Do unions raise costs?

In short, yes. Workers covered by a union contract earn higher wages than nonunion workers, which translates into a higher per-employee cost for business owners. 

Unionized workers in California earn on average 12.9% more than similar non-union workers, according to research from UC Berkeley Labor Center. They are also more likely to receive employer-sponsored health benefits and a retirement plan. 

Research on the other ways unions may affect businesses is more mixed. An analysis of more than 300 studies of businesses around the world found, for example, that unionization appears to be connected with higher productivity in the education and construction sectors in the United States, but makes no difference in manufacturing. 

When it comes to profits, it appears unionization has a negative effect. A meta analysis of unions’ impact on businesses’ profitability found a small correlation. Another study looked at the market value of publicly traded companies before and after they were unionized. It found that a union election victory led to a 10% decrease in the company’s market value. 

But, unions aren’t all bad news for businesses’ bottom lines. Whenever a worker leaves a company and needs to be replaced, it’s costly and disruptive for the company, and some research shows that unionized businesses have lower staff turnover. Further, research shows that companies that unionize are no more likely to go out of business than comparable companies that are not unionized.

There are other cost concerns as well. Affordable housing developers have pointed to California’s requirement to use a “skilled and trained workforce” as a mandate to use union laborers, driving up housing construction costs.

-Grace Gedye