In his State of the Union Address, President Obama demanded laws that would strengthen unions. What would the country look like if his wish was realized?
“The effects of high unionization are mitigated but are generally skewed towards the negative side”, says economist Youri Chassin of the Montreal Economic Institute. The think tank is based in the Canadian province of Quebec, where close to 40 percent of workers are part of a union.
“They can be analyzed with respect to three main variables: wages, employment and investment. For the latter, having strong unions can have the effect of accelerating automation. Indeed, since physical labor has become more expensive, then buying more low-cost machine makes financial sense”, he says. That would explain why “McKiosks” are becoming more common.
“With respect to wages, it is true that unions bring forth better salaries. In Canada, wages are on average 15 percent higher, whereas it’s 17 percent higher in the U.S. However, this increase comes with two caveats,” the economist explains
“First, this increase means higher structural unemployment. With higher wages, fewer people get hired. This effect can be seen in Quebec; unemployment is higher than other large provinces like Ontario or British Columbia, where unions are weaker.
“Second, highly competent and highly trained workers tend to be losers with unions. Indeed, wage scales become uniform, and wage difference between new and experienced workers get slimmer.”
These higher wages have an effect on investment and employment. “In the short run, the employer will think twice before investing in a unionized business,” says Chassin. If some of his competitors are not unionized, he will look for ways to go around wage hikes, including better retirement plans. This is what the automobile industry did in the 1960s, when retirement didn’t account for much.
“But now, the question is not whether more workers can be hired, but rather if the business is to survive at all. Because of their importance, unions need to take responsibility for their actions and wonder if their demands endanger their employers’ viability,” he believes.
Chassin also questions the legitimacy of some unions. “In Quebec, a business can get unionized when 50 percent of the workers get a membership card. Without a secret ballot, one can wonder if all workers wanted to join the union. In addition, their financial reports are only available upon request, and workers asking for them tend to be frowned upon.”
According to Chassin, this compulsory membership violates the workers’ rights. “The Universal Declaration of Human Rights says that humans are free to join and not join any association. President Obama said he wanted to strengthen unions, not workers.”
In short, Chassin strongly favors workers’ choice. “Let workers choose whether they want to unionize. This way they can choose not to benefit from collective bargaining if it’s detrimental to them. Governments should also let businesses freely acknowledge union. If most workers vote for a union, then it would be in the CEO’s self-interest to negotiate with the union.”