At the dawn of the 20th century, heavy industry and big business were in their infancy and a great deal of human labor was needed in order to facilitate the mushrooming Industrial Revolution. This quickly led to widespread abuse of workers, including children, who were often consigned to sweatshops where they were forced to toil for several hours a day. However, workers eventually united to form labor unions that stood up to the big corporations and negotiated better pay and working conditions for millions of employees and also demanded the passing of child labor laws. The effectiveness of labor unions, however has always been a source of controversy.
Who Do Unions Benefit?
Of course, labor unions were created for the benefit of their members. The union represents the workers to the employers and negotiates on their behalf to secure better wages and working conditions. Unions also run the largest non-military job training service in the country and often partner with organizations such as the United Way to perform various community services. Research that tracks the wages of unionized versus non-unionized employees indicates that the wages of union workers exceed that of non-union employees by about 8 to 12%.
Economic studies have also suggested, however, that much of the difference in pay and benefits that many union workers enjoy compared to non-union employees can no longer be attributed to the unions themselves. Modern union contracts make it more difficult for a company to fire an unproductive employee, so employers now tend to be much more selective in whom they hire, which has resulted in an increase in the quality of the union workforce as a whole. Many unions form for employers and industries that are larger and more stable financially because this allows the union to demand better wages and benefits.
Unions can convince workers to join them as a means of preserving the unions' clout in industries (such as the U.S. auto industry). But history shows that this can cripple an industry, especially over time. Members of the UAW enjoy wages of about $70 an hour, a wage greater than that of many Ph.D. scientists. They also enjoy a whopping seven weeks of vacation per year for unskilled laborers. Foreign automakers came to the U.S. auto market in the 1970s and used non-union workers in the southern states to build vehicles. Due to the savings in labor costs, these foreign automakers could afford to sell their vehicles for less money. This made it much harder for the big three automakers to produce competitive cars at affordable prices for the public, and in 2008 Chrysler and GM were forced to declare bankruptcy.
Jimmy Hoffa gave millions of dollars of union pension money to the Las Vegas mob in the '60s and '70s, and elements of organized crime can muscle into local labor unions and take jobs and other benefits from working members. Some unions are not above using strongarm tactics to protect their territories, as the International Longshore and Warehouse Union proved in September of 2010 when it attacked a railroad dock terminal, overpowered security guards and sabotaged trains carrying grain for a company that tried to use a different labor union.
The Bottom Line
Regardless of their effectiveness, labor unions have played a major role in workers' rights and the economies of America and other capitalist countries. Although some economists say that unions have outlived their usefulness, they will likely continue to impact our industries and other sectors of the economy one way or another for decades to come.
More From Investopedia
- Why Facebook Interns Make More Than The Average Intern
- 6 Tips On Selling Your Home In A Down Market
- Vacation Savings Tips
- Labor Issues
- labor unions
- child labor laws