Unions and Their Drag on Productivity and Competitiveness

We live in a world where moderate and left-of-center elite opinion feels compelled to say only good things about organized labor. Not that many of these college-educated elites actually know any union members personally, but hey, they deserve our regard.

But this chic geniality should not be a blank check in support of whatever organized labor does. Not all unions are Mother Teresa’s spiritual heirs—certainly not when they oppose automation, which hurts the rest of us as consumers. And certainly not when they demand such high wages and impose such inflexible work rules in national economic-power industries under threat from China that they weaken, if not ultimately destroy, their own firms.

One might ask: “Who are you to judge what unions do well and what they don’t?”

The answer is: Since when is any one group in society exempt from criticism and analysis? I have certainly criticized businesses and “civil society” organizations. There is no reason organized labor should be left out.

First, unions’ push for better wages and working conditions can be good not only for individual workers but for society, if it leads organizations to boost productivity and shift toward so-called “high-road” production systems based on higher skills, more capital equipment, higher quality, and higher productivity.

But many unions go well beyond that. Often, they oppose automation:

• The Screen Actors Guild successfully bargained with studios to limit AI and other technologies that might boost productivity.
• Dockworkers unions have resisted port automation so effectively that American ports are now backward and antiquated compared with many in Europe and Asia, including China.
• Freight railroad unions have pushed companies and regulators to limit automation, such as automated inspections and one-person crews, even though technology can safely do the job.
• The Teamsters oppose laws that would enable autonomous trucks and, in Massachusetts, support a ban on autonomous taxis.
• The Teamsters’ 2023 agreement with UPS after a nationwide strike curtails the use of surveillance in trucks and restricts potential worker replacement with automated technologies, according to the Center for American Progress.

All of these examples highlight how organized labor often lowers productivity and raises prices for consumers.

Second, some unions demand wages and benefits (including rigid work rules) that reduce the international competitiveness of critical firms. A 2023 United Auto Workers strike pushed the Big Three U.S. automakers, General Motors, Ford, and Stellantis, to grant at least 27 percent wage increases.

Last year’s International Association of Machinists and Aerospace Workers strike against Boeing in the Pacific Northwest forced the company to grant wage increases significantly above the rate of inflation. And just yesterday, workers at Boeing’s St. Louis facilities, who were demanding steep raises like those granted last year in Washington and Oregon, ended a 101-day walkout that significantly disrupted production of advanced military aircraft and other essential defense products.

Like shareholders who demand outsized short-term profits, union members are rational in pressing for higher pay. If they succeed, they get more money in the short run. But just as short-termist shareholders can weaken a company, so too can unions that push compensation to levels that undermine the long-term viability of the companies that employ them.

While unions retain power in certain cities, states, and industries (albeit less than before), that reality is unlikely to change dramatically. But what can—and should—change is the moral aura surrounding unions and their interests. Unions are an interest group and should be recognized as such. Some of what they advocate is legitimate and, at times, even beneficial for the national interest. Much of it is not.

Opposing automation is not in the national interest, especially as the United States desperately needs higher productivity to address long-term entitlement spending and as China aggressively moves to dominate industries that generate national power. Excessive wage demands in industries central to national strength, including aerospace and autos, directly harm U.S. national security.

This brings us back to the strike that ended yesterday at Boeing’s St. Louis plants. The machinists at these facilities assemble F-15EX fighter jets—a critical responsibility, especially given the Air Force’s recent indication that it must dramatically expand its fighter fleet over the next decade to meet escalating global threats. Yet, as Air Force Chief of Staff General Kenneth Wilsbach reported, the worker stoppage delayed deliveries of these aircraft.

The Air Force expects 126 F-15EXs by the end of 2030, but production is already nine months behind schedule. That delay raises serious national security and competitiveness concerns, and likely prompted the bipartisan letter from 17 U.S. representatives urging Boeing to resolve the “disruptive strike” for the sake of “U.S. national security interests and longstanding national policy.”

“We’re proud of what our members have fought for together and are ready to get back to building the world’s most advanced military aircraft,” union leaders said in a statement yesterday.

Yes, please do get back to producing the nation’s foundational fighter force structure…

In today’s fierce and rapidly evolving techno-economic competition with China, the United States does not have the luxury of waiting while skilled workers in industries central to national power—and the companies essential to sustaining national security and global leadership—pass contracts back and forth.

Of course, none of this lets corporations off the hook. Executive compensation at many large companies is too high, and too much of GDP flows to the financial sector, especially hedge funds and other speculative outfits. But the challenge facing the nation is so great that every group, including interest groups, must recalibrate toward the national interest, not narrow self-interest—even if that group is blue-collar workers.