The cost of unionization
As the uncertainty of the current economic crisis drags on, union representation may seem more attractive than ever to workers who are concerned about job security, wages and benefits. The truth of the matter is that unions target companies that are profitable. While many of these companies have had to make changes to remain competitive, they are still in the crosshairs of unions. However, when they can’t seem to make headway in well-run companies, unions will vilify a company that works to maintain profitability by engaging in orchestrated corporate campaigns.
Most employees do not realize how the presence of a union and even its outside activities can negatively impact the business and their job security, especially in today’s competitive and recovering marketplace. Now is the time for companies to take proactive steps to protect their business and their employees by remaining union free. The cost of doing nothing is too great a risk.
Some research, such as work by John E. Dinardo and David Lee at the National Bureau of Economic Research, has led many to believe that increased wages and benefits have a negligible impact on an organization’s market value. If this is the case, why did unionization play a significant role in the auto industry’s crisis? The United Auto Workers (UAW) still preaches to all who will listen about “The Union Advantage in Wages and Benefits” – that union workers receive higher wages and more benefits than non-union workers.
A March 2009 study published by the Bureau of Labor Statistics supports these claims. The study found that non-union employers paid an average of $19.06 per hour (wages and salaries), while unionized employers in the same sector were required to pay $22.76 per hour. Additionally, unionized workers received $13.82 per hour in benefits, while non-union workers received $7.33 per hour in benefits. Of course, one could argue that union dues are not accounted for in this study, but does any of that matter if the company, or the entire industry, collapses under the pressure?
Why do so many organizations, like Wal-Mart, FedEx, Citigroup, Associated Builders and Contractors, even the US Chamber of Commerce, take such a strong stance against unionization? In his landmark text, “Unions Are Not Inevitable!” explained author Lloyd M. Field, referencing multiple studies done in the 5-year period after unionization. The findings, according to Field, were that the newly organized company’s operating costs increased by more than 25 percent of its gross payroll and benefit costs. In his book, Field provides an example of a company with a gross payroll of $18 million, for which unionization would result in $4.5 million in additional annual operating costs.
Jim Gray, president of Jim Gray Consultants, a firm that specializes in helping business leaders with business transition and human resources issues, found that companies could expect to spend anywhere from $400,000 to more than $2,000,000 on a single unionization drive. . These costs include items such as attorney fees, travel expenses, employee meetings, video presentations, lost productivity, and other items that are often difficult to quantify but can add up to thousands, even millions, lost.
As for the annual expenses of a union-based organization, Gray estimates the total additional operating costs (over a non-union business) range from $900,000 for a business with 100 employees to over $4,000,000 for a business with up to 2,000 employees. These amounts do not include wages and benefits, but do include items such as additional training for managers, additional HR support, attorney fees, arbitration costs and grievance handling, as well as negotiations, lost productivity, strike planning, security and Loss of sales. margin, as well as a number of other elements.
Extending the research to 10 years after unionization, the Employment Policy Foundation (EPF) stated that the output per employee of a unionized company would be 2.4% lower than that of a non-union competitor, if that unionized company will experience a 0.25% reduction in productivity. His conclusion was that unless the unionized company could sell its product at a higher price or other cost savings, the unionized company is likely to earn 14 percent less profit per hour of work than its non-union competitor.
Research by David Lee and Alexandre Mas, which used a similar methodology to Lee’s earlier study with DiNardo, found that unionization reduced an organization’s market value by approximately $40,500 per worker eligible to vote in a union drive.
In his book, “Union Testing: Creating a Successful Union-Free Strategy,” author Peter J. Bergeron notes that the cost of operating a unionized organization is estimated to be 25 to 35 percent higher than that of running a union. a non-union organization. This is because unionized organizations generate more human resources staff, more legal advice, more involvement with regulatory agencies, loss of flexibility and higher labor costs due to overtime rules, grievance and arbitration processing, and many others. requirements.
With extensive operating costs and potential loss of market value, organizations must be diligent in their strategies to avoid unionization. An integral part of any successful union avoidance strategy is communication with employees. As Bergeron noted, “Companies that fear the ‘U word’ are the easiest targets for unions. If your employees don’t know about unions, make sure you provide that information, otherwise the union will.” by you, and not in a good way Employers need to provide useful information In short, employees need to see current and relevant factual information They need to know about things that may affect them, and they need to know that Top management really is aware of the challenges they face on a daily basis.
The bottom line is that unionization can have a serious impact on the agility and profitability of any company. It is vital that all non-union employers take proactive steps now, building relationships with employees so they know how much they are valued, not just for their performance, but also for their skills and contributions. Employers should see it as their responsibility to educate and inform employees about the reality of union representation. Times are hard; stay union free to avoid making them more difficult.