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Unions: Good or Bad?

Image: Flickr user DonkeyHotey.

I've long supported unions. I've even belonged to two -- when I was a high school teacher and when I was a university administrative worker. But over the years, I've occasionally doubted my pro-union convictions. Permit me to share some of my thoughts and then to solicit yours. I suspect that many who read this article are much more informed about and experienced with unions than I am.

Why unions are good

In much of industrial America, workers long toiled under very unsafe conditions, earning extremely low pay and enjoying little to no legal protections. Unions brought about many major improvements for union workers that are now widespread among union and non-union jobs alike, such as paid vacations, weekends, sick leave, minimum wage, the eight-hour day, child labor laws, overtime pay, pensions, worker's compensation, health insurance, holiday pay, parental leave, workplace safety regulations, lunch breaks, and much more. Unions have served workers well by improving working conditions and helping workers avoid being exploited by employers.

Even today, unions have a strong impact. According to the Bureau of Labor Statistics, union members in 2013 had median weekly earnings of $950 (that's $49,400 per year), while non-union workers had median weekly earnings of only $750 ($39,000). That's a 27% higher income for union workers. And unions have helped push through legislation in recent years, too -- for example, they supported the Affordable Care Act.

Photo: Flickr user A. Michael Simms.

Why unions are problematic
As much as I'd rather not accept it, while unions have done a lot of good and have helped workers avoid exploitation, they can also help workers exploit employers sometimes. Perhaps it has been a gradual shift over time as unions slowly accumulated more and more power -- though the percentage of American union workers dropped from a high of 35% in 1954 to a 97-year low of 11% in 2013.

Unions can have the power to impede a company's ability to compete and thrive. A firm might be in desperate trouble, yet its unions may be unwilling to bend or compromise in order to help the company survive. Many employers find themselves left very inflexible when they have union contracts to abide by. Meanwhile, if a union negotiates high wages for workers at a company, it may lead the company to charge higher prices for its offerings, which can make it less competitive with rivals.

Some argue that unions have led to a decline in the value of merit. In many union settings, workers can't advance much or at all on their merits, but rather they must generally progress within the limits defined by union contracts (where advances might be based on seniority, for example). Employers may have trouble weeding out ineffective employees if they belong to unions. In theory, at least, unionized workers might become so comfortable and protected that they lose the incentive to work hard for their employer. And outstanding employees might lose their get-up-and-go if there's no incentive to excel -- or worse, if they're pressured by the union not to go the extra mile.

Still, it's worth pointing out some of the many, many successful American companies that have unions, such as Southwest Airlines, United Parcel Service, Caterpillar, Walt Disney, Verizon, Harley-Davidson, Ford Motor Company, and Boeing.

Photo: Flickr user Caelie Frampton.

Is there a problem?
So there's both good and bad associated with unions. I suspect that most businesses -- and even many or most investors in said businesses -- would prefer that the businesses be union-free. But that's easier said than done. Many workers, meanwhile, are intent on keeping their unions, and they occasionally organize to form new ones. Just this year, football players at Northwestern University have been petitioning to form one. Meanwhile, domestic workers long denied by law the right to unionize have formed the National Domestic Workers Alliance and have been endorsed by existing unions. Workers at Wal-Mart, too, have been pursuing a union and have even conducted strikes.

With income inequality becoming a bigger problem in America and a more widely recognized one, there a case to be made that the American worker has more need than ever for a voice and for political and economic power.

Is ownership an answer?
One strategy for companies to prevent unions from taking too much control might be to ensure that their workers are as satisfied as possible. That sounds simple, but employee satisfaction can become mighty difficult to maintain as a company grows large. Another option is to convert employees into owners -- via stock ownership or profit-sharing, for example. If workers have a real stake in a firm's bottom line, they may be more sympathetic to management's point of view and more eager to work extra hard to help the firm succeed.

Meanwhile, some are trying to think outside the box and imagine alternative labor union models, such as the "Labor 3.0" project.

Questions remain
This brief foray into union considerations has left me with plenty of questions. For example:

  • If unions are no longer so critical, should they disappear? And if so, how?
  • If unions are indeed still vital, how worried should we be that less than 12% of our workforce belongs to unions, and that this figure has been dropping?
  • If a company wants to avoid unionization, what is its best strategy?
  • How might unions and employers/managements better coexist without one side exploiting the other?
  • How should investors view companies that have unionized workers?

I know that this brief article only covers the tip of the iceberg, but it's a fascinating iceberg. Share your perspective by leaving a comment below.

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Read/Post Comments (4) | Recommend This Article (6)

Comments from our Foolish Readers

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  • Report this Comment On November 22, 2014, at 2:20 PM, dwduke wrote:

    Unions have done their job, very well I might add. I have worked in union shops and non union shops. I prefer the work environment in non union shops much better though. Unions shops have unionized workers who are lazy and exploit the loopholes in the contract to be lazy and never get fired. Those are the kind of workers that go around to the hard working workers and harass them for working so hard. In a nonunion shop there is on of that. There is less stress without the union thugs complaining all the time.

  • Report this Comment On November 22, 2014, at 2:40 PM, Jazzenjohn1 wrote:

    I think we need a new union that stays away from politics and doesn't protect workers that really need to be fired from being let go. We need the wage, workplace fairness, and working conditions negotiation of the union. The rest of it should be stripped out, and the dues should then be lowered.

  • Report this Comment On November 22, 2014, at 3:27 PM, Pwdrskir wrote:

    Unions served their purpose, but are now the problem. The Govt unions abuse the tax payer by double and triple dipping – search any of the following,

    “Decades of double dipping” - Times Union,

    “'Double dip' rules are quietly relaxed” - Times Union,

    “Double-dipping labor leaders stand to reap millions”,

    & protecting child predators – search any of the following,

    A NYC school swim coach repeatedly touched and kissed his female students. Told one to shave the hair around her bikini. Commented on another's tan lines. He paid a $7,000 fine and was instructed to take a sexual harassment class.

    A New York city schoolteacher sent sexually explicit emails to a student -- emails he admitted to sending. It took six years to get him fired, during which he was paid $350,000.

    "Michigan’s largest teachers union will force arbitration in an effort to compel a rural school district to pay a $10,000 severance buyout to a former teacher CONVICED of molesting a teen boy."

    Unions are the biggest abusers of political money and make the Koch Brothers (#42) look like paupers. has the “Heavy Hitters: Top All-Time Donors, 1989-2014” – Top 50


    2-National Education Assn-$73,795,236

    3-American Fedn of State, County & Municipal Employees-$66,986,218

    4-National Assn of Realtors-$64,805,267

    5-AT&T Inc-$59,456,031

    6-Intl Brotherhood of Electrical Workers-$48,593,414

    7-Goldman Sachs-$47,497,295

    8-American Assn for Justice-$45,216,290

    9-Carpenters & Joiners Union-$45,093,750

    10-United Auto Workers-$43,364,375

    11-Laborers Union-$41,402,639

    12-Service Employees International Union-$40,652,457

    13-Communications Workers of America-$38,450,995

    14-American Federation of Teachers-$38,050,160


    16-United Food & Commercial Workers Union-$37,473,121

    17-Teamsters Union-$36,373,152

    18-United Parcel Service-$34,216,308

    19-Citigroup Inc-$33,910,357

    20-National Auto Dealers Assn-$33,904,010

    21-American Bankers Assn-$33,903,955

    22-JPMorgan Chase & Co-$33,752,009

    23-Machinists & Aerospace Workers Union-$33,235,197

    24-EMILY's List-$33,004,994

    25-Newsweb Corp-$32,536,871

    26-Blue Cross/Blue Shield-$31,978,236

    27-American Medical Assn-$31,805,912

    28-National Beer Wholesalers Assn-$31,647,210

    29-Microsoft Corp-$31,226,914

    30-General Electric-$30,392,306

    31-National Assn of Home Builders-$29,412,978

    32-Lockheed Martin-$29,405,272

    33-Bank of America-$28,758,273

    34-Verizon Communications-$27,959,803

    35-Plumbers & Pipefitters Union-$27,495,430

    36-National Assn of Letter Carriers-$27,495,345

    37-Morgan Stanley-$27,259,224

    38-Deloitte LLP-$26,936,093

    39-Credit Union National Assn-$26,036,705

    40-Ernst & Young-$25,517,378

    41-Operating Engineers Union-$25,029,507

    42-Koch Industries-$24,725,058

    43-International Assn of Fire Fighters-$24,605,570

    44-American Hospital Assn-$24,399,366


    46-Time Warner-$23,868,345

    47-Sheet Metal Workers Union-$23,709,978

    48-Boeing Co-$23,384,102

    49-Comcast Corp-$23,377,002

    50-American Dental Assn-$23,265,678

  • Report this Comment On November 23, 2014, at 10:21 AM, CatfishMO wrote:

    I worked for 30 years in a union shop, thank goodness. But in my opinion, The unions need to Phocis more on their end of the contract. That way both sides would benefit greatly. Also the Co`s. would not have to fear the union getting in the door. My experience showed me that there is benefit for both Co and workers in a union shop.

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Selena Maranjian

Selena Maranjian has been writing for the Fool since 1996 and covers basic investing and personal finance topics. She also prepares the Fool's syndicated newspaper column and has written or co-written a number of Fool books. For more financial and non-financial fare (as well as silly things), follow her on Twitter...

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