It has been long understood by economists, and many in the general population, that unions can destroy jobs.

Here are a few examples why:

  • Former President Obama’s one-time economic advisor, Larry Summers, wrote:
  • Another cause of long-term unemployment is unionization. High union wages that exceed the competitive market rate are likely to cause job losses in the unionized sector of the economy.
  • In 2003, an Employment Policy Foundation analysis found:
  • …a company with 10 percent of its workforce unionized could experience 2.6 percent higher unit labor cost, and 21 percent lower before-tax profit than its non-union counterpart unless the union impact can be offset by charging higher prices.
    • Economist Barry Hisrch has argued that “a highly competition and dynamic economy has been the principal reason for the long-term decline of private sector union governance.”
    A large union workforce requires financially healthy unionized employers. Competitive pressures limit the size of the union sector if union compensation premiums are not fully offset by higher productivity. Compared to nonunion workplace governance, where there is substantial managerial discretion constrained by market forces and law, union governance is formal, deliberate, and often sluggish. Unionized companies, therefore, often fare poorly in dynamic and highly competitive economic settings. Among a host of reasons for declining private sector union density in the US, the most fundamental explanation appears to be the increasingly dynamic US economy coupled with the relatively poorer economic performance among union than nonunion establishments and firms.
  • This is consistent with Professor Hirsch’s earlier findings that:
    • Unionized firms have profits that are 10% to 20% less than non-unionized firms
    • Capital investment of an average unionized firm is 6% lower than that of a comparable nonunion firm
    • The average unionized firm made 15% lower annual expenditure on Research & Development
    • In studying 510 manufacturing firms, median growth of non-unionized firms was 27%, while the growth rate of unionized firms was zero.

    Further Reading