EPI: Unions Don’t Cause Firm Closures

by Seth Michaels, Mar 23, 2009

What’s the real effect of union membership on businesses? A new report by economist John DiNardo of the University of Michigan suggests there’s no connection between a firm’s likeliness to shut down and whether its employees have a union.

Released by the Economic Policy Institute (EPI), Still Open for Business looks at research over the past two decades into union membership, wages and firm survival and finds that there’s no evidence to suggest that firms where workers have a union are more likely to go out of business than any other firm.

This research provides evidence that this causal effect of union recognition is zero….In short, the biggest fear voiced by employer groups regarding unionization—that it will inevitably drive them out of business—has no evidentiary basis.

DiNardo’s study compares conventional wisdom and corporate spin about unions to reality. Firms where workers have narrowly won union recognition in an election have similar failure rates to firms where workers narrowly lost an election to form a union.

In addition, DiNardo says that workers who are members of unions have strong incentives to cooperate and ensure that their bargaining results in a company that’s sustainable in the long term.

The obvious fact that unions have no stake in driving employers out of business is reinforced by this evidence. It seems clear that American employers as a group need not fear firm insolvency as a result of granting workers rights to collective bargaining.

In their efforts to spin, distort and mislead against the Employee Free Choice Act, corporate front groups and anti-worker politicians are using the threat of company shutdowns as one of their top scare tactics. But it’s just not the case. DiNardo’s report—looking at the facts and the numbers, rather than starting from assumptions about what must be true—is a valuable counter to the anti-Employee Free Choice front groups who trumpet groundless claims about how unions affect business.

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