How to think about unions
How to think about unions
The good, the bad, and the ugly
Unions are a divisive issue. One camp would have you believe that unions provide better pay and conditions for workers while reducing inequality. That, especially in the long term, they will make conditions better for everyone by providing a level playing field for firms and workers. The other camp pushes the narrative that unions are outdated organizations devoted to the betterment of their members at the expense of the rest of society. That they stifle innovation and lock both firms and workers into a system of byzantine policies. So how should we view unions?
First, note that these two camps largely aren't in direct conflict. It could be true that unions increase wages and working conditions while also stifling innovation and reducing overall efficiency. In fact, I believe that both of these are true. The New York Times recently ran this chart showing the differences in median weekly earnings between union members and non-union members across several industries.
This seems to indicate a massive benefit to being in a union. Unfortunately, this is just a descriptive statistic. The jobs that are unionized and are not unionized differ across multiple measures, so attributing the difference in pay to union membership is inaccurate. Unionized workers might make money because they are in a union, or they might make more money because unionized jobs are more likely to be in high wage areas. Economists know this and have used various statistical techniques to find a true union effect. In other words, they need to find nearly identical workers employed in nearly identical jobs, and where the only difference is union membership. When doing this, they find a smaller but still significant result: union membership boosts income by 10 and 20 percent. Another study found that unions increase workplace safety. This research is not settled; another paper studied unions from 1984-2001 and found no income gains.
So there is evidence that unions appear to do right by their members. That would make sense from an economic perspective; if workers band together they should have more bargaining power and thus higher wages. But this is not the only issue one should consider when thinking about organized labor. A union's purpose is to better the working conditions of its members. A union is not trying to better society or better the lives of consumers (supporters of teacher's unions would do well to recognize this). So while it can be true that unions make conditions better for union workers, they can also make conditions worse for non-members. One study found that unionization results in an immediate decrease in patent quality. They certainly reduce efficiency in some cases; I was not allowed to move my own stuff from one office to another because this could only be done by a union worker. This kind of story is common.
Some unions can become particularly dogmatic, seeking to increase their power and membership at all costs. One damaging example occurred in my adopted hometown of New Haven, Connecticut. It all started twenty years ago, when local IKEA bought an empty office building of rather unique architectural character:
The Pirelli building was occupied by a rubber company but had been empty since 1999. IKEA bought the property in 2003, and built a store on the property in 2004, making it just their 20th location in the United States. IKEA eventually decided that it wanted to sell the Pirelli building to a developer that would turn it into a hotel. To increase the sales price, IKEA decided to get permission from the city to convert the building before putting it on the market.
Converting an empty office building into a hotel is a no-brainer for the city. Hotels bring in municiple revenue, both directly through the tax the hotel pays and indirectly through the taxes hotel guests pay while using the city's amenities. New Haven could also use more hotel rooms. Although several have opened in the last five years, there is a serious lack for a small city with a massive university.
But when IKEA went to the city to obtain permission to turn their empty office building into a hotel, they met pushback from the New Haven planning comission and board of alders. Why? Because they would not guarantee that unionized labor would be used to staff the hotel. This makes no sense. IKEA isn't going to own or operate a hotel on the site. They just wanted legal permission to renovate the empty building so that a second company would buy and renovate and a third company would operate.
Unfortunately, a union was behind the attempted delay. UNITE HERE, a union of mainly hospitality workers, basically owns the New Haven Board of Alders. Those alders who are part of UNITE HERE wanted to force IKEA to commit to having unionized labor staff the hotel. Never mind that IKEA didn't know who would renovate the hotel, let alone who would operate it. Keep in mind that this wasn't a construction union demanding unionized labor for the renovation. This is a hospitality union demanding that a landowner commits to tying the hands of a future hotel operator on a piece of property that is up for sale!
This is just one example of UNITE HERE using scorched earth tactics to better the lives of members, no matter the cost. Having a hotel replace an empty office building is a slam dunk. This is doubly true an iconic building in a highly visible location. Almost everyone wins from this transition. Local businesses make more money, more jobs are available for New Haveners, and tourists have more options. But UNITE HERE doesn't care about that. They would rather have a building sit empty than have a hotel staffed with non-unionized labor. More importantly, they are willing to use legal procedure to block any project that doesn't meet their demands.
Luckily IKEA still got the go-ahead after a 3-1 vote with one abstention. Today, the Hotel Marcel is open for business. Unfortunately, I was unable to determine whether the workers are unionized, but my guess would be no. Will the hotel succeed? That's up to the free market - as it should be.