For more than a century, labor unions have attempted to improve wages, benefits, and working conditions for their members. In the United States, unions represented about one-third of all workers in the 1950s. By 2011, unions represented only about 12 percent of the American labor force-8 percent of the labor force in the private sector and 36 percent of public sector workers. Many private sector union members belong to industrial unions, such as the United Auto Workers (UAW), which represents workers at American auto firms, tractor and earth-moving equipment firms such as Caterpillar and John Deere, and Boeing in the aerospace industry.
During the 1950s and 1960s, organized labor in the United States was generally receptive to free trade, an era when U.S. producers were strong in international markets. However, labor union leaders began to express their concerns about free trade in the 1970s as their members encountered increased competition from producers in Japan and Western Europe. Since that time, American union leaders have generally opposed efforts to liberalize trade. Some analysts note that unions can have adverse effects on firms' competitiveness when they set wages and benefits above those of a competitive market. Unions can also impose restrictive work rules that decrease productivity and stifle innovation. Also, union emphasis on seniority over merit in promotion and pay can hinder the incentive for worker effort. Moreover, strikes can lessen a firm's ability to maintain market share.
An influential study by Hirsch concluded that unions tend to result in compensation rising faster than productivity, diminishing profits while also lessening the ability of firms to remain price competitive. This has caused unionized companies to lose market share to nonunionized firms in domestic and international markets: Classic examples of this tendency include American auto and steel companies.
Hirsch found that unions will typically raise labor costs to a firm by 15 to 20 percent, while delivering a negligible increase in productivity. Thus, the profits of unionized firms tend to be 10 to 20 percent lower than similar nonunion firms. Also, the typical unionized firm has 6 percent lower capital investment than an equivalent nonunion firm, and a 15 percent lower share of spending on research and development. However, Hirsch found that the evidence does not show a higher failure rate among unionized firms.
However, other analysts contend that unions can increase the sense of worker loyalty to the firm and decrease worker turnover, thus increasing worker productivity and reducing costs to the firm for hiring and training. They also note that unions are a major force for greater social equality, and it is virtually impossible to have decent health care, pensions, and other worker benefits without a strong labor movement. Moreover, they note that the United States, which has a far lower rate of unionization than many other advanced countries, has consistently maintained huge trade deficits. If low rates of unionization determine trade competitiveness, shouldn't the United States be close to the top?

What do you think? In a competitive global economy, can labor unions be effective in improving the economic well-being of their members?