How Unions Affect the Workplace

By Mike Einterz

Thousands of people protested in Wisconsin, then thousands more in Indiana, and thousands more in Ohio, because laws were changing about public unions.  But how do public or private unions actually affect the workplace?

A union is a group of people who agree to be treated as an organization with a designated representative to bargain for them with a given employer over the terms of the organization’s members’ employment.  The terms include the wages, hours worked, benefits, and work rules.  Various unions often affiliate with each other to generate more clout.  The prime example of this is the AFL-CIO.  On a local level, a union could be as small as one company’s workforce or even a portion of one company’s workforce, or a union can be very large, like the UAW, in which case the local company’s employees’ union activities are governed by a local office of the union.  The vast majority of union members belong to a national union with a local office.  For example, an electrician may be a member of the National Electricians Union (IBEW) which affiliates with the AFL-CIO, but his union activities would be directed out of the local “office” of that union.

The unions gain power because we, as a country, by law, allow for their formation, and enforce their rights to bargain and protect their members through the government.  The U.S. Department of Labor assists the unions in establishing themselves and policing the relationship between the union members and employers.  If a decision by the government in addressing a particular dispute is objected to by the union or an affected employer, the dispute is judicially resolved through a hearing before an Administrative Law Judge operating under the auspices of the National Labor Relations Board (“NLRB”).  The NLRB is federally appointed and political in nature containing three members from the President’s party and two from the opposition.  Although there is precedent to guide the NLRB, often politics plays a bigger role in decisions than precedent.  Ultimately the NLRB and its Administrative Law Judges are to apply the NLRA, the federal Labor Relations Act.  The NLRA determines with relative specificity what an employer can and cannot do.  It is designed to protect the employee.  It restricts the employer from retaliating against employees, altering their wages or work conditions, or in any manner taking any action that directs their employee in the performance of their job without the union’s prior approval.

The employer loses significant power over its employees when the union arrives.  Similarly, the employer loses flexibility and ingenuity when the union becomes an adversary instead of a partner.  It is this power struggle that makes headlines.  Unfortunately, current labor relations discussions between unions and employers have become centered on less work for more pay, more benefits, and more control.  Concepts of productivity, profitability, and shared risk have left the debate.  This results in adversarial relationships that are tense and unproductive.

Unions as a percentage of the workforce are down from over 25% years ago to under 10% today.  The last bastion of unions is public employees – teachers and government workers.  In this sector the unions have succeeded in raising their members’ wages even above private sector wages, and have garnered generous benefits, far greater than private sector benefits.  As the public attempts to reign in these costs, the unions have balked - just as in the private sector – no one wants to work for less or have the opportunity horizon placed behind them.

Unfortunately, the union leaders – paid by the members’ dues – are rewarded for expanding benefits and wages of their members regardless of the impact on the employer or taxpayer.  There is no formula to govern this relationship.  Similarly there is no market – in public unions – to control costs.  Compounding that situation is politics.  Unions are favored by Democrats and not by Republicans.  When Democrats are in power they expand union power and prestige with the quid pro quo that the unions’ members continue to vote to keep Democrats in power.  Traditionally, Republicans have not actively sought to undermine the unions’ power, but to expose them to more of the power of the market forces.  Only recently have conservative Republicans taken on public unions over their largesse from the taxpayer till.

So it boils down to power to pay more or less, power to receive more or less, and the power to insulate a part of the labor force from the forces of the market.  When unions are strong politically, market forces do not work and therefore cannot guide the marketplace to productive change.  When unions are weaker politically, productive forces in the market cause changes.  Some people like the changes caused by the market – innovation, creativity, productivity.  Some people like being outside of market forces – no change, insulated from economic issues.  This power struggle will continue as long as unions continue to participate in the marketplace and generate power for politicians.