Cost of Unionization - American Society of Employers - Michael Burns

Cost of Unionization

Did you know that the costs for being unionized are far more than just increased wages and benefits?

A 2003 Employment Policy Foundation study found that a company with 10% of its workforce in a union could experience 2.6% higher unit labor costs and a 21% lower before-tax profit than its non-union counterparts.

Another study by the Federal Reserve Board of Governors conducted in the 1990’s found unionization significantly curtailed investment. The Board study found that “winning a union certification has about the same effect on investment as would a 30% increase of the corporate tax.”

Professor Barry Hirsch, a noted economist at the Andrew Young School of Policy Studies, Georgia State University, reported that;

  • Unionized firm have profits that are 10% to 20% less that non-unionized firms
  • Capital Investment of an average unionized firm is 6% lower than that of a comparable nonunion firm
  • The average unionized firm made 15% lower annual expenditures or Research and Development
  • In studying 510 manufacturing firms, medium growth of non-unionized firms was 27%, while the growth rate of unionized firms was (0) zero.

With the recent spate of union organizing of retail companies what has gone mostly unseen are the small businesses that closed either after being organized or during union organization.

Locally Great Lakes Coffee closed its shop in Midtown Detroit after workers went on strike to try to unionize. Mighty Good Coffee in Ann Arbor, Michigan closed in 2019 after its workers struck because they could not get a first labor contract.

For larger companies that can manage being unionized costs are 30% higher due to:

  • Larger HR/Labor staff needed to handle grievances, rate negotiations and compliance responsibilities that come with government regulations.
  • Increased involvement with regulatory agencies such as the Department of Labor, Occupational Safety and Health and the Equal Employment Opportunity Commission.
  • The cost of specialized labor attorneys to administer the collective bargaining agreement and contract negotiations.
  • Costs that arise for employees called in to cover for other employees in steward representative position so they can attend to union business
  • And more….

The below chart details the hourly cost of wages and benefits for union vs. non-union workers. It shows higher average wages and benefits in a union firm vs. the non-union firm.

Small companies often cannot weather having a union because they cannot raise prices in a competitive market. Larger employers may have some leverage in their profit margins to offset some of the increases in administrative and compensation costs but absent that they have to pass along those costs to their customers.



The Union Tax” How Unions Cost Companies and Jobs. (2/28/2018)

Labor Union News. More Workers Are Left Un-employed (Again): A Coincidence, Or Just Another Union Casualty? (6/1/2024)

Bureau of Labor Statistics (12/2018)

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