours, and working conditions.

After signing the CBA, an employer cannot change the agreement without a
union representative’s approval. However, CBAs eventually expire, at which time
the labor union must negotiate and both parties must sign a new agreement
A labor or trade union is an organization of workers dedicated to protecting members'
interests and improving wages, hours and working conditions for all.

No matter what you do for a living, there's a union with members who do the same
thing. Unions represent:

• mechanics,
• teachers,
• factory workers,
• office workers,
• actors,
• musicians,
• police officers,
• construction workers,
• airline pilots,
• janitors,
• plumbers,
• doctors,
• pharmacists,
• IT/computer professionals,
• government workers at all levels,
• engineers,
• writers,
• nurses,
• and many more types of workers.

Did you know there are over 60 national/international unions that represent millions of
workers across America and Canada? See a list of AFL-CIO-affiliated unions
here and a list of Change-to-Win unions here.

Unions work to make America strong

Unions work like a democracy. They hold elections for officers who make decisions on
behalf of members, giving workers more power on the job.

A local union is a locally-based group of workers with a charter from a national or

international union such as the Service Employees International Union (SEIU) or United
Auto Workers (UAW). A local may include workers from the same company or region. It
may also have workers from the same business sector, employed by different
companies.

How to form a union:

1. It starts with the formation of a bargaining unit, a group represented by a union for
dealing with an employer.
2. It is legal for employers to try to persuade employees not to unionize. However, it is
illegal for an employer to prevent employees from unionizing through threats, violence,
and other coercive action.
3. An employer is required by law to bargain in good faith with a union, although an
employer is not required to agree to any particular terms. Once an agreement is
reached through negotiations, a collective bargaining agreement (CBA) is signed.
4. After a CBA is signed, an employer can't change details of the agreement without the
union representative's approval. The CBA lasts for a set period of time with the union
monitoring to assure the employer abides by the contract. To learn more about
collective bargaining and how unions work, visit CollectiveBargainingFacts.com.
5. As with many other organizations, union costs are paid by member dues that typically
cost about $50 a month. Most unions have paid staff to manage their operations. While
some staff may be paid by union dues, members also often volunteer.
Everyday benefits to help working families

The collective buying power of union members is also used by Union Privilege to
negotiate consumer benefit programs for working families.

Union Plus benefits and discounts are for union members and Working America
members. Benefits include everything from financial services and legal services to
discounts on AT&T wireless, travel, car rentals, flowers, entertainment and more.

Benefits also include unique assistance for workers facing financial hardship due to
disability, layoff, strike and more.

NOTE: No union dues money goes into the development or operation of any Union Plus
program.
 The Labor Movement from Industrial Revolution to Now

The origin of labor unions dates back to the eighteenth century and the industrial
revolution in Europe. During this time there was a huge surge of new workers into the
workplace that needed representation.

In the United States history of unions, early workers and trade unions played an
important part in the role for independence. Although their physical efforts for the cause
of independence were ineffective, the ideas they introduced, such as protection for
workers, became part of our American culture.

The Most Famous Labor Union in History

In the history of America's trade and labor unions, the most famous union remains the
American Federation of Labor (AFL), founded in 1886 by Samuel Gompers. At its
pinnacle, the AFL had approximately 1.4 million members. The AFL is credited with
successfully negotiating wage increases for its members and enhancing workplace
safety for all workers.

The Congress of Industrial Organizations (CIO) under John L. Lewis and the larger
AFL federation underwent a huge expansion during World War II. The AFL-CIO merger
occurred in 1955.

Union membership and power peaked around 1970. At that time, private sector union
membership began a steady decline that continues today. However, membership in
public sector unions continues to grow consistently.

According to the Department of Labor, the 2015 union membership rate was
11.1% and the number of workers belonging to unions was 14.8 million.

Unions and Benefits

In 1986, the AFL-CIO created Union Privilege to offer Union Plus benefits to union
members and their families. Union Plus offers over 20 benefits, including:

 AT&T discounts

 Mortgage program

 Auto buying program

 Travel discounts and more!

A labor union is an organization that advocates for workers' rights and benefits
through collective bargaining.

How it works (Example):

Labor unions represent workers in both the public and private sector. Individual
labor unions represent workers in specific industries and function in an
intermediary capacity between employers and employees. Unions negotiate
directly with employers on employees' behalf with regard to compensation,
conditions and working hours.

Workers employed by transportation, shipping and manufacturing companies

typically maintain contracts with labor unions. The unions agree to engage
employers in collective bargaining in return for union dues withheld from payroll.
The International Brotherhood of Teamsters and United Steel Workers are two
prominent labor unions in the United States.

Why it Matters:

Labor unions protect workers from exploitation and ensure fairness of pay as well
as safe, reasonable working conditions. Many economists argue that labor
unions have a distortive effect on the labor market that results in decreased
efficiency.