Union membership decline and impact on firm equity value

¶ … Union Trends Such as Consolidation of Unions Through Mergers, or the Development of a Competing Labor Federation

The topic of unions in the United States is truly a significant one, given the fact that trends and defining characteristics which impact unions have been so mercurial of late. "Union membership in the United States has declined significantly in recent decades. The number of union members peaked in 1979 at an estimated 21.0 million. In 2003, an estimated 15.8 million workers were union members" (Mayer, 2004). In the 1950s when unions were considered more novel in the United States, around one-third of all workers were members of a union of some sort. Now the numbers are hardly the same (Mayer, 2004). In 2003, around ten percent of all employed workers could be considered as members of some sort of union (Mayer, 2004).

Other research findings echo that the current trends and sweeps that unions are undergoing deserve closer scrutiny as well. It's generally clear that employers and firms at large hold no small amount of opposition to unions and the goals that unions generally hold in protecting the worker from exploitation, intensive working hours and hazards on the job. Even so, it's important to look at the impact that unions have on firms: "Event-study estimates show an average union effect on the equity value of the firm equivalent to $40,500 per unionized worker, an effect that takes 15 to 18 months after unionization to fully materialize, and one that could not be detected by a short-run event study. At the same time, point estimates from a regression discontinuity design -- comparing the stock market impact of close union election wins to close losses -- are considerably smaller and close to zero" (Lee & Mas, 2012). Ultimately, researchers have located a negative rapport between the cumulative abnormal returns and the vote share in encouragement of the union, thus permitting a reconciliation among what appears to be findings that contradict (Lee & Mas, 2012). Given these findings and the distinctions which have emerged in the last decade, it becomes all too important to take a truly close look at how unions operate, their levels of effectiveness, their impact on workers and firms alike, along with their impact on local and greater economies, and the stock exchange.

Definition

According to investopedia.com, a labor union can be defined as "An organization intended to represent the collective interests of workers in negotiations with employers over wages, hours and working conditions. Labor unions are often industry-specific and tend to be more common in manufacturing, mining, construction, transportation and the public sector" (2014). Within this definition, the website has acknowledged the union membership has declined for the most part in the United States and that there are a variety of reasons for this, some stemming the recent economic crisis to the lack of jobs in America period, and the greater willingness of the individual to accept lower wages and non-union work. One common misconception that people have about unions is that the security clauses force workers to join and pay full dues as a means of seeking employment, but the reality is that it is vehemently against the law to force workers to join. Some of the most famous unions in America are the Screen Actors Guild, the Teamsters, and the American Postal Workers Union, along with the unions for steel workers and autoworkers.

3. Relevance

The relevance of current union issues cannot be underestimated. However, the decline of labor unions was something that most Americans found largely unimpressive and unremarkable, and this is understandable as the bulk of Americans aren't in unions: "It's a vicious cycle: as unions decline, fewer people see their fates as bound up with unions, which just accelerates the decline" (Liu, 2013). However, the fate of unions is important and striking. Americans still remain in the consequences and grip of the Great Recession which has put a greater focus on the need for organized labor and protected labor. However, it's misinformed to think that unions are dying simply because American's aren't in them. Unions help the economy thrive in a variety of ways: "Unions restore demand to an economy by raising wages for their members and putting more purchasing power to work, enabling more hiring. On the flip side, when labor is weak and capital unconstrained, corporations hoard, hiring slows, and inequality deepens. Thus we have today both record highs in corporate profits and record lows in wages" (Liu, 2013). The reason it's so problematic when people take unions for granted is that they don't realize all the good that unions do. Unions help in lifting wages for members and non-members, by creating an overall higher prevailing wage (Liu, 2013). Unfortunately, when unions are pushed over to a tiny fraction of the minority, the public then begins to see them as unimportant and simply helping to benefit special interest groups and special privileges on the dime of the taxpayer: such a thought process is damaging to the economy (Liu, 2013). One could argue that the economy is in such terribly shape today as a result of the fact that people have attempted to squeeze the power from unions and to disperse their ability to protect workers.

However, it's important to administer blame and responsibility where it is due for the most part. Unions have still managed to play a part in their own decline and destruction. Some of the work rules that they've accomplished through bargaining have meant they are less able to respond to necessary changes in the world. Thus, there is still a prevailing need to reinvent unions and the way that they protect workers. "That's why a few national labor leaders, from Service Employees International Union and elsewhere, have launched a "Labor 3.0? project to reimagine unions" (Liu, 2013). Nevertheless, it's important to keep in mind that organized labor is precisely what keeps an economy healthy and balanced (Liu, 2013). This is crucial to bear in mind as certain conservatives argue for a higher federal minimum wage based on the idea that when firms pay their employees more so they can live the employees will depend on federal programs to a smaller extent: this is vital as one can make the same case for unions, more or less (Liu, 2013). Workers at companies like Walmart which have no union are generally more dependent on government programs like food stamps and Medicaid, and are less financially independent (Liu, 2013). "If we want a better economy, then, we need a better story about how the economy works, in which a union worker is not a cost but a customer. The weakness of labor is everyone's problem -- and its revival everyone's opportunity" (Liu, 2013).

Key Issues/Constituents' Major Concerns

Employees

One of the major reasons that these unions exist is because they make security and growth a possibility. These unions are able to offer individuals and larger entities a certain degree of peace of mind, while allowing certain organizations the ability to expand and collect capital. Many of these unions provide places where workers can be secure with benefits packages, and a living wage that allows them to better support their families and have more livable lives, now and in the future.

Unions function to protect the workers who are members, along with the ones who are not. "Unions raise wages of unionized workers by roughly 20% and raise compensation, including both wages and benefits, by about 28%" (Mishel, 2003). Unions are able to better minimize wage inequality for workers who don't have a college degree which is so important, as not everyone should be forced to go to college in order to have a good job. More importantly the ways in which unions protect workers generally revolves around the strong pay standards that are set forth. Workers with just a high school diploma generally earn 5% more than workers who do not (Mishel, 2003). Thus, the influence of unions on the total non-union wages is almost as massive as the impact on the total union wages (Mishel, 2003). Overall, one of the biggest advantages which his offered to workers revolves around the fact that the fringe benefits for the average employee is significant: these workers receive things like paid leave, while being given health insurance, and pension plans (Mishel, 2003).

All of these functions continue to fall within the general umbrella of offering extreme financial safety and advice. Just as financial institutions exist as a means of providing options to the users, so that people have places to put their money where it will be safe and also to provide support and potential for growth and development, unions allow their members to live better and safer lives. Unions are strong backbones of society as they offer up possibilities for expansion and safety. Thus, they are able to enlarge horizons and help entities better weather the storms of life -- or at least worry about them less.

Employers and Government Agencies

Another overwhelming function of unions is the extent of transformation that they are able to provide firms with. Companies can change their image by hiring workers who are members of unions. This makes it appear as though they care more deeply about their employees. This is analogous to the manner in which financial entities are able to transform liability-assets. Unions also have the ability to transform risk: they distribute risk via modes of diversification and minimize it for savers in the case of particular workers. With greater and more organized presence of a union, it gives employers the possibility to engage in a certain amount of maturity transformation -- something which is important not just for government agencies and bodies which are looked after by greater institutions, but also society as a whole. They can find other ways to save and other ways to create greater avenues of stability for themselves.

Thus, the importance of these unions is truly no small feat. These unions are able to transform the institutions that they end up serving; on the other hand, non-intermediaries are able to give loans but are not able to gather the deposits or funds from savers in the same cohesive manner. Regulators are able to keep an eye on the markets and watch transactions (Mugunth, 2013). Unions, like intermediaries are a particular group that are able to support overall prosperity by engaging in the most stable and protective methods for workers which are humanly possible, allowing them to extend a blanket of stability to the companies that they serve.

Problems that Unions can Cause

There's a truly pervasive reason as to why some people absolutely despise unions. "They create an 'us vs. them' culture within companies, instead of putting everyone on the same team. They create a culture of entitlement. They restrict flexibility and hurt competitiveness. They drive companies to move jobs out of the country, to places where there are no unions. They often become career employment for their leaders, who pay themselves well (much better than the workers they're representing)" (Blodget, 2012). These are all realities of what unions can do to the economy, to the labor force and to society. There are certain difficult compensation and benefit packages available to union members that seem absurd to the rest of the world: for example, bartenders in certain New York hotels can earn six figures a year. Unions push for a level of equality that is not always merited in society as a whole, pushing companies to no longer value the skills that employees bring to the table, but which minimize the incentives for workers who do amazing work (Blodget, 2012).

Necessity of Unions and Union Mergers for Society

One of the major necessities of union mergers is that they allow unions to be stronger for society at large. Union mergers are one of the strongest assets which are potentially available for society at large as they allow for a potential reversal of the massive inequality which is beleaguering the United States as a whole. Companies are continually refusing to share their wealth with their employees, creating a situation where workers are viewed simply as replaceable widgets which are there to fulfill the most set tasks. "Great companies in a healthy and balanced economy don't view employees as 'inputs.' They don't view them as 'costs.' They don't try to pay them 'as little as they have to keep them from quitting.' They view their employees as the extremely valuable assets they are (or should be)" (Blodget, 2012). There is a repeated and sustained failure to share wealth with employees, a mindset based on scarcity and selfishness and this mentality is becoming ever more apparent based on the rampant insecurity which abounds throughout the wages and development.

Consider the following tables compiled by economist Henry Blodget. Blodget's following tables demonstrate that part of this inequality is as a result of a diseased mentality in the U.S. In regards to labor. The table below demonstrates that corporate profit margins have just peaked, meaning that companies are making more money than they ever have (Blodget, 2012).

While this might seem innocuous and generally good for society, the issues that this creates become apparent when one considers the average wage received. The chart below is in direct connection to the chart above, demonstrating that wages received, in conjunction with the general economy, are at an all time low. This is creating a system of imbalance which is only forcing the entire economy to suffer from a lack of health. Unions need to be able to merge and combine so that they can interweave and crisscross, making a situation of greater stability, for all involved -- the shareholder, the company and the American worker. With massive imbalance, there's a danger that the economy can veer off.

(Blodget, 2012).

The problem revolves around the fact that when companies have a preoccupation with "shareholder values" can put companies in a situation where they feel it's overly important to make the earnings as maximized as possible, rather than making the moves that will help to best sustain them: investing in human and physical capital (Blodget, 2012). American companies need to have an increased willingness to exchange some of their current profits to invest in the wages of their workers so that they have more money to spend (Blodget, 2012). "And as American workers spent more money, the economy would begin to grow more quickly again. And the growing economy would help the companies begin to grow more quickly again" (Blodget, 2012).

More union mergers would be able to help curb the current obsession that so many companies have with fostering profits, that they're harming their own employees, snipping their investments and undermining their own future growth: this is largely a temporary strategy and one which undermines the ability of the economy of thrive.

Best Practices: Unions for Economic Development

So many of the functions of unions revolve around the ability to help foster economic development and to bolster the security of the average worker. One cannot underestimate the crucial role that unions are able to demonstrate by their abilities in catering to the important needs of workers by making sure that the needs of society are taken care of as a whole. Many unions are able to offer ease of earnings and even money management with a more aggravated level of cohesion, creating a higher level of conveniences within the modern work experience. This creates a situation where economic development is more likely to occur, with a more stable society and workforce as a whole.

Unions are more likely to be aware of the necessity of a balance and harmony in their existence. Unions can also help themselves develop by making the best use of credit within their systems: "A decent financial institution must make sure that they cater to the all the needs of investors by making high amounts of capital for the big and expensive projects that are being undertaken by the industrial and service sectors" (Milford, 2013). These union need to have a clear picture that they are supporting these massive entities and the individual team worker, as both are needed as a means of developing the nation's economy. Thus, when an institution has a strong level of credit availability, it indicates a situation where all connected parties will be able to thrive. Thus, in order to act as this massive backbone of society, financial institutions really need to be able to provide credit in a meaningful manner, allowing borrowers to buy and item or begin a venture based on the believe that income will eventually be coming in.

This allows individuals to follow their dreams, attend night school, purchase cars, and invest in real estate. Essentially, unions help people to lead better and happier lives. It's quite common throughout the nation for governments to change fiscal policy rules and regulations with a certain degree of regularity; when partnered or working harmoniously with the government, institutions can better help direct the economy in a beneficial direction while connecting and following the government mandated fiscal policy. In fact, the government can even take initiative in this regard to help by creating societies which value unions and which value the roles unions play in fostering strong economies and a satisfied workforce.

The first step of the change process towards a merger involves assessment. Assessment is simply a realistic viewpoint on the way things currently are and how they potentially need to be adjusted. Assessment is crucial because it means that the manager needs to have the ability to take a realistic viewpoint of the circumstances at hand. A strong connection to reality and an ability to look at the good, the bad and the ugly is essential.

Based on that ability to look at things as they are, the union leader needs to be able to draft an appropriate plan for the future. This means the manager needs to be able to develop a vision for how the future of the organization needs to look and the path that will be taken to get the organization there. One of the trickiest aspects of this process involves implementing the change process, as this means the organization will have to commit to changes in protocol and be taught new steps. The union leader's attitude is essential during the implementation process.

Finally, the evaluation aspect is next in the change process, as the union manager needs to realistically assess how successful, exact and relevant the entire change process was and what can be done to adjust it. The manager needs to accept that his change process might need dramatic changes or rapid adjustment and must be prepared to implement that.

Summary

This paper has looked at the range of unions that exist in the world today and the various reasons why they exist. We've seen that unions truly accomplish a range of objectives, but that their primary functions are to provide security to workers and to help remove the fear from the uncertainty of life. This can be achieved by providing the pillars of employment support that are crucial in order to create a stable economy or workforce: these are things like health benefits and high wages and stock options. Investing the time and effort in keeping employees happy is absolutely crucial if companies are going to thrive and if the economy is going to achieve and maintain a base level of stability. Allowing unions to merge and to reap greater amounts of financial success and deeper levels of organization is absolutely essential for the more nuanced evolution of the economy as a whole.

Another massive function that unions fulfill is that they exist to help empower people and groups. The cushion of support that unions can provide can help a person to fulfill their dreams and can help businesses to massively expand through an organized and satisfied workforce. Fundamentally, this paper has seen that unions exist so that workers on a collective and individual level can thrive and expand and so that the economy can become more stable and evolved. All the efforts that union leaders and company leaders can engage in so that they are able to foster stable and sustainably bright futures for all team members need to be the result of an organized and lasting merger.