Labor Unions: Collective Bargaining and Worker Rights

What Is a Labor Union?

A labor union is an association of workers who have come together to attain common goals — such as better working conditions, fair wages, and job security. The leadership of the union negotiates with the employer on behalf of union members, and the resulting labor contracts are known as collective bargaining agreements (CBAs). These agreements can cover a wide range of issues, including wages, work rules, complaint processes, rules governing hiring, firing and promotion, employee benefits, workplace safety, and other related policies.

The contracts negotiated by union leaders are binding on both the employees and the employer — and in some cases, even on workers who are not members of the union. Once the government approves a union's position as representing a group of workers, it represents them exclusively, regardless of whether particular employees want collective representation (Reynolds, 2008).

A union operates much like a democracy. Unions hold elections to determine officers who then make decisions and represent the membership. Union members pay dues that cover the union's operating costs, and most unions employ full-time staff to run their operations. Though staff are paid from dues, members occasionally volunteer their time as well. Some unions also establish strike funds to support workers financially in the event of a work stoppage (Silverman, 2010).

Legal Rights and Collective Bargaining

Section 7 of the National Labor Relations Act gives employees the right to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of mutual aid and protection. It is an unfair labor practice (ULP) for management to infringe upon these rights (The Law, Employee Rights and How They Affect Workers' Rights, 2006).

An employer is required by law to negotiate in good faith with a union, although the employer is not mandated to agree to any specific terms. Once an agreement is reached through negotiations, a collective bargaining agreement is signed. A CBA is a negotiated contract between a labor union and an employer that sets the conditions of employment for union members, including requirements related to wages, hours, working conditions, vacation, sick days, and benefits.

After a CBA is signed, an employer cannot alter anything specified in the agreement without the union representative's consent. The agreement remains in effect for a fixed period of time, and the union monitors the employer to ensure compliance. If a union believes an employer has violated the CBA, it can file a complaint, which may ultimately be resolved through a process known as arbitration (Silverman, 2010).

Union Wage Premiums and Economic Impact

The economic impact of union membership is substantial. Full-time nonunion workers in 2002 had average weekly earnings of $587 — 21% below the $740 earned by union members. A survey conducted in 1985, covering approximately 200 economic studies, concluded that unions were responsible for their members' wages being, on average, 14 to 15% higher than wages of equally skilled nonunion workers. Other economists have argued that the union wage premium was 20 to 30% or higher throughout the 1980s. A more recent National Bureau of Economic Analysis study found a union wage gap of 18%, representing a relatively stable premium from 1973 through 1995 (Reynolds, 2008).

The wage premium tends to vary by industry and phase of the business cycle. Unions representing garment workers, textile workers, white-collar government employees, and teachers are thought to have relatively little impact on wages. By contrast, the wages of unionized mine workers, building trades workers, airline pilots, merchant seamen, postal workers, teamsters, rail workers, and auto and steel workers exceed those of similarly skilled nonunion employees by at least 25%.

During the job expansion of the late 1990s, the union premium began to decline. Because union wage agreements are typically valid for about three years, wage changes tend to lag behind the more flexible nonunion sector during an economic upswing. The reverse occurs during an employment slump — such as that of the early 2000s — when nonunion wage growth declines sharply as hiring decreases (Reynolds, 2008).