LONG-FORM COMMENTARY: Why Stanford Needs Unions

Gabriel Frank-McPheter, Stanford University

  1. Introduction

In less than two days, the Stanford Graduate Workers Union (SGWU) got over 2,500 signed cards expressing support for unionization, well over the threshold of 30% of workers required to trigger a unionization vote. Since then, 3,600 of approximately 5,000 eligible graduate workers have signed cards, and the SGWU has officially petitioned the National Labor Relations Board for a unionization election. The SGWU’s mobilization efforts are impressive and represent a significant political moment at Stanford. Consequently, Stanford administrators have publicly responded to unionization efforts by encouraging graduate workers to “consider… future graduate students, who will not have the same opportunity to vote on union representation,” framing the issue as “a complex topic, on which reasonable people can disagree.” While the politics of this framing warrant a longer discussion, there’s notable economic facts that administrators left out in their response. 

Labor unions at Stanford—not just of graduate workers, but of directly hired and subcontracted service workers—are an economic benefit to the Stanford community. This commentary will first argue that the economic literature points to somewhat inconclusive but net beneficial effects of unionization for workers and the economy broadly. It will then discuss the history and achievements of Stanford’s largest current service worker’s union, Service Employees International Union Local 2007 (SEIU Local 2007). Finally, it will apply the economic theory, literature, and historical precedent to analyze the potential benefits of graduate worker unionization. 

  1. The Benefits of Labor Unions in Economic Theory and Literature 

Stanford administrators are right to say that unionization is a “complex topic,” one that warrants examination beyond just basic economic theory. Admittedly, an elementary theoretical approach may view unions as an artificial restriction on labor supply. Stanford professor and former presidential Council of Economic Advisers member John Taylor explains in his introductory economics textbook: “By restricting membership… [labor unions] shift the labor supply curve to the left, raising wages” and, in turn, reducing employment in that industry. However, as Taylor posits, that often produces an increase in employment and a decrease in wages in a subsequent industry that workers move to. Thus, the effects of labor unions on wages and employment in the labor market as a whole are somewhat challenging to evaluate using simple economic theory. Moreover, these conditions assume perfect competition and thus may not be applicable to non-traditional labor markets, like that of graduate workers. Challenging ethical questions are also raised: If the theory is correct, can higher wages for unionized industries be ethically justified at the expense of non-union workers? Classical economic theory cannot provide definitive answers to such positive and normative questions. 

These theoretical complexities warrant an approach grounded in empirical analysis, which points to unions having generally positive effects for workers’ wages and benefits. A literature review by the Economic Policy Institute finds that: 

“Unions raise wages of unionized workers by roughly 20% and raise compensation, including both wages and benefits, by about 28%… The most sweeping advantage for unionized workers is in fringe benefits. Unionized workers are more likely than their non-unionized counterparts to receive paid leave, are approximately 18% to 28% more likely to have employer-provided health insurance, and are 23% to 54% more likely to be in employer-provided pension plans… Unionized workers receive 26% more vacation time and 14% more total paid leave.”

The theoretical grounding for this is simple: Workers have greater bargaining power as a collective than as individuals and are thus better able to negotiate for higher wages and benefits. This confirms the theoretical conclusion that unionized workers see higher wages (see left graph in Figure 1). 

In practice, the theory’s conclusions on employment are more complex. Research from the National Bureau of Economic Research finds that “more union involvement in wage setting significantly decreases the employment rate of young and older individuals relative to the prime-aged group.” They theorize that because these groups have the strongest alternatives to traditional labor market employment—schooling and housework for the young and retirement for the old—labor unions must negotiate particularly high wage increases for these groups to incentivize their employment, raising costs for firms and thus lowering demand for labor. They find that this does not necessarily drive unemployment (those seeking work but not employed) but rather leads these groups to exit the labor market altogether. So, the data does confirm that labor unions may restrict supply and decrease employment in their sector (see left graph of Figure 1). However, the workers that would otherwise have been employed in the unionized sector do not move to a non-unionized labor market (see right graph of Figure 1) but instead leave the labor force altogether. Of course, given that these groups have stronger alternatives to employment and do not make up large shares of the labor force, these consequences of unionization could perhaps be given less ethical weight. 

Moreover, contrary to the classical theory, the economic literature suggests that the wages of non-unionized workers may actually increase. Given the aforementioned hypothesis that unions affect the labor force participation rate rather than the employment rate of non-unionized sectors, one would not expect a change in the labor supply or the wages of non-unionized sectors. Interestingly, the aforementioned literature review from the Economic Policy Institute suggests that “strong unions set a pay standard that non-union employers follow. For example, a high school graduate whose workplace is not unionized but whose industry is 25% unionized is paid 5% more than similar workers in less-unionized industries.” Given that unemployment does not subsequently rise, this is not easily explained by classical economic theory. Perhaps, unions can be conceived of as placing a price floor in the labor market of a given industry, as even non-unionized firms must offer higher wages to stay competitive with unionized firms in attracting workers. The typical reduction in employment that such a price floor would theoretically generate may again be felt in the labor force participation rate rather than the unemployment rate, as explained by the National Bureau of Economic Research’s findings. Altogether, this suggests that unionized and non-unionized workers alike benefit from unionization at the expense of some groups exiting the labor force. 

Furthermore, the economic benefits of unions are felt not just by workers but also the economy more broadly: The literature suggests that unions improve productivity and worker retention. Meta-regression analysis published in the Industrial Relations Journal found a positive correlation between labor unions and worker productivity in the United States, particularly so in the manufacturing sector. Moreover, analysis from the Brookings Institute suggests that unions directly and indirectly strengthen worker retention through higher pay and benefits, significantly decreasing turnover costs for firms. It is difficult to weigh these improvements in productivity and retention against the costs of higher wages and benefits. Theoretically, if the gains from increased worker productivity and retention outweigh the costs of higher wages and benefits, the total quantity of goods and services produced should increase while prices should decrease. Moreover, because unions raise wages, they reduce income inequality, which OECD research finds may increase consumer demand, as workers are able to purchase more products. Likewise, in the broader economy, increased worker productivity and retention should theoretically increase gross domestic product. Thus, there are myriad reasons to conclude that unions may yield substantial economic benefits, although the complexity of the question makes causation challenging to conclusively evaluate. 

Altogether, the theory and literature should suggest that unions do not necessarily harm the economy and may indeed benefit it. One must weigh the clear benefits of unions—increased wages for both unionized and non-unionized workers, improved worker productivity, and increased employee retention—against the possible drawbacks of a decreased labor force participation rate and increased costs to firms. The economic literature has not conclusively weighed these benefits and drawbacks but trends towards a positive outlook on unions as a whole. One must ultimately make their own normative evaluations of which groups and benefits take priority over others. So indeed, as Stanford President Tessier-Lavigne suggests, unionization is “a complex topic, on which reasonable people can disagree,” but this does not tell the whole story. 

  1. The Work and Benefits of SEIU Local 2007 

In the context of Stanford, the Service Employees International Union Local 2007 (SEIU Local 2007) has been a powerful tool for service workers to engage in collective bargaining beneficial to their interests. The union has over 1,300 workers, consisting of the front-line staff students see on a daily basis, workers at the Stanford Linear Accelerator Center (SLAC), and a small number of workers at Santa Clara University. SEIU Local 2007 President Paul Regalado, who works at SLAC, stated in a recent interview that the union has collectively bargained for health insurance, a pension plan, regular wage increases, and an apprenticeship program. In a newsletter, the union informs workers of benefits it has fought for recently, including winning back pay for a temporarily suspended worker and creating an employee emergency assistance fund for “qualified disaster events, personal hardships due to local or natural disasters, and personal emergencies and financial hardships.” These achievements are undoubtedly beneficial to the well-being of the workers that make Stanford run. 

Moreover, the union fought for safety protocols during the COVID-19 pandemic that benefited the entire university. A study by the United States Department of Labor found that because unions can collectively bargain for better safety protocols, 68% of union workers always wear personal protective equipment as opposed to 53% of non-unionized workers, 39% of unionized workers regularly took COVID-19 tests as opposed to 9% of non-unionized workers, and 48% of unionized workers were certain they would receive paid leave if they got a fever as opposed to 30% of non-unionized workers. SEIU Local 2007 followed this trend. President Paul Regalado stated that the union “immediately started working with the University on programs to keep people working, keep people safe, keep student services operable, and establish hazardous pay for onsite workers… Through many, many months of demanding, [they] were successful at negotiating a 3% increase outside of [their] regular CBA [collective bargaining agreement] annual increases and a $250.00 monthly stipend for [their] workers that is still being paid out to this day.” The safety protocols made possible by the union encourage workers to stay home when they’re sick by providing a financial safety net to do so, limiting the spread of COVID-19 on campus. Consequently, these achievements do not just benefit workers, but also the Stanford community as a whole. 

  1. The Potential Benefits of the Stanford Graduate Workers Union

Like SEIU Local 2007, the platform of the Stanford Graduate Workers Union (SGWU) would bring about positive changes for its members and the university. In their proposed platform, SGWU advocated for a five-step program: affordable living conditions for all graduate workers, comprehensive benefits for all graduate workers and their dependents, safe and healthy workplaces free of power abuse, harassment, and discrimination, improved support for international and immigrant graduate workers, and democratic decision-making power and transparency. These policies would unambiguously improve quality of life for graduate students and create a healthier Stanford community for all. Moreover, unionization would introduce strong collective bargaining power for graduate students, allowing for future collaboration with undergraduates on issues of shared importance such as transportation options. 

Applying the economic literature to the case of the SGWU points to positive benefits of graduate worker unionization for the Stanford community. Although some aforementioned literature suggests a decreased labor force participation rate as a result of unionization, this may not apply to the case of graduate workers. The SGWU would likely not create the typical “restrictions on membership,” as their labor supply is determined in large part by the number of graduate students admitted by Stanford, and President Tessier-Lavigne has already committed to not let “academic matters, including admissions” be impacted by unionization. Moreover, the number of graduate workers needed, or labor demand, is not as flexible as it is in the classical economic model, as the demand for graduate worker labor is somewhat fixed by the university’s research and teaching needs. In other words, unionization should not affect employment for graduate workers, the typical largest negative consequence of unionization. However, the collective bargaining power of the SGWU will likely yield higher wages and benefits. This, in turn, could produce the improved productivity and retention that the literature indicates is created by unionization. That means more committed teaching assistants, higher-quality research, and benefits for the entire Stanford community. 

  1. Conclusion 

An economic analysis of unionization’s history and potential at Stanford points to broadly beneficial outcomes. Although the theory is challenging and the literature complex, unionization seems to improve productivity, wages, and worker retention. These benefits and more have already been seen in Stanford’s existing union, SEIU Local 2007. To the extent that unionization may produce negative outcomes for employment, these will likely not be present in the specific case of graduate worker unionization due to the relatively constant supply and demand of labor necessitated by the graduate worker labor market. Instead, graduate worker unionization is likely to improve wages and productivity, which would benefit undergraduates and university research. As Stanford prepares for the upcoming SGWU unionization election on May 31, 2023, it should remember that the economic analysis makes clear that Stanford needs unions.

Leave a Reply