Study asks “Who benefits most from unionization?”

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By U.S. Chamber of Commerce

Organized labor’s current emphasis on preserving public-sector union power is likely a reaction to the near-steady, decades-long decline in private-sector unionization. Private sector union density has fallen from 35.5% in the 1950’s to a current low of 6.9%. One manifestation of this waning support is the repeated failure of the unions’ number one legislative priority – Card Check (EFCA) – to pass a Democrat-controlled Congress.

The steady decline of private-sector union density raises the question of how well unions serve their rank-and-file and who benefits most from unionization. Drawing on insights from multiemployer pension plans, Professor D. Bruce Johnson of George Mason University’s School of Law argues that the answer is union officers and staff, rather than rank and file workers. His study appears in the latest issue of the American University Business Law Review.

The study relies on economic theory and preliminary empirical evidence to determine how well private sector unions are serving their members through multiemployer pension plans, and evidences that union management is receiving a disproportionate benefit from unionization at the expense of rank-and-file members.

From the abstract of the article:

This study addresses the economics of labor unions in an attempt to determine who captures the rents from unionization. Among other things, it examines the generosity of mult-iemployer defined benefit pension plans for rank-and-file union members and the officer and staff plans for the union that administers them. For a given wage, it finds that union officers and staff enjoy pensions and related benefits that are lavish by comparison. Although this could be the outcome of efficient implicit contracting, given the high agency costs workers and employers face monitoring union administration, it is impossible to reject the hypothesis that union officers and staff are the primary beneficiaries of unionization in the multi-employer setting. Multiemployer plans now appear obsolete and should be replaced by 401(k) defined contribution plans despite resistance from union officials anxious to preserve their private benefits of control.

The study can be found at http://www.aublr.org/current-issue/