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Private-Sector US Unions

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October 13, 2020

The number of private-sector workers covered by collective bargaining agreements (CBAs) peaked in the 1970s, and has since declined. Some 7.5 percent of private sector workers were union members in 2019.

EPI’s Unequal Power project questions the assumption that workers and employers have equal power in the labor market. The employment-at-will doctrine holds that an employer may hire or fire a worker for any non-discriminatory reason, and that a worker may accept or quit any job at any time. Many CEOs are protected by contracts, as are workers covered by CBAs and most public employees

Employment-at-will governs most US employer-employee relationships, making the US an outlier among industrial countries. Federal and state laws restrain some US employer behavior by prohibiting employers from retaliating against employees who report a labor law violation, and some laws recognize an implied covenant of good faith and fair dealing, prohibiting employers from firing older workers to reduce health and retirement costs or firing a salesperson just before a bonus is to be paid.

Economic models of competitive labor markets assume full employment, workers who change jobs easily, and workers who are paid the value of their marginal contribution to production, that is, the amount of the good or service produced by a worker multiplied by the marginal revenue to the business of this production. Competitive labor markets should squeeze out discrimination because firms that do not discriminate could hire productive workers cheaper and undercut firms that discriminate on the basis of race or sex when selling goods and services.

Few labor and product markets are perfectly competitive, and many labor markets are becoming more imperfect. Most employers have at least some power over the prices that they can charge for their goods and services, and some power to set wages and working conditions. When there is unemployment and uncertainty, workers may accept wage and benefit reductions to keep their jobs, as with studies that find that 80 percent of workers stay in jobs after significant wage and benefit cuts due to the uncertainty of finding another job.

Unions are a means for workers to collectively deal with employers, using the collective power of workers to pressure employers to raise wages and to improve working conditions and benefits. Unions may call strikes to halt production or mount boycotts of firms, while employers may hire replacement workers and lock employees out of their jobs.

Government legislation and court decisions frame the relative power of unions and employers in labor markets. The Unequal Power project finds that legislative and judicial power supporting unions peaked with the 1935 National Labor Relations Act, which granted most private sector workers the right to organize into unions and required employers to bargain with unions that won NLRB-supervised elections.

Laws and court decisions in the 1940s and 1950s, and economic changes such as automation and the integration of the global economy in the 1960s and 1970s, reduced the power of unions. Private sector union membership began to fall sharply in the 1980s. Less than 10 percent of private sector workers have been union members since 2000.

The share of private-sector union members peaked in the mid-1950s


Source: https://www.epi.org/publication/private-sector-unions-corporate-legal-erosion/

What ended the golden era for private-sector unions between the 1940s and 1970s? The Unequal Power project points to employer opposition, government de-regulation, and globalization that set the stage for the demise of private-sector unions in the 1980s and 1990s. Milton Freedman’s celebration of the free-market convinced many legislators and judges that market activities were the optimal way allocate labor and other resources, and that workers and employers had equal power in the labor market.

Employers in the 1980s moved some manufacturing from the US to lower-wage countries and outsourced more employment to contractors and staffing agencies. President Reagan fired and replaced striking air traffic controllers in August 1981, emboldening private employers to follow suit, as when Greyhound in 1990 replaced striking bus drivers.

Union membership fell sharply in the 1980s


Source: http://www.faireconomy.org/class_race_the_attacks_on_public_employees

Instead of assuming that unions were permanent fixtures of workplaces, business schools and labor consultants emerged to help employers to operate without unions. Management rights became a mantra in the 1980s and 1990s, and more employers warned workers that striking for higher wages and benefits could result in permanent loss of jobs. Many unionized workers accepted wage and benefit reductions as power in the labor market shifted from unions to employers.

Court decisions further limited the power of unions. The US Supreme Court’s 1981 Fibreboard decision strengthened management rights by limiting the types of decisions that employers must negotiate with unions. This means that firms could move jobs overseas without bargaining, even if the result was a loss of jobs in the US. Union membership, traditionally higher in manufacturing than in private-sector services, fell faster during the 1980s.

Union membership fell faster in manufacturing than in non-manufacturing since 1975


Source: https://www.epi.org/publication/private-sector-unions-corporate-legal-erosion/

In many industry sectors, the sharpest drops in union membership occurred between 1979 and 1983. In communications, mining, and durable goods manufacturing, union membership continued to decline after 1983, but at a slower pace.

The sharpest drop in union membership was between 1979 and 1983

Union Coverage in Selected Sectors
1979, 1983, and 2019
  Union Coverage (%) Change (%)
  1979* 1983 2019 1979–2019 1983–2019
Mining 37.2 23.1 4.6 -32.6 -18.5
Construction 35 30.4 14.5 -20.5 -15.9
Nondurable goods manufacturing 32.5 28.4 9.7 -22.8 -18.7
Durable good manufacturing 39.8 32.1 9.2 -30.6 -22.9
Utilities 46.7 43.7 25.1 -21.6 -18.6
Wholesale 12.7 10.9 5 -7.7 -5.9
Retail trade 10.9 9.7 4.7 -6.2 -5
Transportation/warehousing 52 53.6 24.1 -27.9 -29.5
Communications 54.6 51.7 13 -41.6 -38.7
Source: https://www.epi.org/publication/private-sector-unions-corporate-legal-erosion/

The Protecting the Right to Organize Act of 2019 (HR 2472) would increase the enforcement powers of the NLRB, allowing the NLRB to impose $50,000 civil penalties on employers who commit unfair labor practices and $100,000 penalties on employers who unlawfully discriminate against or fire workers because of their union activities. The Pro Act would also expand the definition of joint employer and allow CBAs to require all workers in a bargaining unit to contribute to the union as a condition of employment. Employers would have to report to DOL the names of any labor consultants they hire to try to influence their workers’ attitudes on unions and collective bargaining.

References

Mishel, Lawrence, Lynn Rhinehart, and Lane Windham. 2020. Explaining the erosion of private-sector unions. EPI.


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