Misc. Mondays: Unions Hurt the Economy and Cause Unemployment

I am tired of hearing all of the pro-union propaganda that unions create job security.  While it is true that unions eliminate the employment-at-will doctrine, and employees can only be terminated for just cause, that does not create job security.  Rather, a joint study conducted by two liberal universities, Princeton and UC Berkeley, examined the effect unionization has on corporate performance, and thus the economy.  The entire text of the study can be found here.  Without reading the report – written by highly educated economists – here are some of its conclusions:

  • New unionization is associated with a reduction in a company’s market value totaling approximately $40,500 per worker eligible to vote.
  • The negative effects of unionization on the equity value of firms appears fairly stable over time.
  • An examination of the balance sheets and income statements of both sets of companies reveals that union wins are associated with relatively lower growth.

You have all heard me rant how the auto industry and the steel industry are prime examples of union-ladened industries and how they are not only not profitable, but nearly non-existent.  We can quickly add the newspaper industry to this list.  Newspaper employees are heavily unionized, and print newspapers are filing for bankruptcy at record paces.  The Philadelphia Inquirer, Seattle Post Intelligencer, Tribune (Chicago Tribune and LA Times), Connecticut’s second largest newspaper, Miami Herald, Hearst Corp. (San Francisco Chronicle), and Minneapolis Star Tribune have all either filed or are teetering on the brink of filing for bankruptcy.  There may be more.  In addition to the bankruptcies, 1500 people from almost 50 different newspapers were laid off in February, alone – most of them members of a newspaper union.

My sentiments are not just management oriented, either.  Obama’s Director of National Economic Council, Larry Summers, who wrote the “Concise Encyclopedia of Economics” stated in his book:  “Another cause of long-term unemployment is unionization.  High union wages that exceed the competitive market rate are likely to cause job losses in the unionized sector of the economy.  Also, those who lose high wage union jobs are often reluctant to accept alternative low-wage employment.”