Benefits of Labor Unions

Labor Unions

The benefits that labor unions accrue to their members are well-known, in terms of offering better bargaining power for work terms and conditions. The relationship between unions and business, however, has often been characterized as adversarial in nature. Yet, there are benefits that unions can offer to the companies that employ them.

The first of these benefits is that there can be efficiency in collective bargaining, versus bargaining which each union member independently. The workforce is more united as well, when things like salaries are transparent. If each member of the workforce bargained independently there could be disparity between workers, creating friction. Collective bargaining also provides businesses with a defense against the appearance of discrimination in the workplace, something that can be valuable for avoiding lawsuits, legitimate or otherwise.

Unions also play a policing function within their memberships. This can include ensuring that members are adequately trained for their roles, where the labor is specialized. Moreover, unions can work with management to create a positive workplace atmosphere by alerting management to issues that are affecting members. When unions contribute to a positive work atmosphere, higher attendance and productivity result. Moreover, unions have the ability to police their membership with respect to things like attendance (Deery, Erwin & Iverson, 1999).

There is more written about the detriments of unions. For management, there will certainly be higher costs with respect to the better bargaining power that labor has, but this might be offset. The offsets would include more professional workers, the availability of substitute workers, and they might also include better productivity from the unionized workers. That said, there are just as many opportunities for inefficiency, for example situations when the union person must be on-site, even if he/she has no work to go. Those costs are higher than they would be for a non-union worker.

It is important, then, for management to get the most out of the relationship with a union. In many industries, unions are necessary to ensure a high quality of work, with the trade-off of higher costs. But for some companies, this is a model that can work. In other situations, the trade-offs are less favorable. A strong downside with unions is that they are organized, and this gives them the ability to shut down a facility, by striking or other job action. This risk is one of the major reasons businesses often prefer not to have a unionized workforce.

Unions are also taking a role as shareholder activists. There are many instances where unions are shareholders in the companies where their workers are employed, and many unions also have large investment funds. There is evidence that shows unions influence is aimed largely at corporate governance. The number of outsiders on boards increases with activist union shareholders, and the union represents a powerful shareholder counter to the messages and plans from the CEO and other executives. What this means is that unions can serve an effective role in ensuring a higher standard of corporate governance, particularly when they are also shareholders. Moreover, no evidence has been found of conflict of interest, where unions own shares to further the interests of their members (Prevost, Rao & Williams, 2012).