More Unionized Workers Are Left Unemployed (Again): A Coincidence, Or Just Another Union Casualty?
For some small businesses, unionization may be the final straw that causes them to quit altogether.
By Peter List, Editor | June 2, 2024
Should unions be so quick to unionize every worker in every workplace, even if it means the business could fail?
Unions have rarely been successful in keeping unprofitable businesses running. However, when they have, it has often come at a significant cost to the workers involved. This was evident in the auto industry in 2009, where American taxpayers also shared the burden.
Restaurants across America are “teetering on a precipice,” notes Business Insider.
In Seattle, like elsewhere across America, restaurants have “dealt with inflation, supply chain issues, labor shortages, and the fallout from remote work, among other hurdles”…and, now, delivery apps.
In an industry where supply-chain issues, lingering inflation, competition, declining consumer confidence, and generally low-profit margins, unionization is—at least for some small business owners—the last straw.
“The worst crime against working people is a company which fails to operate at a profit.” — Samuel Gompers, American Federation of Labor
Unions like the Service Employees International Union (SEIU), which advocates for unionizing every working person under the #UnionsForAll slogan, would do well to consider the potential impact of targeting smaller businesses.
It appears that more small businesses are choosing to close down after being targeted by a union, and this trend may have significant consequences.
Workers United, an SEIU-affiliated union, has successfully unionized nearly 450 out of 9,000 Starbucks cafes across the U.S. However, the union's reputation for negatively impacting small employers seems to be growing. This has, at times, led to employees being left shocked and unemployed as collateral damage.
In Washington, D.C., the latest casualties of Workers United’s efforts to unionize smaller employers are two coffee cafes called The Wydown.
“The Wydown, a DC coffee shop whose workers recently announced plans to unionize, abruptly shuttered both of its locations Tuesday night, laying off 30 workers, according to former employees,” reported the Washingtonian in May.
“The closures are likely the end of the workers’ union drive — workers’ ability to force reopenings is generally limited to partial closures, rather than the total end of a business — and marks another defeat for organized cafe labor in a city that has largely resisted the wave of unionization unleashed by Starbucks Workers United’s victories,” notes Restaurant Dive.
In Philadelphia, Korshak Bagels—owned by an idealistic, pro-union owner named Phil Korshak—closed a mere two years after opening (and being unionized).
“Korshak was a union shop,” reports Philadelphia Magazine. “It started hiring in March of 2021, opened in May; and within a month, the crew unionized. And there was maybe no one happier about that than Phillip Korshak, who voluntarily recognized the union.”
“Korshak was a key shop for Local 80, a Workers United-affiliated union organizing food service workers,” reported BillyPenn.com last year. “It had the only Local 80 staff working under the terms of a ratified contract. It was also the only place where the owner agreed to share the business’s finances with the union”
Yet, despite the pro-union owner working from 3 a.m. to 8 p.m. to cover shifts when workers called out, Korhsak was losing $1000 per week on payroll, eventually spending his life savings ($50,000) to keep his dream alive.
In Detroit, a Great Lakes Coffee location in Midtown Detroit “where workers went on strike and tried to unionize has permanently closed” the Detroit Free Press reported in 2022.
The paper reported that workers went on a union recognition strike, demanding to unionize with UNITE-HERE (not the SEIU’s Workers' United) and negotiate a contract for higher wages and what they called better working conditions.
Although UNITE-HERE had requested an election, the union later withdrew its petition after the company closed its doors, partly due to COVID-related closures.
“While we are disappointed and heartbroken, we are grateful for all who have stood with us, for your solidarity, love, and support,” the workers said in a statement. “We’ve been on strike for over 150 days, & all of us have had to find new jobs. Our resources, time, and energy need to be cared for in order to stay in the fight for workers’ rights.”
In Ann Arbor, Michigan, four Mighty Good Coffee cafes closed even before the pandemic after the company’s baristas unionized.
“The move came as a shock to the baristas involved,” reported 7 Action News in 2019.
The union was in the middle of their first contract negotiation when the closures were announced.
“We walk away with no job and no contract,” said Mandy Gallegos, a barista who joined protestors at the time. Gallegos held a sign that read “Unionizing got us laid off. Are they really Mighty Good?”
Costs of Unionization
When workers unionize, beyond mere wages and benefits, unionization costs employers money and, sometimes, that cost may be too much to bear.
A decades-old study by the Board of Governors of the Federal Reserve System found that union certification significantly reduces investment.
We find that a winning certification election has, on average, about the same effect on investment as would a 30 percentage point increase in the corporate tax.
Similarly, Economist Barry Hisrch found that unionized firms have profits that are 10% to 20% less than non-unionized firms.
Take, for example, Good Foods Co-op, a health-food grocery that has operated since 1972 in Lexington, Kentucky. It is currently trying to stay in business in a highly competitive industry.
Employees of Good Foods voted to unionize last year, with a contract securing the right to food safety protections for customers and employees, guaranteed yearly pay increases, discipline for cause only, a right to representation, increased employer contributions for health insurance including dental and vision, additional holidays paid at time and a half, and formation of a labor-management committee.
In addition to the increases in pay and healthcare contributions, “Good Foods incurred about $100,000 in attorney fees during union negotiations.”
If the Good Foods Co-op is unable to secure loans, it may also close down.
Just as not all coffee cafes are multi-billion dollar corporations like Starbucks, not all companies are sustainable under unionization.
However, rather than espousing a "#UnionsForAll strategy, unions may want to choose their targets more carefully and the sooner union organizers realize this, the better off all employees will be.
Related: The Union Tax: How Unions Cost Companies And Jobs
