Why Bernie Sanders' Goal of More Unions Won't Work

Sen. Bernie Sanders (I-Vt.) said last month that he wants to foster more unions, but the very things that allow organized labor to increase membership are often also the things that cause their destruction.

At least that’s the way new research points.

Before World War II, union membership was synonymous with highly skilled labor and high wages. That made sense because acquiring the knowledge to be a skilled worker takes a long time. That used to be trades such as welding or machining, etc. Now it would be different, such as computer programming of some sort or aerospace engineer. Such skills are not usually learned overnight, at least not to a high standard.

The extended time it takes to be competent at such jobs restricts the supply of people who can do the required work. Some people who start the journey to learn a new skill change their mind, others find it too hard, and others lose interest. But whichever way you slice it, there is a lower supply of such workers than there is for less-skilled work such as dishwashing.

Now we get to economics 101. Lower supply generally results in higher prices. Or, in the case of labor, fewer workers with the necessary skills results in increased wages.

So, what about the mid-century U.S. boom in union membership that also coincided with higher wages for members?

“Our results show that over the last nine decades, when unions expand, whether at the national level or the state level, they tend to draw in unskilled workers and raise their relative wages,” said a recent report from the National Bureau of Economic Research, “Unions and Inequality Over the Twentieth Century: New Evidence from Survey Data.” Researchers from Princeton University and Columbia University wrote the paper.

To oversimplify this somewhat, when unions expanded they didn’t bother with restricting membership to those with high skill levels. Instead, they took those with lower skills.

The research, which used a variety of data sources, also found that higher union membership also resulted in lower income inequality. That should make intuitive sense because lower-skilled workers would see their incomes substantially increase by joining a union, whereas the skilled workers might see an increase by a smaller magnitude.

For people like Bernie Sanders, a declared socialist and former would-be Democratic presidential candidate, lower inequality gets seen as a good thing. So no doubt he put two and two together and saw that more union membership would help him to his goal.

Unfortunately, what we know is that high union membership is not sustainable with the added goal of higher wages. At a minimum, it hasn’t remained as high as it was in the decades immediately after WWII.

There are two reasons for that: high wages and high membership aren’t sustainable.

First, the period after WWII was unusual and unlikely to get repeated. The rest of the industrialized world got largely destroyed during the war. Europe, Japan, much of the Soviet Union and China all saw much of their critical infrastructure and industrial base erased during the various battles.

U.S. industry owned much of what was left. Demand for industrial products was high as every country in the world tried to rebuild, and the people who helped to rebuild were often Americans. When the rebuilding got done, the demand for American know-how subsided, somewhat, and with it the need for high-priced American union workers.

The second reason goes back to what made unions work in the first place. It is hard for anyone, including a union, to sustain higher-than-average wages when the workers in question don’t have the necessary higher skills. The thing that maintains higher salaries is the relatively restricted supply of workers with the required skills. That’s why the top computer programmers earn a lot of money – there aren’t enough of them.

When membership of a union gets restricted to people with skills that take time to acquire, then the wages will remain high.

If companies find that they are paying high union wages to less-skilled workers, then they will seek to find other sources of labor, such as foreign employees. Indeed, that is what happened during the 1970s and onward in the U.S.

Sorry, Bernie! Unions may revive, but don’t count on masses of members and higher wages to happen at the same time.