Judging Unions' Future Using a Historical Perspective: The Public Policy Choice Between Competition and Unionization

In this paper I look at unions' future using a historical perspective and focusing on the period of union ascendancy as well as the past few decades when unions have been in decline. We know trends currently in place are unfavorable to unions. What conditions would be favorable? The rise of unions from the 1930s through the early 1950s was due to the convergence of a number of events - an economic policy that attempted to restrict competition beginning in the 1930s, the twin beliefs that labor markets were inherently noncompetitive and/or that individual workplaces were exploitative, and low union premiums. The passage of highly favorable legislation, in the form of the Wagner Act, was a reflection of the idea that unions could actually improve the functioning of labor markets and serve as a countervailing power to big business. Over the past several decades, union density declined because government policy became pro-competitive, it became clearer that labor markets were relatively competitive, HR practices developed that reduced the amount of opportunistic behavior of employers, and unions increased the percentage premium they enjoyed in industries where rents were available. In this environment, the public-good aspect of labor unions - their ability to improve the functioning of labor markets - was called into question. The passage of amendments to the NLRA that were unfavorable to unions was a reflection of this changed sentiment as to the public good aspect of unions as well as to the adoption of pro-competitive market policies in general. Consequently the future trend in union density will depend on the competitiveness of the economy and on the related question of the number of opportunities for unions to fulfill their major goal of either extracting economic rents or remedying market failures that result in exploitative employment relationships.