Capital Commerce

Study: Unions are Bad for Economic Growth

February 7, 2009 RSS Feed Print

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President Obama is a big fan of unions. He should read this interesting study out of Princeton and UC Berkeley concerning the effect unionization has on corporate performance:

We estimate the effect of new unionization on the equity value of firms over the 1961-1999 period using a newly available sample of National Labor Relations Board (NLRB) representation elections matched to stock market data. ... Event-study estimates using both close and large victories, however, show that new unionization is associated with at least -10% abnormal returns, equivalent to $40,500 per unionized worker. ... An examination of the balance sheets and income statements of both sets of firms reveals that union wins are associated with relatively lower growth ...

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This straight from the study:
"Despite an enormous literature that has documented numerous aspects of unions and their role in the labor market, the magnitude of a “average” effect of unions on firm performance throughout the economy remains somewhat unclear, as we argue below."

K. of CA 3:01AM July 18, 2010

Unions were formed to give the American worker a voice and to prevent companies from taking unfair of their employees. OSHA, 40 hour work weeks, lunch breaks, etc. are essentially from unions. Whereas, the 10% in abnormal returns may be accurate, the term "abnormal" here refers strictly to not normal returns that would otherwise go toward the companies profits. In other words, because there is a union, the 10% goes towards the companies employees instead of the pockets of the management. Now, if you support employers getting all the money and the American worker receiving less then the representation that "Unions are bad for Economic Growth" is completely accurate. And technically this is accurate, but a fairer statement would be "Unions are bad for Economic Growth but help the average American worker". A reading of the study in its entirety illustrates this to any fair minded person.

K of CA 2:56AM July 18, 2010

The need to cite number of years worked is very revealing. Whereas poor management can and is often fired for sub-par job performance, union workers get to keep their jobs based on seniority, not merit. How does that make sense? Jim, if union members are as great for companies as you say they are, they should be willing to subject themselves to job performance reviews regardless of seniority. Drop the entitlement mentality and back your talk up with some walk. In America we trade value for value. No one cares how many years you worked somewhere. If you're not doing your job TODAY, you're of no value to your employer and you should be fired. What's more, the longer you stay at the company not doing your job as well as the new guy, the more you cost the customer of your company when that widget you build is sold.

Chet of AL 8:41PM June 17, 2010

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Study: Unions are Bad for Economic Growth

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