Still Open fOr BuSineSS Unionization Has No Causal Effect on Firm Closures

The most prominent fear employers voice regarding unionization is that it will drive them out of business. But is that fear well-founded? This brief summarizes recent research showing that unionization simply does not cause firm failure: firms that become unionized are no more likely to fail than comparable firms that remain nonunion. This finding may surprise some readers. Because unions clearly do aim to give workers a larger share of the benefits of economic growth, the possibility does exist that if they succeed in transferring income to workers and away from profits, then a firm’s solvency could conceivably be threatened. However, it is also possible that even unions that successfully redistribute income from profits to wages can coexist with firms that remain viable over the long run. Only the most simple-minded and unrealistic economic models argue that there is an inexorable link between any such redistribution and a firm’s death. Recent research has been able to make convincing claims about the causal impact of unions winning recognition through an election certified by the National Labor Relations Board (NLRB) on the subsequent survival of the newly unionized firms. This research provides evidence that this causal effect of union recognition is zero and has been zero since at least the 1960s, which is how far back we can go with the available data. In short, the biggest fear voiced by employer groups regarding unionization— that it will inevitably drive them out of business—has no evidentiary basis.