Government policies push higher union raises

Want to know who’s getting good raises? Look for the union label. 

A new Goldman Sachs study for the first quarter of 2024 found compensation for private-sector union workers rose 6.6% over the previous year, “once again far outpacing compensation growth for nonunion workers, which also increased but to a more moderate 4.1%.”

Unions have been enjoying a resurgence under President Biden. The April 24 New Yorker reported “many scholars and union officials have come to view Joe Biden as the most pro-labor President since Franklin Roosevelt, a designation he has proudly embraced.” 

American Progress in February cited Ford’s giant new electric-vehicle battery plant in Tennessee as an example of President Biden’s pro-labor policies. The plant received a taxpayer-guaranteed loan from Biden’s Infrastructure Investment and Jobs Act of 2021 after Ford signed project labor agreements guaranteeing high union wages. That might be good for the beneficiaries of federal dollars and those specific union employees. But the 2021 act’s $1.2 trillion price tag is one reason inflation has risen so much in recent years across the country.

Raymond Sfeir, director of the A. Gary Anderson Center for Economic Research at Chapman University, points out that one reason union pay is rising faster now is because their contracts commonly extend several years, with expiring contracts dating back to before the inflation of the Biden era. By contrast, pay for non-union workers rose faster than for union workers from 2021-23 because their contracts are shorter and can be renegotiated more quickly to reflect inflation. Yet ultimately, he said, “For firms with labor unions the pay increase will be higher because of the power the labor union has.”

The Goldman Sachs overview looked only at jobs in the private sector. While most American workers aren’t in a union, about half of those who are in a union work for the government. 

Public sector compensation in California has risen sharply in recent years.

Last May, the United Teachers of Los Angeles approved a contract with the Los Angeles Unified School District raising pay 21% through 2025. It’s certainly not because the quality of instruction has improved that much. Most of the students on their watch fail to meet grade-level standards in mathematics and English language arts.

Finally there also is a major difference between private and public-sector union contracts. If private union contracts rise too high, a company can go bankrupt. For the public sector, bankruptcy occurs, but is rare. Instead, excessive contracts lead to tax increases or reductions in services. That has been seen throughout California in recent decades as taxes have risen to record levels while schools, roads and other public services decay.

Unions bring higher compensation to their members. But the bill is paid by everybody else.