Unions Haven't Kept Up With the New Economy: Allison Schrager

Something still feels broken in the labor market. There are many jobs and wages are up. But there is also a sense of uncertainty and misery. Service jobs can be grueling, and despite recent growth, people’s wages over the course of their careers aren’t increasing as fast as they once did — especially when you account for inflation. And every day brings more technology that might one day take your job.

The Biden administration and labor activists think the answer to these problems is to empower unions. After all, unions historically protected some workers and their wages, and helped jobs feel stable. Despite the political enthusiasm, though, it's not clear workers actually want to be part of these labor groups. Recent unions drives have failed. At their height, about a quarter of employees were part of a union; now only about 10% are, and it falls further each year.

That's not altogether surprising. Why pay dues to an institution that may not serve your needs? Unions in their present form no longer work for our new economy. If they want to play a role going forward they need to reinvent themselves. Here's how.

The union model made some sense in the post-war era, when many jobs were fairly routine and there was lots of value in gaining skills unique to a particular employer; How a company made cars or did word processing tended to be unique to each employer. This meant workers were more beholden to their employers, since their skills had less value on the open market. There was also not much wage variance within a single firm because jobs were more similar and there was a smaller premium on talent. It was harder to monitor who was a better, harder worker. If you were lucky enough to be in a union, it offered job security, higher wages and benefits that rewarded long tenure. People got paid a similar amount, which meant better workers subsidized weaker ones, and that was a fair trade for the security that came from the power of banding together.