Unions have a pretty bad reputation. They are often stereotyped as protecting lazy and bad workers, as well as causing unemployment other inefficiencies. However the many benefits of unions are often ignored. These include increased morale, productivity and equality.

Unions provide an important role in providing a voice for their members. If a worker has a grievance it may not be heard (either because the worker is afraid to complain or the boss may not listen). However the union can raise the issue and ensure the boss listens. Addressing grievances improves morale (as the worker feels they are valued, their opinions matter and they have the power change things for the better which increases innovation) which in turn boosts productivity. Whereas if the grievance lingers the workers may vote with their feet and quit. This is inefficient for all concerned as the worker must look for new work (which may include a spell of unemployment) and be trained into their new job, while someone must be found and trained to replace them. This means that contrary to the stereotype unions could actually make a firm more productive.

Unions are often criticized for increasing their members wages. It is claimed that this makes businesses uncompetitive and forces them to close. However if this was true there would be no unions. The fact that some unions survive in the private sector (the number is small in America but high in many European countries, Sweden in particular) shows that they cannot be wholly bad. If they were they would have been driven out of business by more competitive non unionised businesses.

Higher wages has some advantages. It boosts productivity and morale and encourages workers to work harder. After all the higher the wage, the more they have to lose if they get fired. This reduces turnover which is a large cost for businesses. Most importantly, higher wages boosts demand. If workers are paid more then they can afford to buy the products they make. It is a virtuous circle in which higher pay leads to higher demand leads to higher pay and so on. (I discuss this argument in “Pay More, Get More”).

Unions have beneficial effects on equality. Unions tend to be concentrated among the lower paid and ensure they get the highest pay increases. Unions directly redistribute profits (which would have gone disproportionately to the wealthy) towards the lower paid. Unions often aim for a policy of pay equalisation or levelling, which aims to ensure workers doing similar tasks get the same pay. The data clearly shows that the decline of unions since 1980 coincides with the rise in inequality. While correlation is not causalty there is certainly a link in this case.

The middle class is also harmed by the rise in inequality and this study shows that an increase in unionisation would increase the income of the middle class. It also shows that wages of non union workers also increases, demonstrating that unions are not as selfish as they are often described.

It is argued that unions push wages above productivity levels. They are depicted as being too greedy to understand basic economics. However the data tells a different picture. Since 1980, (when America last had strong unions) productivity has increased by 80% but inflation adjusted wages have only increased by 12% (see study above). Without a union to protect them, workers wages are held low and denied their rightful share of the wages. Unions don’t push wages above productivity, they ensure wages keep pace with productivity.

Unions also give their workers a say in their work. They make workers feel valued and respected and that they matter to a business. This probably accounts for why unionisation is higher among larger firms, because they give workers a feeling of anonymity and many feel they don’t matter to the business. Workers often have the best ideas for improving a business as they are on the ground floor and have direct experience of how it works.

Unions have many advantages and benefits. They prevent workers from being exploited and ensure that wages rise with productivity (whereas the decline of American unions has led to stagnating wages). Rather than being drain on businesses, they contribute a lot and benefit the whole economy.