Does the Union Label Mean Higher Wages?

New study investigates

Unions often claim that their members earn much more, on average, than nonunion workers. The AFL-CIO, for instance, says on its website that union workers make 27 percent higher wages. If this were universally true, you would expect unionization rates to be climbing, but just the opposite is happening. This suggests that the truth about the union wage premium is more complicated than unions let on, and a new paper published by the Mackinac Center tackles this issue directly. 

The study, “Problems With Estimating the Union Wage Premium,” is the product of Christopher Douglas, chair of the economics department at the University of Michigan-Flint and a member of the Mackinac Center’s Board of Scholars. Douglas finds that, contrary to the AFL-CIO’s claim, the average union wage premium was less than 15 percent in 2014 and had fallen by 33 percent since 1985.

But Douglas dove deeper into the government data and discovered other interesting findings. For instance, in two entire sectors in 2014 — nondurable goods manufacturing and wholesale trade — the union wage premium was zero and in two others it was less than 10 percent. Also, in nearly every sector with a substantial union presence, average nonunion wages are growing faster than average union wages.

Douglas also highlights a recent study that compared the performance of two types of businesses: those that had narrowly voted to unionize and those that had narrowly voted not to unionize. What he found was surprising. Firms that unionized were more likely to reduce their payroll, pay lower average wages and hire fewer workers. They also were more likely to go out of business. This study is about as close a comparison as one could hope for in assessing the real effects of unionization on workers and businesses, and for workers, it raises questions about the value of unionizing.