How the Role of Unions Can Affect Compensation Program Management Within an Organization

Unions come in all shapes and sizes. Some are small, hyper-localized organizations that represent workers in one business, while others represent workers in a specific field across the country. Unions tend to drive up wages, but the specific effects depend on the industry, the strength of the union and other variables.

A business's income can indirectly affect wages and worker retention. Businesses generally pay higher wages and hire more workers when they are profitable. Unions may drive down the profitability of businesses, particularly for the 24 months before and after the union's creation. Thereafter, the effect of a union tends to stabilize and has less of an impact on a business's value.

A 2012 report by the Economic Policy Institute notes that unionized workers tend to reduce wage inequality. Unionization tends to benefit less educated and lower wage workers more than it benefits higher wage, more educated workers. The result is a less dramatic gap between the highest and lowest paid workers in an organization.

Unionization tends to drive up worker wages, using collective bargaining to advocate for the interests of all workers within an organization or profession. According to the Economic Policy Institute, this can boost wages for both unionized and non-unionized workers. On average, a unionized workplace sees a 20 percent increase in wages and a 28 percent increase in total compensation packages -- including health insurance and other fringe benefits.

According to a 2003 report by the Economic Policy Institute, union workers typically have more fringe benefits such as health insurance and sick leave than non-union workers. Unionized workers' health care deductibles are 18 percent less, and they're 24 percent more likely to receive employer-subsidized health insurance. They also receive 26 percent more vacation time and 14 percent more paid leave.