Union Density and Unemployment

July 6, 2012

1-minute read

A major part of Hudak and the right wing's argument for "right to work" laws is that weaker unions will bring more jobs.
In fact, despite some evidence of a shift of manufacturing investment and production to lower wage/anti union jurisdictions (as in the Caterpillar case) , the mainstream academic evidence is that there is a very weak or no relationship between union density and unemployment among other key economic indicators. High union density does generally translate into a less unequal distribution of earnings, but with very limited impacts on other labour market and economic performance variables.
Here is an eminently mainstream summary of the economic evidence, based upon a comprehensive literature review.
“Union density per se has a very weak association, or perhaps no association, with economic performance indicators such as the unemployment rate, inflation, the employment rate, real compensation growth, labor supply, adjustment speed to wage shocks, real wage flexibility, and labor and total factor productivity. There is, however, one significant exception: union density correlates negatively with labor earnings inequality and wage dispersion.” (Toke Aidt and Zafiris Tzannatos. Unions and Collective Bargaining: Economic Effects in a Global Environment (Washington, DC: World Bank, 2002), p.11.) My colleague Chris Roberts has noted that data in the 2011 Annual Fraser Institute Report on US and Canadian Labour Markets show no negative correlation between US state and Canadian provincial union density on the one hand, and labour market performance on the other hand. Here, I have posted a link to a simple scattergram for the ten provinces, plotting the unemployment rate in May, 2012 against union density. It basically shows no relationship between union density and the unemployment rate. In fact, if one drops the two outliers at either extreme of the scattergram - high union density/high unemployment Newfoundland and Labrador - and low union density/low unemployment Alberta - it looks like unemployment actually falls in line with higher union density.    

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