It’s easy to make the claim that staying union free benefits the workforce and the company in general. Common sense says union interference hinders your ability to make decisions concerning everything from employee promotions and compensation to general operations. Unions also contribute to a negative culture because they’re always on the lookout for opportunities to grieve your decisions. Companies without unions are more likely to thrive, but do the statistics back up that claim?
Following are surprising statistics demonstrating the real advantages of staying union free, ranging from enhanced employee engagement to increased productivity and profits.
1. Avoid the cost of a union campaign
The cost of a union campaign is high. In fact, the campaign may cost your company $400,000 to over $2 million on a single campaign, depending on the size of your company. There are obvious and not-so-obvious expenses. The obvious expenses include things like attorney fees and developing video presentations that explain the company’s stance on unions and the benefits employees already enjoy.
The not-so-obvious expenses emanate from the negativity that union campaigns add to the workplace, like lowering employee engagement and employees surreptitiously spending work time “selling” the union idea to coworkers, both of which lower productivity. In fact, expenses are incurred even before the union campaign starts, though it may not be apparent they’re due to union activity.
A campaign does not suddenly begin out of the blue, even if it appears that way. For example, managers find they’re spending more time responding to employee complaints about things the employees never had a problem with before. It could be due to union representatives purposely encouraging workforce dissatisfaction in preparation for pushing a campaign in the future.
2. Avoid the costs of unionization
The cost of unionization is even higher than the cost of a union campaign because the expenses are ongoing for years due to multi-year union contracts. Once a union organizes employees, companies can expect a 25-35% jump in operating expenses. This includes additional HR staff, legal counsel, regulatory agency involvement, loss of flexibility and an increase in labor and administrative costs.
Labor costs usually make up the largest percent of total operating expenses. The Department of Labor’s (DOL) U.S. Bureau of Labor Statistics reported that from December 2006 to December 2016, employer benefit costs for businesses with a union membership increased 31 percent. Employer costs for nonunion businesses for the same time period increased 22 percent. Also for the same ten-year period, union wages and salaries increased 24 percent while nonunion wages and salaries increased 23 percent.
In March 2018, the Department of Labor found, “Employer costs for health insurance benefits were significantly higher for union workers, averaging $6.13 per hour worked (12.9 percent of total compensation), than for nonunion workers, averaging $2.24 (6.8 percent of total compensation).” There’s a DOL table with a breakdown of compensation and benefits by bargaining unit in the private sector, and in almost every category, the union cost is higher.
Expenses like compensation, benefits, legal fees, and additional HR staff are tangible costs. There are numerous intangible costs too, like difficulty hiring the best talent because union contracts limit an employer’s ability to reward an employee based on exceptional performance.
3. Improve investor confidence and stock prices
There’ve been numerous studies examining the impact of labor unions on stock prices, and investor confidence and behaviors. In the research article, Do Labor Unions Affect Stock Price Crash Risk, the authors write, “For publicly held companies, labor unions increase the likelihood of experiencing future stock price crashes. This finding is consistent with the argument that firms facing strong labor unions tend to report lower accounting information, in order to preserve bargaining power when negotiating contracts with labor unions.” (p. 11)
The article goes on to explain that unions have more bargaining power when negotiating contracts because they have the power to go on strike, disrupting production and harming a company’s reputation. The conclusion of the authors, after extensive calculations, is that “stock price crash risk is increasing in labor union strength.”(p. 19) It’s not a recipe for investor confidence.
Just the threat of unionization can negatively impact profits, and thus stock prices, of union free companies because it may change company behaviors when the company wants to stay union free. For example, a company might decide to hire more highly skilled, high priced workers who aren’t likely to vote for unionization.
Also, unions bargain collectively for wages compared to the employees in a non-union setting who bargain individually. The result is that unions compress the range of wages in the business which leads to lower profits. Employees at the lower range are overpaid, while higher skilled people are underpaid, both of which contribute to high employee turnover. It’s expensive to replace employees. Lower profits leads to lower stock prices.
4. Increase employee productivity and experience more competitive product pricing
The Employment Policy Foundation (EPF) stated that a unionized company’s output per employee would be 2.4 percent less than a union free competitor, if that unionized company experienced just a .25 percent reduction in productivity. Their conclusion was that, unless the unionized company could sell their product at a higher price or other cost savings could be attained, the unionized company is likely to see 14 percent less in profits per labor hour than their non-union competitor.*
Full Cost of Unionization Vs. Being Union Free
The full cost of unionization is almost incalculable. The increase in labor costs are easy to calculate, but how do you calculate the cost of the lack of flexibility in the employee disciplinary process? What is the cost of burdensome work rules that negatively impact employee engagement? Union proofing your business and staying union free is not just a good decision for your employees. It’s the best decision for remaining competitive and successful as a company.
* Employment Policy Foundation, “Financial Outcomes in Union and Non-Union Workplaces,” Issue Backgrounder, March 14, 2003.