Are Labor Unions Bad for Business?

As United Auto Workers strikes continue to ripple across U.S. factories, the debate between workforce compensation and unionized companies’ ability to compete wears on. Workers are arguing for a slice of the sharply rising profits of U.S. automakers General Motors GM, Ford F, and Stellantis STLA, but the industry’s turbulent past, littered with bankrupt vehicle makers, weighs on the minds of executives and investors alike. Meanwhile, the nonunionized workforces of the Japan Three, and more recently Hyundai-Kia along with Tesla TSLA, cast a long competitive shadow.Amid this backdrop, it’s worth asking: Do unions lead to bad outcomes for businesses? The answer isn’t always clear-cut—despite lower profitability among companies with higher unionization, these firms also tend to see reduced employee turnover and lower average Morningstar Uncertainty Ratings.Unions Correlate With Lower Profitability and Greater Workforce IncidentsAs we’ve previously noted, traditional financial theory typica...