GM Walkout: Union Fringe Advantage?

United Auto Workers (UAW) walked out across the US in the first strike at General Motors (GM) since 1998. The two major issued as the two sides negotiate a new national contract: whether the UAW, having made big concessions on health care, should get some kind of jobs guarantee from GM. The GM management and UAW leaders held several bargaining sessions, trying to come out with a deal that would set up a huge, union-led health-care trust to assume retiree medical benefits and address a slew of other economic issues. Apparently, the two sides did not come to an agreement.

As we notice, the union wage advantage is an estimated 13 percent over their nonunion counterparts. This advantage rises by 2 to 3 percentage points when fringe benefits are considered. Here comes the question: why do union workers enjoy a greater variety and higher overall level of fringe benefits than nonunion workers?

First, union fringes may be higher because the union is able to deprive management of its workforce and the employer is willing to pay both higher wages and larger fringe benefits to avoid the costs of a strike. Second, union workers, by virtue of their higher earnings, may simply choose to “buy” more fringes than lower-income nonunion workers. Third as a collective-voice institution, a union may formulate fringe benefit proposals, inform its constituents of the details of such proposals, and crystallize worker preference. Fourth, older workers are usually more active in the internal politics of a union and therefore more influential in determining union goals.

What do you think about unions? Do you think unions are a positive or a negative force insofar as economic efficiency and productivity are concerned?