The recent UAW strike against General Motors provides a good backdrop against which to consider the collapse of the union movement, and its causes and consequences.  First the facts.

Two generations ago (back in the early 70s) about 1 in 4 workers belonged to a union.  The manufacturing, mining, construction and utilities sectors led the nation in both unionization rates and in the total number of union jobs.  Unions and union interests were powerful.

Then as now unions came in two flavors – trade and industrial.  They served very different roles.  Trade unions date back at least to the middle ages and serve a critical role in the functioning of markets. Employers of carpenters, welders, masons, plumbers and a host of others rely upon unions to set standards and find willing workers.  Trade unions are the labor “market makers” for a number of skilled occupations.    

Industrial unions like the United Mine Workers and United Auto Workers serve a very different role than trade unions.  Many firms in both industries operate effectively without the influence of these unions, and the role of the unions has traditionally been to represent workers through collective bargaining.    

Both types of unions also dabble in broader political arenas, and are often aligned.  While trade unions are necessary for the smooth operations of many businesses, industrial unions are largely unnecessary for commerce.  Whether or not either type of organization provides benefits to members is an unsettled question.    

Union membership has plummeted since the early 70s, both in absolute numbers and share of workers.  Interestingly, the decline has been highest in manufacturing.  From 1973 through 2006 the share of manufacturing workers belonging to a union dropped from 38.9% to 11.7%.  Other large declines occurred in mining and construction, and federal government employees.  Only state government workers nationwide saw an increasing share of employment during that time.   

Indiana’s experience mirrors the national trends.  In manufacturing, the union share has dropped from 50% to 20.8% since the early 1980s (the earliest date state data is available).  The state’s total private sector union rate dropped from 26.2% to just 10% over the same time period.    

Unions aren’t gone from the labor or political scene, but at this rate they are a generation away from the political clout of the Independent Order of the Odd Fellows.   The question is why?  

Advocates of unions blame shifting economic conditions that favor corporations.  But this explanation just doesn’t carry water.  The labor market today is highly competitive for firms and the current national unemployment rate hovers near historical lows.  This should be a prime time for unions.   

Union critics argue that the activist role of unions has subordinated worker concerns to a broader political movement, and thus unions are less important to individual workers.  This argument also does not hold much water.  Unions today are far less activist than even their recent past should suggest.    

I imagine that the real truth lies in the economics of labor markets.  The work that’s done today requires much more specific skills and training than even two generations ago.  This increasing importance of individual human capital means that skilled workers will be compensated better than their less skilled compatriots.  Thus, a union that treats workers as homogeneous units of production won’t be attractive to at least the better skilled half of the labor force – since a collective bargaining agreement would tend to depress their wages.  This argument means that as workers become more important to businesses, unions become less important to workers – hence their decline.    

The best evidence that this is the ultimate reason behind the collapse of unions in the U.S. and in Indiana is that the only growth in unionization rates has occurred among the public sector – the one place where labor market forces matter least.