How Unions Can Help Restore the Middle Class

The following testimony on the importance of unions to restoring a solid middle class was given to the Senate Committee on Health, Education, Labor and Pensions on Tuesday, March 10, by Dr. Paula B. Voos, a professor in the School of Management and Labor Relations at Rutgers, and an Economic Policy Institute [www.epi.org] research associate.

Thank you for the invitation to speak today. I am pleased to have the opportunity to consider the role unions can play in rebuilding the American middle class, a matter of utmost importance not only for ending the current economic downturn, but also for our nation in the longer term. As an economist, I have been studying the role unions play in our economy for some time and in 1993-94, I had the opportunity to serve on the Dunlop Commission in its consideration of how labor law should be modernized to serve the “Future of Worker Management Relations in the United States.”

There is now a substantial body of research evidence on the economic impact of U.S. unions. Unions typically:

- Raise the wages of the employees they represent;

- Increase the fringe benefits of those same employees, usually by a greater extent than they increase wages;

- Reduce income inequality within the represented firm, by reducing differentials between low-paid and high-paid employees, men and women, various racial/ethnic groups, younger and older employees, and so forth;

- Increase pay of nonunion workers in occupations and industries with substantial union presence as nonunion employers move closer to union standards;

- Reduce income inequality in the wider society by reducing inequality not only within and between represented firms, but also across entire industries as nonunion employers increase compensation to discourage unionization, all of which strengthens the middle class (Card, Lemieux, and Riddell, 2007).

- Reduce employee turnover by lessening the number of quits (voluntary separations); and

- Thus increase the retention of skilled employees, enhancing human capital and productivity in both the firm and the economy as a whole;

(See Freeman and Medoff, 1984; Bennett and Kaufman, 2007).

Furthermore:

- Because they suffer less turnover, unionized employers have greater incentives for employee training and for high-skill, high commitment human resource policies, rather than low-skill, high-turnover or other “low road” approaches to human resources. Reduced turnover avoids costs to employers but also lessens society’s costs associated with unemployment, such as Food Stamps, uncompensated care and other social programs.

- Union-represented employees have been found to be more productive, on average. This is probably both due to the fact they have more work experience and due to greater employer investments in them and in physical capital (see Doucouliagos and Laroche 2003 for an overview of seventy-three statistically independent studies);

- The nature of the labor-management relationship is crucial in this regard: good union-management relationships are ones that foster high workforce productivity, but workplaces characterized by labor strife and worker resentment—whether union or non-union—do not (Belman, 1992).

- Union employees typically cannot be disciplined or discharged without a reason, termed “just cause.” This assurance of fair treatment is one reason union employees have greater “voice” than non-union employees and typically are more willing to make suggestions or speak up to improve business operations.

The most important reason to improve the ability of employees to organize into unions is that such membership is a fundamental right in democratic societies, related to freedom of association and the right of all human beings to band together to improve their lives. For that reason alone, I would urge you to pass legislation to make real in the U.S. once again the promise of the National Labor Relations Act. Section 1 of that Act puts federal law behind “the practice and procedure of collective bargaining and ... the exercise by workers of the full freedom of association, self-organization, and designation of representatives of their own choosing.” (NLRA Sec. 1).

Nonetheless, some may be concerned with the economic consequences of increased unionization at this moment in time. They should be assured that the economic consequences would be positive. There are two main reasons:

- First, greater union membership would help the United States recover from the current economic downturn and help prevent future economic crises.

- And second, greater union membership would help the United States make the transition to competing internationally on the basis of high productivity, high quality, and innovation, rather than on the basis of low wage labor or long hours - a race to the bottom that we can never win against nations like China.

http://www.epi.org/analysis_and_opinion/entry/how_unions_can_help_restore_the_middle_class/