Politics aside, most everyone can agree that unions served a critical role throughout North America in the twentieth century. We can all think back to the horrors that Upton Sinclair exposed in The Jungle, a turn of the century expose that showed what unchecked industrialism could bring. Thanks in part to government reform and the entrance of organized labor in industries such as meat packing and food distribution, working conditions improved and products became safer to consume.
Union growth continued in the first half of the twentieth century, reaching its peak in 1945 during World War II, when union membership represented one-third of employed people in North America. But by 1979, the unionized figure would drop to less than a quarter of the workforce. The decline would continue throughout the eighties and nineties—according to the US Department of Labor, union membership stood at only 12.9% of wage and salaried workers in North America in 2003. But in looking at union impact on the private sector, this number is deceptive, as this figure also takes into account government workers, nearly 40% of which are unionized. So in realty, less than 10% of private sector workers are unionized today.
In other words, union impact on the private sector continues to shrink, begging the question, are unions still relevant? Certainly from a quality standpoint, there is little difference today in the quality and performance of union and non-union workers (which was not the case in the not-to-distant past). In fact, many manufactures complain off-the-record about the tense relationships unions can bring, which in some cases can actually increase accidents and reduce efficiency. We’ve personally heard of multiple stories of physical aggression against management; in one particular case, a union worker intentionally tried to run over a plant manager at a major automotive plant.
Today, many manufacturers appear determined to reduce their reliance upon union workers by taking more aggressive steps to combat union influence. Some, such as CNH Global, a company cited in the Chicago Tribune article that, we’ve reprinted in this edition of Surplus Record, are locking out union workers, in hopes of negotiating more favorable contracts. By forcing union workers off the job, employers are clearly displaying the leverage they have in today’s job market.
For many companies such as CNH, cutting salary and wages is not the major reason for their interest in reducing union influence. In fact, the gap between union and non-union compensation is closing. One study by the Employment Policy Foundation found that “the difference between earnings of union members and non-union workers in the retail sector is quite small. In 2001, union members earned an average of $464 per week; compared to $442 per week for non-union workers.” Companies such as CNH are taking what some consider radical steps to cut union power because they’ve realized that they need more flexible work arrangements to manage rising healthcare and pension costs that threaten to make them uncompetitive in the world market. But they also realize that they can find equally skilled―or even higher quality―labor outside of unions.
In today’s world, an aggressive anti-union stance does not imply policies that harm workers. Many leading companies that compete on customer service and operational efficiency have learned that good employee practices make for better business—regardless of union affiliation. Costco, the warehouse club, has the highest compensation packages in the business, yet the great majority of its workforce is non-unionized. The lowest paid employees at Costco earn $10 per hour, but this quickly rises to $44,000 annually by the fourth year of employment. Why does Costco pay so much more than the average retailer? Because its turnover rate hovers at approximately 20 percent (roughly 1/3 the turnover rate of most retailers, according to the National Retail Federation).
Clearly, organizations like Costco are onto something: higher compensation leads to better, more satisfied employees whose loyalty is to the company, not trade unions. This begs the question: are unions still relevant?