After losing popularity for over 40 years, the influence of labor unions is making a comeback across various industries in the United States. A strong demand for workers has given unionized employees greater leverage at the negotiation table. Despite a decline in the share of company income going to employees compared to pre-pandemic times, a robust job market has enhanced the influence of unions, with more organizations striving to secure a larger slice of the profit pie for their members.
For the average worker, although the COVID-19 pandemic has altered many aspects of life and work, the economic environment, influenced by the job market, remains healthy. The U.S. Employment Cost Index shows that in the 12 months leading up to June this year, average wages increased by 4.6%, surpassing the 2% to 3% growth seen in most of the past 20 years, marking the first time wage growth has exceeded inflation in more than two years.
However, another indicator suggests that the average employee's conditions have declined compared to before the pandemic. Data from the Economic Policy Institute indicates that in the first quarter of this year, workers' share of corporate profits reached 75%, down from 76% in the last three months of 2019. To close this 1% gap, U.S. corporations would need to allocate approximately $120 billion from their profits.
Since the global outbreak of COVID-19 in 2020, the U.S. job market has remained tight, giving unions the opportunity to narrow the income gap created by the pandemic. Last month, a strike threat by 340,000 people helped United Parcel Service (UPS) workers secure several pay raises, leading UPS to lower its adjusted operating profit margin forecast for 2023 from 12.8% to 11.8%.
While union actions can improve workers' income, they also pose challenges for American businesses. The United Steel Workers union has been aggressively involved in the bidding war for U.S. Steel. Last Thursday, U.S. Steel stated that the labor agreement reached with the United Steel Workers does not allow employees to block strategic assessments related to the company's sale among other matters.
Darren Hawkins, CEO of the bankrupt freight company Yellow, attributes the bankruptcy to union actions, stating they hindered Yellow's business plans.
Data from the Bureau of Economic Analysis shows that corporate profits are 30% higher than the pre-pandemic level of $2.7 trillion. Income analysis by the Economic Policy Institute reveals that in the first quarter of this year, labor income accounted for 75% of corporate income, which is still below the pre-pandemic level of 76%. Market analysts expect that with the resurgence of union influence, American workers are likely to secure a larger share of corporate earnings.
