Comment: Some employers might actually benefit from unions

Unionized firms, such as UPS, have had better employee retention than nonunionized FedEx and others.

By Conor Sen / Bloomberg Opinion

Elevated labor turnover has contributed to a lot of the challenges for businesses this year, with direct and indirect costs that affect their bottom lines and make them less able to fulfill demand at a time when the whole economy is struggling with supply-chain issues.

The monthly Job Openings and Labor Turnover Survey provides one view of the quits rate. It measures the number of people who have left their jobs each month. In September, 4.4 million Americans quit their jobs, the most on record. Prior to the pandemic, the monthly rate was closer to 3.5 million. That’s 3 percent of all U.S. workers quitting their jobs in a single month.

And that’s an expensive proposition for companies. When a lower-paid employee such as a fast food worker quits their job, the cost to the business — everything from hiring and training a replacement worker to lost revenue while the position is unfilled — might be a few thousand dollars. For higher-paid workers with more specialized skills, the cost can be in the tens of thousands of dollars.

Even that can understate the impact of high turnover. As we’ve seen with automobiles and semiconductors, missing a key critical component can shut down production for an entire business line. The same is the case when it comes to workers; a sales director probably can’t do software development and vice versa. Additionally, if lots of workers at a business are quitting it can negatively impact employee morale, leading to more turnover. That might force a company to offer retention bonuses or raise wages to keep the staff happy.

It’s hard to know what a healthy level of labor market turnover would be in the aggregate, but if it were three million quits per month — roughly the level in the U.S. in 2017 — then we’re 1.4 million quits per month above that. If the average cost of a worker quitting economy-wide is $7,500, then that’s an extra cost to American business of $10.5 billion a month, or more than $120 billion a year.

Businesses will want to reduce that cost the same way they work to get other costs down. And for that, United Parcel Service is worth a look.

Drivers and warehouse workers are two types of employees that have been in high demand this year, as companies ranging from UPS and Amazon to Target and Instacart try to meet consumer demand for shipping and delivery. UPS, because it has a unionized labor force, has had lower labor turnover and more consistent staffing this year than some of its non-unionized competitors such as FedEx.

Unions aren’t always a good deal for employers; they often entail higher labor costs and less flexibility than non-unionized labor arrangements, which is why many companies tend to fight unionization. But in this economy and labor market, UPS’s unionized labor arrangement has served the company well, while its competitors deal with understaffing and high turnover.

That suggests that as employers wrestle with turnover dynamics, they might want to act more like UPS when it comes to their workforce, particularly to the extent they believe the days of loose labor markets are over.

This is not something all employers will or should consider; the quits rate in the financial sector, for instance, is not very high, and neither banks nor their well-paid staff are likely to be particularly interested in unionization. But drivers, fulfillment center workers, hospitality workers: These are roles in industries that don’t have any easy solutions to their labor challenges unless mass automation turns out to be a viable option.

Progressive activists are always pushing for unionization on ideological grounds; they believe it’s pro-worker, will reduce inequality, and create politically-powerful interests they can use to exert power. Employers, on the other hand, are wary about agreeing to something that will reduce their profitability, or cede bargaining power to their workforce. But different economic environments call for different kinds of business models, and right now, the UPS unionization model looks like a winner for both company and employees alike.

Conor Sen is a Bloomberg Opinion columnist and the founder of Peachtree Creek Investments. He’s been a contributor to the Atlantic and Business Insider and resides in Atlanta.

Talk to us

More in Opinion

The COVID-19 ward at Providence Regional Medical Center Everett in May 2020. (Andy Bronson / Herald file) 20200519
Editorial: Nurses and hospitals need our care, support now

The pandemic has taken a toll on Providence and its nurses. Changes are needed to restore all.

Editorial cartoons for Monday, Aug. 15

A sketchy look at the news of the day.… Continue reading

Melinda Parke sits inside her Days Inn motel room as her son, Elijah, sleeps on his chair behind her Wednesday, April 20, 2022, in Everett, Washington. (Ryan Berry / The Herald)
Editorial: Purchase of hotel as shelter can be effective tool

The county’s investment of federal aid will serve those who need shelter and supportive services.

Teresa Reynolds sits exhausted as members of her community clean the debris from their flood ravaged homes at Ogden Hollar in Hindman, Ky., Saturday, July 30, 2022. (AP Photo/Timothy D. Easley)
Editorial: How many billion-dollar disasters will it take?

A tally of climate disasters shows an ever-increasing toll of costs and lives. Congress must act.

A group of Volunteers of America crisis counselors and workers meet with Gov. Jay Inslee, left, after the governor toured their facility and gave a brief address about mental health services on Thursday, July 28, 2022, outside the VOA Behavioral Health Crisis Call Center in Everett, Washington. (Ryan Berry / The Herald)
Editorial: Our support makes sure lifeline is there in crises

The new 988 crisis line is seeing an increase in calls that speaks to the need for mental health care.

Burke: What sorcery was used to get people to buy Big Lie?

Want to keep He Who Must Not Be Named and his Dementors out of office? Use your magic ballot.

Saunders: It’s a bad look, but Trump was right to invoke Fifth

The man who once said only the Mob takes the Fifth, wised up to avoid the possibility of perjury.

Comment: Monkeypox isn’t covid, but we’re making same mistakes

We’re too focused on rumors — and ourselves — to concentrate a response on those most at risk.

Comment: Trump’s worst enemies were his subservient ‘yes men’

Whether generals or chiefs of staff, Trump needed to hear a range of opinion, not an echo of himself.

Most Read