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The United Auto Workers, once one of the most powerful labor unions, is waging a series of small strikes that may be a prelude to a massive, long-term work stoppage. At the same time, Hollywood writers and actors have been on strike, with local strikes of nurses and teachers in different parts of the country. In some cases, the unions have great power and will probably succeed in winning more pay and benefits. In other cases—including the auto workers—any success in the short-term will hurt workers in the long run.

A basic model of union power can be applied—but with different results—to varied occupations, including autoworkers, baristas, teachers, or nurses. Competition among the employers for sales makes the greatest difference in union power. Members of the UAW, back in the 1950s, produced almost all the cars sold in America. At that time Volkswagens and Saabs were oddities. Honda made only motorcycles. Lexus and Acura did not exist. In the U.S. there were three major car manufacturers, plus a few much smaller companies. The UAW would demand the same contract from each of them. The companies knew that whatever bargain they struck, their competitors would face the same costs.

A prolonged strike back then would hurt the one company that was recalcitrant but provide no competitive advantage. All the companies would pass their labor costs on to customers. The damage to a company from signing a generous contract would be that higher car prices would discourage a small number of total car sales, but no loss of market share to any one company.

Today the world of autos is different. America’s big three car makers have less than half of the U.S. market. Not only are we importing more cars, but a good deal of our domestic production occurs in right-to-work states, such as Indiana, South Carolina, Alabama. The UAW represents fewer than half of the country’s auto workers.

If the UAW succeeds in winning large gains, the products they manufacture will be less competitive against other brands. That may make little difference in the first year or two, but eventually, lower profit margins will reduce investment by those companies. They will continue to shrink. In fact, their massive shrinkage from huge market share in decades past is largely due to union effects on both compensation and work rules, which slowed quality improvement.

The same pattern would apply to unions at coffee shops and fast food restaurants. Several Starbucks locations have unionized as well as some restaurants. Labor costs average about one-third of total revenue in the industry. Higher labor costs that result in higher prices will discourage sales, leading eventually to closures or lack of expansion. If the companies swallow the higher costs and accept lower returns on their capital, future investments will be lower. Eventually, the non-union shops will win out, leading to job loss at the union locations.

Public employees are the most unionized part of the labor force now, for the simple reason that their employers face little competition. In the case of police and firefighters, there is usually no competition at all. But teachers are seeing significant increases in alternatives, such as educational savings accounts that can be spent at private schools, and charter schools that are usually non-union. For teachers' unions, fighting for higher wages and benefits once appeared to be perfectly safe (both to union leaders and to their critics). But a backlash has set in since the pandemic started. Costs are just a small part of this issue, but union protection for poorly performing teachers and resistance to parental input eventually had political repercussions.

For teachers union members within sight of retirement, aggressive demands for higher wages are probably a wise strategy. Younger workers, though, may find their short-run gains more than offset by future job losses.

Nurses and other healthcare workers are striking or threatening to in several communities. They are somewhat intermediate between autoworkers and public sector employees. The hospitals they work for compete with one another, but the competition is sluggish. Prices matter somewhat to customers and their employers, but the decision-makers may not see significantly different prices based on cost. Patients dislike having to change doctors, resulting in something like brand loyalty. The result is that aggressive union demands may succeed in raising pay without dire consequences. And if one hospital system does have to downsize, the other ones in that community will probably be increasing. In contrast, an autoworker who loses a job and wants to take one at another company that’s expanding probably has to move out of state, to a right-to-work state in the South. And then the worker must accept a lower wage. However, a healthcare worker who faces downsizing can probably find a job in the same community.

In all cases, the ability of the union to win greater compensation revolves around how competitive the employers are. High competition in the private sector equates to low union power. Monopoly, such as in the public sector, means strong union power.

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