The Economics of Unionization

Last month, workers at a Staten Island Amazon warehouse voted to unionize. A remarkable victory for organized labor, workers across other firms backed by national labor organizations are following suit. Villanova economics professor Cheryl Carleton, PhD, explains that the successful warehouse unionization (a grassroots initiative) is changing the way we view labor unions.

“It prevents employees from thinking about unions as just the large existing unions,” notes Carleton. “Workers themselves can coalesce and maintain a unified front to negotiate for what they need from firms.”

And if unions succeed, firms without unions must compete to entice employees to their firm.

As a counterweight to increased unionization efforts, companies have grown in their use of intimidation tactics. We see that in the ways firms retaliate against union organizers. “Many large firms that have lots of money and have fostered strong relationships with political powers do not want to let workers have a stronger voice in negotiation of wages, benefits, and work rules. They will try to have these unions nullified or intimidate workers not to join them,” says Carleton. “There has been considerable consolidation in industries in the United States, which gives firms a lot more power.”

And according to economics professor Mary Kelly, PhD, “firms will argue that if they compensate existing [union-represented] workers with higher pay, better benefits, and improved working conditions, those higher costs will limit the number of new workers hired, encourage the replacement of some labor with capital/technology if possible and/or ‘force’ prices higher to consumers.”

But even if unionization fails, there are still costs to the company. “We see this now with companies increasing the benefits they provide and spending more money to prevent more unionization efforts. The “spillover” effects of the presence or threat of unions increases cost to firms,” says Carleton.

But we still don’t know the final economic impact of unionization. “Companies, the stock market, and shareholders always respond to change and uncertainty, so when a company unionizes it is a period of uncertainty,” says Carleton. “If the company does unionize, does it create more stability and more profitability? Or does it end up being more costly for the firm? Time will tell!”

Despite all the uncertainty, “the idea of unions and the need for unions is still present, and the current labor market situation has given workers the impetus they need,” Carleton says. “Unions are necessary to stand up to industries. Each worker has little power, but combined workers have a stronger voice.”

To speak with Carleton or Kelly, email mediaexperts@villanova.edu