Unions bring higher wages and better benefits to the workers they represent, but they also bring increased productivity to employers and the overall economy.
Anti-union critics say unionization lowers productivity. But according to recent data from the International Labor Organization and some anecdotal analysis of highly unionized employers like United Parcel Service, that argument is bogus.
The media pumped out stories on U.S productivity over the Labor Day weekend with headlines proclaiming the "U.S. Leads in Productivity". But the fine print in the ILO data on which they were based tells another story. The reality is that U.S. workers produce more than workers in other advanced nations because they work 300 to 400 hours longer per year than workers in Europe and Japan.
The media grabbed the raw output numbers in the ILO report, but looking at the real measures of productivity in the ILO data - output per hour worked and productivity growth over time - the U.S. falls to the bottom of the heap among the industrialized nations. And one of the reasons for the drop in U.S. relative productivity that is never talked about is the impact of declining real wages.
Basic economics says that as labor costs rise the incentive for capital investment increases - hence rising productivity. The opposite holds as well - when wages fall there is a relative disincentive to make new capital investments.
As real wages in the U.S. have fallen, so too has the incentive for companies to make productivity enhancing capital investments. In fact, in the U.S., where real wages are lower than they were in the 1970s, there is a perverse incentive to substitute labor for capital.
Recent data (ILO, Bureau of Labor Statistics) shows that where union density and real wages are high, for example in the manufacturing sector, productivity growth is more rapid.
The European countries with strong productivity growth have much higher unionization rates than the United States. In Ireland, for example, where 40 percent of the manufacturing workforce is unionized, productivity per hour worked rose at an average annual rate of 8.5 percent from 1980 to 2005, more than double the U.S. rate.
Higher productivity growth rates and higher wages go hand-in-hand in Europe, where unions remain strong and the wage-setting power of unions reaches a much larger portion of the labor force through pattern bargaining and nationwide agreements. In virtually every European nation with strong productivity growth, total compensation has increased at a higher annual rate than in the U.S.
We can also see that phenomenon in highly unionized firms in the U.S., including in the service sector. The New York Times did a story in July that showed that productivity at United Parcel Service - the most highly-unionized and highly-paid service sector company in America - is skyrocketing as a result of extensive technological research and innovation. UPS has spent more than $600 million in research on package flow technology in recent years.
The research at UPS is paying off. Last year, it cut 28 million miles from truck routes in good part by mapping routes that minimize left turns.
While not the only reason for UPS' heavy investment in technological research, the fact that UPS's workers receive high wages and benefits as a result of their Teamster union contract is certainly an added incentive for the company to operate more efficiently. If UPS drivers and sorters were making the same wage and benefit package as their lesser-paid counterparts at FedEx, the drive to be more efficient and keep delivery rates down would not be as great.
In the end, higher wages and better conditions - the result of unions - are good for workers and good for America.
Greg Tarpinian is the Executive Director of Change to Win.
Comments (1)
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As stated in the post by Greg Tarpinian, "the results of Unions-are good for workers and good for America", is a solid statement with no mis-conception or mis-understanding. As Organized Labor is challenged by the anti union groups, our Brothers and Sisters of the Trades are recapturing the workforce with education, training,quality at a level of excellence that is not in question.
As the Unions of Change To Win see the postive results of the Organizing campaigns we stand and work together with, that same message of working together doesn't stop there. Trades Unions need to unite together to ensure our members are contributing to, and supporting, each other in the workplace. As the Carpenters work next to the Laborer on a construction site, the Teamster delivering materials or removing waste, stands firmly with the element of Solidarity of the respective Trades.
As Employers seek profitibility, the cost cutting approach should never be our Brothers and Sisters of Organized Labor. Employers that use the "Union Umbrella" to seek the benefits of our education, training and quality, should not divide us because of shadows of corporate greed.
Organized Labors vision to recapture the workforce depends on the Brothers and Sisters of the Trades to recongize eachother as one, not as seperate Unions.
In Solidarity,
Thomas Bennett
President
Teamsters "General" Local Union No.200
Milwaukee, WI
Posted by Thomas Bennett on October 21, 2007 at 10:16 PM
Posted on October 21, 2007 at 10:16 PM