23rd January 2013
While “everyone knows” that manufacturing employment has fallen over the past generation, that decrease has occurred almost entirely in unionized firms. In 1977, non-union manufacturers employed 12.5 million workers; in 2012, they employ . . . 12.5 million workers. Unionized manufacturing employment dropped 80 percent over that same period. The de-industrialization of America is really a de-unionization.
WaPo doesn’t explore why this is happening, but academic researchers have. One major factor: Unionized companies invest 15 to 25 percent less in capital and R&D than comparable non-union firms. Less investment makes businesses less competitive, so they create fewer jobs.
Unionized firms invest less for two reasons. First, unions “tax” successful investments by demanding more concessions from firms that are performing better. If GM had developed a hybrid that got 100 mpg. does anyone think the UAW would have made any concessions? This union tax reduces the return on investing in unionized firms — hence they invest less.
Second, unions raise labor costs, both directly (via higher pay) and indirectly (inefficient work rules). But unionized firms can’t charge more than their competitors without going out of business, so they must cut spending elsewhere, which often means their investment budgets.