Canadians should celebrate decline of private-sector unions

Here’s a brief history of private-sector unionization in Canada over the last 25 years. In 1997, the proportion of workers covered by a union agreement was 21.3 per cent; this fell to 19.7 per cent in 2002, 18.7 per cent in 2007, 17.7 per cent in 2012, 16.4 per cent in 2017 and finally (according to numbers released earlier this year by Statistics Canada) to 15.1 per cent in 2022.

This steady decline in unionization is good news because labour unions restrict worker choice, reduce competition, discourage investment, disrupt markets, disincentivize work effort and cut productivity. The effect of unions, in other words, is to everywhere impose economic losses (including on most workers) that swamp the short-term gains some may enjoy when unions are initially formed.

In the United States there’s a similar decline in unionization, prompting the Wall Street Journal’s James Freeman to ask: Why don’t U.S. workers want to join unions? It’s an interesting question because according to union headquarters, almost all politicians (including Conservatives) and the broadsheets of most journalists (particularly those not trained in economics), unionization is an unmitigated good for workers that ensures fair wages and protection from rapacious employers.

A simple answer as to why workers, whether in Canada or the U.S., are increasingly not opting for unionization has to do with basic economics. Economic transactions such as employment arrangements are not zero-sum, and imposing costs on one side of the contract inescapably imposes costs on the other by reducing the joint surplus from trade and reducing the volume of mutually beneficial transactions. Unionization hurts employers; it hurts workers, too.

An excellent case in point. In 2020, six weeks into the pandemic (when you would expect food delivery to boom, as restaurants were closed), an article published by the union-cheerleading think-tank Canadian Centre for Policy Alternatives celebrated that couriers for food delivery service Foodora had just won the right to unionize. But as an editor’s note at the top of the article says, just days before its publication, Foodora closed its Canadian operations, citing an inability to compete. The workers lost their jobs.

There are other examples of workers discovering the hard way that unionization is often an unlucky thing to do. CNBC reported last August that of Starbucks’ roughly 9,000 U.S. locations, about 200 (or about two per cent) had voted to unionize, but of a list of 19 locations that the coffee giant either closed or were planning to close, eight (or 42 per cent) had union activity. Whether unionization was the motiving factor behind the store closures might be disputed, but the gap of two per cent to 42 per cent is rather wide.

More generally, as a 2022 study on private-sector unionization by two MIT economists titled “Unionization, Employer Opposition, and Establishment Closure” concluded based on U.S. data from 1981 to 2005: “Unionization decreases an establishment’s employment and likelihood of survival, particularly in manufacturing and other blue-collar and industrial sectors.” A different study in the Journal of Labor Economics in 2021 concluded, “Unionization substantially decreases payroll, employment, average worker earnings, and establishment survival.”

In addition to making businesses less competitive, which ultimately hurts its employees, in his Wall Street Journal article, Freeman identified another reason unionization is becoming unpopular: incidents or allegations of long-running corruption in unions. One high-profile case took place in 2021, when two former presidents—Dennis Williams (June 2014 to June 2018) and Gary Jones (June 2018 to November 2019)—of the United Auto Workers union, which represents more than 400,000 workers, were sentenced to prison for embezzling funds.

Canada has not been immune from union scandals. Last year, Jerry Dias, who was president of Unifor, Canada’s largest private-sector union, came under police investigation and was charged by the union’s executive board of breaching its constitution after stories emerged that he promoted COVID-19 test kits to employers and then accepted $50,000 from the supplier of those kits.

Whether economics or scandal, there’s plenty of reason for workers to avoid unions. And given the deleterious effects of unionization on productivity, employment, business investment and economic growth, all Canadians should rejoice in the continued decline of private-sector unions.