Are Labor Unions Useful for Workers?

In this animating debate with me and my fellow members from the Government and Politics Association at Penn, Louis Cappozzi and Varun Menon, we addressed the question whether labor unions benefit workers or not. It is in response to an article on the failure of UAW (United Auto Workers) to win the union certification election in a Volkswagen plant in Chattanooga, Tennessee.

Larry Liu: The Volkswagen case is peculiar because the management explicitly approved a pro-union vote, as is the tradition in most of the German car plants of VW. The American workers have little experience with worker participation, especially in the southern states. Decades of right-to-work laws have been very effective in the south. But the pressure will soon come back. If you screw workers long enough, there will be a greater push toward unionization. It should be clear also that VW is not endorsing the union to destroy their competitiveness (as one of the largest and most profitable car companies in the world). What VW is doing is to improve oversight and control over their workforce with the establishment of work councils. It is easier for the boss to deal with a union boss than to discipline each single worker. In the US, capital-labor relations have been so hostile that it is either collective bargaining with unions or no unions and no worker representation, and the boss does whatever he wants. The land of the free is not so free for its own working class.


“The UAW suffered a devastating defeat at Volkswagen’s plant here as workers rejected union representation by a 712-626 margin.

The defeat, which came despite Volkswagen’s neutrality, tarnishes UAW President Bob King’s legacy and could make it next to impossible for the union to extend its reach beyond domestic automakers.

(…) Corker and Haslam urged Volkswagen workers to reject the UAW. One leader of the Republican-controlled Tennessee state Senate threatened this week to block any incentives for future Volkswagen investment in Chattanooga if a majority of workers voted for the union.

Unlike previous failed UAW campaigns at Nissan and Honda plants, Volkswagen did not resisted the union here.”

Varun Menon: Glad workers have the choice to reject a union if they feel that union does not represent them.

Larry Liu: Well, the workers are not well informed in this case. The goal of the UAW will be to make the case again to the workers.

Varun Menon: So you’re telling me the workers are dumb Larry?

Larry Liu: Republican lawmakers have carried out a propaganda campaign to demonize unions and threaten VW with a loss of tax incentives if they voted for a union. ““It’s never happened in this country before that the U.S. senator, the governor, the leader of the House, the legislature here, threatened the company with no incentives, threatened workers with a loss of product,” King said.

Varun Menon: We’ll have this debate some other time, but don’t be naive enough to think the union is always right.

Larry Liu: And my reply to you is that “I think that a union is always right”. If you don’t care about the middle class and only the rich, then the following article will be irrelevant to you, but not to the vast majority of American people, who have to work for a living.

“A report on Wednesday from the left-leaning think tank Center For American Progress notes that as middle-class incomes have steadily fallen, so have union membership rates. The middle 60 percent of households earned 53.2 percent of national income in 1968. That number has fallen to just 45.7 percent. During that same period, nationwide union membership fell from 28.3 percent to a record-low 11.3 percent of all workers.”

Louis Cappozzi: Larry Liu, Lets’s not pretend that the unions necessarily represent the interests of the workers. From experience, I can tell you that, in negotiations, the unions look out for their interests first, then those of the Employer, then those of the actual workers. Very often, the dues deductions don’t equal the pay raises the unions negotiate for the employees. Sometimes, unions are good for workers. Other times they are not. I highly encourage you to attend GPA’s Labor Week, coming up during the first week of March. You can ask Philly’s biggest Union boss himself what he thinks.

Larry Liu: Let me quote a WSJ article,

“But it’s possible to come up with a rough upper and lower bound. U.S. unions collected about $8.8 billion in dues last year, according to the Labor Department, a figure that includes private-sector and federal-employee unions, but not most public-sector unions at the state and local level. Those unions have some 54 million members, for an average annual dues payment of about $163 per member.

(…) The median private-sector union member made $878 a week in 2011 compared to $716 for nonmembers, a nearly 23% premium. (The premium was somewhat smaller in the manufacturing sector: $836 per week for union members for $780 per week for nonmembers.) Such comparisons have limited value since there are numerous other variables that affect wages. But to the extent there is a union wage premium, the added cost of dues doesn’t appear to negate it.

Then there’s the question of benefits: 94% of private-sector union members have access to health-care benefits, versus 67% of nonunion members, according to BLS. And employers cover on average 83% of health insurance premiums for union members and their families versus 66% for nonunion members. Union members are also more likely to get paid vacation and sick time and retirement and life insurance benefits. BLS doesn’t put a dollar value on all those benefits, but worker benefits typically account for about 30% of employers’ compensation cost.”

So let us do the math. $163 in annual due payments, and $162 is the union wage premium per week (compared to non-union workers), which is $8424 for the year. So if I have to pay one week of wages in dues so I can get another 51 weeks of the year extra pay, that is a very good deal for me.

Louis Cappozzi, let me examine now your full argument. Arguing that corrupt union bosses will screw up the deal for rank and file workers implying that unions do not have to benefit workers is a gross overgeneralization. One of the weaknesses of unions is naturally that the union boss can distance himself from the rank and file by being coopted by management, but that has to be prevented by a vigilant and activist rank-and-file, and by no means implies that the workers should renounce union membership. The relevant value of comparison for union workers is whether they would be better off without a union. That is to say, would the management cut them such a nice deal if no collective bargaining and no union were available? I can assure you the answer in most cases is no, so the workers will not be foolish enough to buy your argument that a few rotten apples imply the rottenness of the concept of unions.

There is another reason why unions are so important: they help raise wages and working conditions for workers who are NOT represented in the union, but are in the same or similar industry. How is that possible? Well, if the unions are strong and have lots of members, then the non union employers will think twice before they pay shit wages to their non-union workers, who might just as well apply for jobs at the union plant. Now, this reasoning does not work very well in the US private sector, where only 7% of workers are unionized, i.e. 93% have no union representation, but it used to be true historically, and there should be no reason why this should not be so in the future.

Louis Cappozzi: Larry; you have a point when you argue that Unions are necessary to scare employers into keeping wages and benefits competitive for non-Union workers. I would wager that the main reason for the wage difference between Union and non-Union workers has more to do with geography. Due to national politics, Unions tend to be stronger in wealthier states where the cost of living is higher such as New Jersey, New York, and Massachusetts. If you compare wages between Union and non-Union workers by state, I suspect the disparity would be significantly less. I’m not arguing that Unions are never useful, nor that one wouldn’t have been good at the Chattanooga plant. I am, however, arguing that it is not always the case that Unions are good for employees; I suspect there was a good reason that the Chattanooga workers voted against the Union, especially considering that management backed the Union and that NLRB certification rules are definitely pro-Union.

Varun Menon: Keep in mind that laws that prohibit abuses by unions have led to the flourishing of jobs in the southern states, whereas the northern states have seen severe declines. Also keep in mind that in the states that don’t have as big of a union presence, the cost of living is lower.

Mei Ling Liu: When the Union Leader are in corruption, then it is of no use to the employees. When there is no Union, then those oldies are in danger constantly, cause their salaries are higher then the new ones in which the private concern are constantly searching or employing the new one which are cheaper to keep and things get done faster !

Larry Liu: Louis, I will take the point that unions will be stronger in wealthier states, and unions are generally stronger when the economy is doing well and when there are shortages in the labor market. But unions also tend to be stronger, where institutional arrangements make it easier for unions to exist, such as in Germany, where workers are not only represented in work councils but also in the board of directors of the company. I am surprised that this is still anathema in the McCarthyite, red-scared and red-baiting USA.

Varun, it is also true that the cost of living is lower in the poorer south than in the north, but so is the poverty rate. In 2000, the south had 36% of the national population, and 40% of the poor ( In a highly integrated economy, having fewer dollars at your disposal means more poverty, because the southerners also need to acquire higher priced goods from abroad and from the north, not just the relatively cheaper domestic goods.

But the general point stands that with unions, wages would be higher across the board, because the employers have fewer opportunities to divide the workers and allow lower wages to be paid. The reason why Chattanooga employees refused to join a union (the majority was only 53% against, though) was because they were not so well informed about the potential benefits of a union. There was an aggressive political campaign by state-level politicians, who feared that VW unionization would imply an expansion of unions across the whole south, especially car plants that are relatively easier to unionize than other sectors. Sen. Corker told the blatant LIE that if the workers voted in favor of the union, then VW will ship jobs to Mexico, which is contrary to what VW officials have said. VW said that it is neutral about unions, and would know how to work together with unions, as is common practice in Europe and Germany (see . This propaganda and misinformation campaign by state-level politicians has largely worked, and shows the weakness of UAW canvassing and outreach campaigns.

As Varun says, the politicians were scared that this would drive up prices, and make the south less competitive. But there is another force at work: it is about holding down the workforce politically, which is the clearest expression of class warfare waged by the 1% against the workers. If wages are driven up with unions, then it will drive up the purchasing power of these workers, which will allow them to adopt a more middle class lifestyle, and stimulate the economy with extra consumption. In time, the companies will decide to pull the plug on the Tennessee workers by moving out to even cheaper states or out of the US (even though it is not as much the case with VW, which explicitly approved of unionization). But that simply means that the struggle for better wages and working conditions in the form of unionization will need to be exported there. The important point is that as the workers are becoming ever more productive, they should claim their share of what they have produced. Consider the following graph showing the gap between wages and productivity:

Why should the workers not be allowed to claim the things, which they helped to produce, but instead peddle the profits of companies, who are showering their executives with ever more “incentives” and bonuses?

Varun, I looked up the BLS website, which compares unemployment rates across states. The southern states with relatively lower unemployment are Virginia (12th), Louisiana (15th), West Virginia (17th), Texas (19th) and Alabama (20th). Tennessee (43th), Kentucky (44th), and Mississippi (44th) are located toward the bottom with among the highest unemployment rate. So I can barely see any correlation between unemployment and rate of unionization. Unemployment has more to do with the nature of the industry and level of investments, with unions playing only a small factor.

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