What Companies Must Know When a Union Tries to Organize Corporate

Senior Management

MEMO to Senior Management:

What are the differences in operating a union-free workplace vs. A unionized workplace?

Here is some background on the issue. A view that many observers express is that unions tend to raise "non-union wages" (Waschik, et al., 2010). The way the argument goes is that when there is a union shop, wages go up. Hence, non-union companies raise their salaries as well to complete with union shops (Waschik, 263). Also, the scenario includes this suggestion: if "production-line workers" get raises thanks to the union, the company will then be obliged to raise the wages of "non-union management" in order to continue their wage differential between the workers and management (Waschik, 263).

There is a rebuttal to those suggestions: market forces have not been taken into account, Waschik explains. When unions raise wages, it causes companies to lay some workers off, and those workers that have been laid off will now search for jobs in non-union houses, which in turn will drive down wages in non-union shops (Waschik, 263). The supply and demand dynamic is supposedly at work here. Meanwhile, when there is a threat of a union coming in, some companies will raise their wages to discourage their employees from organizing for a union to come in (Waschik, 263).

So if this company is very adverse to a union coming in, raising wages and improving working conditions may be the best way to ward off the threat of a union. If the employees are happy and are pair fair wages, why would they want or need a union?

Unions can lower profits for companies

Meanwhile, in the book Microeconomics: Private and Public Choice, the authors point out that "unions do lower firm profits"; and the reason is that higher costs for a company (through higher wages and benefits paid) tend to reduce the profits (Gwartney, et al., 2014). Waschik explains in his narrative that if higher wages result in more productivity, the company will not lose profits. But Gwartney and colleagues explain that in the short run, workers enjoy higher wages; but in the long run because unions tend to bring down profits, that low profitability will result in potential investments on "…fixed structures, research, and development will flow into the non-union sector and away from unionized firms" (Gwartney, 422).

Gwartney provides the experience of the United Auto Workers (UAW) at the "big three" auto makers in the recent past. Higher wages and lucrative benefits (including retirement and health benefits) were negotiated in collective bargaining situations. But foreign car makers (notably Japan) began building plants in the southern United States (and there were no unions in these facilities), began selling cars at reduced prices, and soon because of the competition, the profits of the "big three" (Chrysler, GM and Ford) sank so low these companies had to be bailed out by the federal government (Gwartney, 422). There is another side to this discussion and on page 423 Gwartney explains that the "real source of high wages is…