December 5, 2023
Global trade and unionization
What role did the surge in China imports have on already declining union rates?
Membership in American labor unions has been declining since the 1950s. At the same time, the United States has seen imports and trade deficits steadily rising in lockstep, prompting some labor leaders and activists to connect the two trends.
While there is a link between global trade and unionization, the relationship is much more nuanced than first appearances would suggest, according to a paper in the American Economic Journal: Economic Policy. In fact, the authors, John S. Ahlquist and Mitch Downey, found that between 1990 and 2014 Chinese imports actually helped stem the tide of declining unionization overall.
The researchers were initially surprised by their finding, since logic would suggest that import competition hurts union membership. Unions tend to push wages up, so compared to their non-unionized counterparts, unionized companies should face more pressure from foreign countries with abundant low-wage labor, such as China.
“In the first version of this research, we immediately found that more trade exposure increased union density,” Downey told the AEA in an interview. “We thought this was clearly a problem with the data and the methods, so we went back to the drawing board several times. But we kept getting the exact same results.”
After realizing that their finding was robust, they set out to make sense of this new puzzle. Why would more import competition have a positive effect on unionization?
The first insight came from analyzing manufacturing apart from other industries.
Historically, steel, automotive, and similar manufacturing industries were the leaders of the American labor movement. But in more recent years, the center of gravity of union membership has shifted toward service sectors, which are less exposed to foreign competition.
When the authors compared manufacturing firms in states with more exposure to competition from China to those with less exposure, they found that Chinese imports accounted for less than a fifth of the decline in unionization rates among manufacturers.
The authors argued that this smaller-than-expected effect was due to what economists call “product heterogeneity.” Unions are concentrated in industries where product quality matters, and unions tend to make high-quality goods. But over the sample period, new Chinese firms tended to export either lower-quality goods or simple, uniform goods like unprocessed lead. As a result, many American unions were less exposed to Chinese competition.
Still, union rates among manufacturing workers were lower because of Chinese import competition. But when the authors compared nonmanufacturing union rates across states with different levels of exposure to Chinese trade, they found that the China trade shock actually buoyed nonmanufacturing union numbers during the 1990s and 2000s, especially in sectors with relatively high and stable levels of unionization, such as education and healthcare.
There is room for legal and regulatory policy changes that make it easier for unions to form and bargain effectively. And our work suggests they can still be effective even in a world with lots of trade with China.
Although it might appear that union members were trading in their hard hats for white-board markers and scrubs, such a tidy story didn’t agree with the data very well. The authors found that workers in 2014 who fit the demographic profile of a union member in 1990 were actually more likely to either be unemployed or have a job in a nonunionized low-wage service sector like landscaping.
However, the spouses and children of less educated men—a demographic that would have been more reliant on manufacturing employment in 1990— appeared to be better candidates for the new type of union member.
“The spouses and children of these men responded to the decimated employment opportunities within manufacturing by leaving low-wage retail jobs and moving towards higher-wage health and education jobs, which happened to be unionized,” Downey said. “It's a pattern that is consistent with a large literature about changes in women's labor force participation, social norms, marriage patterns, and other things like that.”
After exploring important geographic variation, changing employment, and unionization patterns over time, the authors found that trade, overall, played a much less significant role than expected in the decline of unionization, which they say is an important reminder for those interested in a robust labor movement in the United States.
“There is room for legal and regulatory policy changes that make it easier for unions to form and bargain effectively,” said Ahlquist. “And our work suggests they can still be effective even in a world with lots of trade with China.”