Why American Companies Fight Unions

When Starbucks stores in upstate New York announced plans to unionize last December, labor historian Ileen Devault wasn’t sure if the U.S. was seeing the start of a trend or just a tiny blip in the history of workers’ activism in the country.

Now, as a wave of unionization has taken hold across shops and industries nationwide, Devault, a professor of labor history at Cornell University’s Industrial and Labor Relations School, knows it’s not just a blip. “It feels to me like a change in the air,” she says, and an indication of a meaningful shift in workers’ mindsets, even in the face of corporate antagonism. Union membership peaked in 1970 at 17 million. This represented more than 30% private sector workers. In 2002 it was almost half. Today however, it appears that membership is on the rise.

In the U.S., the pendulum swings towards unionization represent a larger picture. This is the ongoing tension between business and workers. “Businesses and unions in the United States have pretty literally always had a very contentious relationship,” Devault says. “And it’s a relationship that’s much more contentious than the relationships between companies and unions in other countries. Historians have been trying to figure out for years why it is that it’s so much more problematic in the United States.”

Amazon and other large companies are spending millions on anti-union campaigns while their employees successfully unionize. This relationship is likely to continue to be thorny. But when it comes to the reason that companies have dug their feet in against unions, the answer isn’t so hard-and-fast.

Why are companies fighting unions?

The 1930s saw the rise of unions in America. According to 2021 research in Quarterly Journal of Economics (published in 2021), membership jumped from less than 10% of the working population by 1936 to almost a third of that number in 1956. It remained that way until mid-1980s. They fell out of favour due to an economic culture where companies were focusing on maximising shareholder value and minimising worker benefits. “Those years turned out to be basically a blip in what otherwise has been not only a very contentious, but many times a very violent interaction between workers and employers in this country,” Devault says of the mid-20th century.

During unions’ heyday in the U.S., however, the income gap between the richest and poorest Americans shrunk considerably. “The only time that the bottom tenth of the population and the top tenth of the population have come closer together has been during those years, when unions were operating in the largest corporations in this country,” Devault says. The income gap between the top tenth and bottom tenth of the population grew as unionization fell in 1970s-80s. Based on Census Bureau data, today it stands at an all time high. This is despite the fact that tracking started over 50 years ago. As much as $50 trillion in wealth has been deposited into the accounts of the U.S. top 1% income earners, a downward redistribution of wealth which has squeezed the middle class.

Unions are responsible for bargaining contracts between workers and employers that guarantee anything from better working conditions to higher wages—on average union households have received 10-20% better pay than non-union households, according to one study. This improvement could rise up to 30% when benefits are taken into account. While this is a good thing for workers, it also means that corporations need to adjust their employment practices and balance sheets to comply with the contract. That’s at the heart of the battle between the two forces.

Devault says that the American tradition of valuing private property above public goods makes this difficult. “We’re all supposed to try to gain as much private property as we can, and then protect it from anybody who isn’t us, whatever that means,” she says. “And I think that emphasis—and the fact that the courts have bought into that emphasis on private property—has meant that unions have always been seen as somehow against the whole idea of private property.” Instead of viewing unionization as a net positive that supports better returns for everyone contributing to a company, companies view their bottom line and profits as property that needs to be protected from workers.

Plus, unions give workers power that doesn’t always jive with the preferences of corporate leaders. “Unions aren’t just about higher wages. They are very much about workers having a say about what happens in the workplace,” Devault says. “And that’s what employers don’t like.” When things like vacation policies, health care benefits, and firing practices are set by the union and not the employer, it means the employer becomes more responsible for its workers—and less capable of, say, instituting layoffs.

What has the impact of unionization on companies?

Although labor historians often point to the beneficial impact of unions on income inequality, and growth in the middle classes, economists instead point to the complex impact that unionized employees can have upon corporate profits. A 2009 NBER working paper suggested that “the average effect of a union win at a workplace is to decrease the market value of the affected business by at least $40,500 per worker eligible to vote, based on monthly stock prices… Calculations of the effects of a union victory suggest that it produces large negative returns of 10 to 14%.”

These projections do not take into consideration stock value. Stock value is affected by public opinion and therefore does not reflect pure profit. “Organizing victories reduce growth in assets, because of decreased growth in plant, property, and equipment,” the study said, but “profit, and return on assets, appears unaffected by unionization.” In other words, organizing can slow down certain operations and growth plans, but bottom lines should be fundamentally unchanged.

Continue reading: U.S. Labor Unions are Having a Moment

The true effect of unionization on business success is difficult to parse, further studies note, because unionization is “nonrandom” by nature. According to a comprehensive study from 2003 that reviewed nearly 30,000 firms in a nearly two-decade span, there are two main types of places where unions come together: some organize at “highly-profitable enterprises” that are very likely to survive collectivization, while others organize at firms that are “poorly managed, or… faced recent difficulties,” making unionization particularly appealing to workers. The conclusion, however, was clear: “Unions likely do not affect businesses by making them more susceptible to failure or re-location, despite the fears of many employers and employees.”

Additionally, union workers often see higher wages. This is because wages are more consistent with standards. Workers who make more have more money to spend and lift the economy. It’s the opposite of the trickle-down economics theory that became popularized in the 1980s.

Concerns about the unionization of workers?

There has long been rhetoric that unions do shift the employee-employer relationship—and may impact worker incentivization. Companies argue that workers are less motivated to work hard when wages and conditions are uniform, are fair, and there are no layoffs.

But when unions are functioning well, Devault says, they aren’t just about pay—but about making sure that workers have more overall power in the workplace. “The pandemic has really changed the way people look at their work,” she says. “We’re starting to see now [that one of those changes is that] I want some say in what goes on in my workplace.” And when workers have more say, they can be more invested in their company’s future, too.

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