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Viewpoint: Anti-Union is Bad for Business

Congress will soon consider the Employee Free Choice Act, which is intended to make it easier for workers to join unions. The business community is almost unanimous in its opposition. Behind concerns about specific provisions lies a more general hostility to unions. As business professors, we believe this hostility is shortsighted and wrongheaded. First, as a simple matter of ethics, businesses have an obligation to consider the interests of the various stakeholders that support them. A common view in the business community is that the only stakeholders who merit special consideration are investors, because they're the only ones who bear real risks; others—employees, customers, suppliers—are directly compensated. But this is false, especially when it comes to employees. Rarely are they merely transitory, casual suppliers of unskilled labor. Workers typically make costly long-term investments in firm-specific skills, and they usually go over and above the strict minimum required by their employment contract in order to assure their organization's success. If a business benefits from such behaviors, a moral obligation of reciprocity is created—specifically, an obligation to give employees a voice in a company's decisions. Relative to non-union forms of voice, have the crucial advantage of giving workers the power to command attention. An Overall Sustainability Second, businesses have a practical responsibility to function in a sustainable fashion. The trouble is, we often think of this only in terms of being "green." However, just as they rely on the natural environment, firms also depend on the broad social and economic environment for human resources. And this needs to be made sustainable, as well. A common view in the business community is that responsibility for this natural and social environment is best assured by government, and that business' responsibility should be limited to obeying the resulting laws and regulations. But this argument flies in the face of two business realities. For starters, business plays an active role in shaping public policies. Beyond that, businesses typically define for themselves a broad range of private policies, ones aimed at preserving the vitality of the local environments in which they operate. In both their public and private policies, businesses have been largely hostile to unions—and in doing so, they have acted against both their own interests and society's. When the lowest-paid workers in society are assured higher wage levels and greater employment security, the families of these workers—and, most important, their children—live better, more economically secure lives. Moreover, our communities are freed of the health and social costs generated by economic distress. Again, unions provide the most effective mechanism for protecting workers' compensation and security. We recognize, of course, that invoking morality and sustainability may not be enough to persuade many in the business community of the need for stronger unions. So how about considering something else: corporate performance. Higher-Quality Workforce Conventional wisdom notwithstanding, unions typically boost rather than hurt business productivity. Unionized firms are able to exercise greater selectivity in hiring, so they end up with a higher-quality workforce. Higher wages translate into lower turnover, which means less waste in recruiting, selecting, and training people to replace departed workers. Lower turnover, in turn, makes it economically rational for a firm to invest in worker training, which makes the workforce more productive. Additionally, the presence of unions encourages firms to implement the kinds of high-performance work systems found in many of America's most competitive companies. Many in the business community are not blind to these benefits, but they still fear that more robust unions will cut into profits and thereby slow down investment and growth. This concern, as far as empirical research can tell, is simply misplaced. Within the U.S., there is no correlation between unionization and the probability of a firm's failure, and looking around the world, there is no correlation between the extent of unionization and aggregate rates of growth. When unions raise the wages of the lowest-paid workers, this increases savings and reduces income inequality, which has beneficial effects on a nation's economic growth and investment, not to mention its health and social cohesion. For all of this, unionization cannot happen by itself. Once unions are radically weakened, as they have been in the U.S. over the past few decades—and in no small measure as a result of the business community's hostility—a race to the bottom starts. The whole economy slides to a lower-level equilibrium where workers earn less and have less influence in the workplace, where firms pay less for labor but get less qualified and less committed workers, and, where, as a result, society gets less output from its available resources. In this setting, progressive, pro-union voices within the business community are easily drowned out by the well-organized anti-union voices who feel vindicated by their victory, pyrrhic though it may be. Our nation today is stuck in just such a low-performing state. The only escape is through government action. Enacting the Employee Free Choice Act would more fully incorporate labor into the country's economic fabric, and thereby secure a better future not only for the next generation of workers but for businesses, too.

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