Why Are Labor Unions Necessary?
Many small businesses see labor unions as a major source of discomfort. They often fear that the collective power of unions will result in work stoppages from strikes and higher wages, harming company profits. During a sluggish economy, when small businesses are struggling to remain competitive, these fears may be multiplied. However, economic research demonstrates that unions have played a vital role in creating the American middle class and remain an important factor in economic recovery.
Labor unions typically raise the wages of employees they represent, increase benefits and reduce income inequality within firms where there is a union presence, according to the Economic Policy Institute in Washington, D.C. In addition, organized labor has additional economic impact by raising the wages of nonunion workers in industries with a substantial union presence by causing nonunion employers to set wages and benefits closer to union standards, EPI reported.
During testimony to a U.S. Senate committee, EPI research associate Dr. Paula Voos pointed out that a successful economic recovery requires a strong middle class with the purchasing power to consume the goods and services produced across the economy. By raising wages and benefits in unionized firms and encouraging nonunion employers to raise wages in an effort to avoid unionization of their workplaces, organized labor benefits the middle class.
Voos also pointed out that unions have other economic impacts besides raising wages and benefits that benefit an economic recovery. By improving wages for workers, unions also reduce employee turnover and increase retention of skilled workers, both of which reduce business costs and reduce the demand for federal benefits, such as food stamps and unemployment compensation.
Although many small business organizations, such as the National Federation of Independent Business, oppose labor unions as harmful to small companies and economic recovery, "Inc." magazine points out that many worker protections people take for granted, such as workplace safety rules, the 40-hour work week and overtime, were the result of labor unions. "Inc." cautions employers that they cannot interfere with unionization processes once employees initiate efforts to organize. Other unfair labor practices include threatening to fire employees who vote to join a union or threatening to close a company if employees unionize, according to "Inc."
Voos testified that the notion that unions harm economic recovery is misguided, noting that unions and their members are rational and do not issue demands that would force firms out of business. She cited studies that show that unionized firms are no more likely to go out of business than nonunion workplaces.