Unions becoming irrelevant in 21st century

Labor Day is celebrated to recognize the important contributions that U.S. workers make to the economic prosperity of America. But at the same time, it provides an opportunity to reflect on the declining relevance of organized labor to the success of our workers.

A century ago, unions played an important role in the labor movement by boosting workers’ wages, improving working conditions and giving workers a voice in the workplace. Unions were relevant then because organized labor provided a platform by which workers could better negotiate these issues with employers. But unions are increasingly unable to address the challenges that workers face in the 21st century.

When manufacturing employment started to decline in the late 1970s, due primarily to technological advances and automation and to a lesser degree globalization, workers did not flock to unions to shield them against these changes. In fact, union membership started to decline concurrently with the decline in manufacturing employment. In 1983, 16.8 percent of workers were part of a private-sector union — today that share has shrunk to an all-time low of only 6.4 percent.

While unions cannot be blamed for the job losses that have occurred due to technological advances and offshoring, in many ways unions made matters worse for companies facing those changing global forces. Typically, union wage premiums arise because unions negotiate compensation packages that are artificially above market compensation levels. But in the long run, those wages reduce the profitability of their employers, and investment in the global economy will move away from companies with such high costs and low profitability.

Today, more than half of U.S. states (28) have passed right-to-work laws that affirm the right of Americans to work without being forced to join a union. Foreign automakers like Toyota, Nissan, Volkswagen, BMW and Mercedes have almost exclusively located their U.S. plants in right-to-work states like Alabama, Mississippi, Georgia, Texas and Tennessee to take advantage of the greater flexibility in labor costs and work rules.

Business-friendly right-to-work states attract more investment and create more jobs. For example, a recent analysis of Bureau of Labor Statistics data from 2006 to 2016 revealed that overall employment grew by 8.1 percent in the states with right-to-work laws on the books in 2006 compared to employment growth of only 3.5 percent in compulsory union states.

The decline in unions also reflects the shift toward service-sector work. A one-size-fits-all union-type compensation contract with pay determined mostly by seniority and not merit is no longer desirable or relevant for the workers of the 21st century. America’s workers today are increasingly competing in a highly globalized economy and labor market, and they are no longer are best served by union representation that ignores individual effort.

The verdict is clear. In today’s high-tech, service and knowledge-based global economy, collective bargaining and unions don’t make sense as they once did in the manufacturing-based economy of the 1960s.

Aparna Mathur and Mark J. Perry are resident scholars in Economic Policy Studies at The American Enterprise Institute. They wrote this for InsideSources.com.



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