Labor Watch

Assessing Big Labor’s Potential Dues Windfall


Since union strength began declining in the late 1950s, organized labor has sought to reverse its decline by numerous stratagems. In the mid-1990s, the new regime at the AFL-CIO led by democratic socialist John Sweeney, former leader of the Service Employees International Union (SEIU), proposed “union summer” to recruit new, youthful union operatives and organizers. But the proportion of American workers willing to join unions did not recover. In the 2000s, Sweeney’s old SEIU and its allies in the Democratic Party pushed “card check,” an organizing rule that would deem unions recognized and give exclusive bargaining powers based on publicly signed cards rather than privately cast ballots, but legislation to impose this scheme failed in the Senate. In the 2010s, the AFL-CIO proposed codifying social justice unionism by offering membership to other liberal-coalition groups, but the alliance remained informal.

The latest campaign, led once again by the SEIU, targets limited-service (in unionist language, “fast food”) restaurants for unionization by a threefold strategy. First, the union will push friendly state and local governments to raise minimum wages to obtain popular support for the union campaign and support from liberal politicians on the make. Simultaneously, the union will push friendly politicians to change the laws on joint employment, franchisee-franchisor relations, independent contracting, secondary boycotts, and forced-dues coercion to ease union organizing. Then after those laws have passed, it will launch a traditional “corporate campaign,” harshly criticizing the limited-service restaurant franchisors in hopes of producing mass unionization of the franchisees’ workforces.

Costs

This campaign, an extension of the Fight for 15 effort launched in 2012, has been costly for the SEIU. In 2022 alone, the SEIU’s annual report disclosed nearly $10 million in contributions to the National Fast Food Workers Union (NFFWU), the proto-union the SEIU organized to be the center of its restaurant-organizing campaign. This amount does not include any retainers paid to lawyers, organizers, or public relations campaigners (such as the firm Berlin Rosen, which has been involved in the campaign since its origin) that may have been paid by SEIU directly, without NFFWU as a cutout funder. Estimates now several years old pegged the campaign’s total cost as nearing $100 million even then.

Potential Financial Windfall for SEIU

But if all goes according to the SEIU’s plan, how much does the union stand to benefit? That is the question that William Even and David Macpherson sought to answer in a data-analytical exercise. Using Bureau of Labor Statistics estimates for employment and total payroll in various industries that the SEIU seeks to organize, Census Bureau estimates on the rate of unionization in those industries, and a plausible estimate that union dues would constitute 2 percent of payroll expenses, the researchers compiled a spreadsheet that can be used to estimate the potential payoff from a successful mass-unionization campaign.

The range of potential benefit is substantial. If all workers in the industries analyzed joined the union (They won’t. More about this later.), the SEIU and its local unions would be looking at $4.5 billion in new dues revenue per year. (SEIU international is funded by a capitation tax on union membership rolls, set since 2020 at $7.65 per regular member per month. Workers pay their dues to local unions, which then remit the tax to the international. Thus, it would be wrong to compare the increase amount with SEIU International’s present budget.) This figure of $4.5 billion and all subsequent figures calculated in this piece are based on the U.S. totals. Due to imprecise estimates, aggregating all states yields slightly different figures.

Yet even with the most favorable organizing conditions, SEIU will not be able to unionize the entire limited-service restaurant, travel accommodation, home health care, and janitorial services industries. Some workers will refrain from union membership, and some employers, especially on the smaller side and in jurisdictions less favorable to unions, will avoid their workers’ organizing. Fortunately, Even and Macpherson allow analysis of potential dues revenues at different unionization rates. From this, one can estimate Big Labor’s windfall in dues revenue for various levels of unionization in those industries. The country comparisons listed are based on the country’s unionization rate for the entire workforce as reported by OECD.Stat with rates for 2019, unless otherwise indicated.

  • Italy (32.5 percent unionized): $1.35 billion
  • United Kingdom (23.5 percent unionized): $919 million
  • Germany (16.3 percent unionized): $573 million
  • OECD Average (15.8 percent unionized): $549 million
  • United States (9.9 percent unionized): $266 million
  • U.S. private sector (6.0 percent unionized, per Bureau of Labor Statistics): $78.8 million

Questions for Future Analysis

These estimates are only slightly more sophisticated than a back-of-the-envelope guess. For instance, there is no reason to believe that total employment in these industries will remain the same if organized labor and its financial and nonfinancial demands on employers increasingly permeate them. The odds of job losses in a unionized industry range from very likely to certain.

What these estimates show is the potential annual payoff for Big Labor’s investment. Even a modest increase in industry unionization to the United States all-sector average unionization would put over 20 times the SEIU’s 2022 investment in NFFWU into Big Labor’s accounts each year.

Another crimp in this scheme is that non-union competitors would likely prosper at the expense of unionized firms, further reducing the financial yield to Big Labor. But that raises the specter that unions would respond by demanding “sectoral bargaining,” as practiced in continental Europe—and if the SEIU gets its way, in the limited-service restaurant industry in California.

Under sectoral bargaining, the union negotiates a contract with an employer association, usually with some degree of government supervision or input, that applies to all workers in the industry, union members or not. This is how France obtains nearly universal collective bargaining coverage, despite having a lower proportion of union membership than the United States. Sectoral bargaining may not yield union dues directly, though New York City requires fast-food employers to offer a payroll checkoff that allows workers to directly contribute to union-aligned advocacy groups, but it does limit the potential for competition by non-union employers (much as “prevailing wage” laws suppress competition in the construction industry).

Future analysis would ideally investigate how increased unionization as sought by the SEIU would potentially affect employment, both under conditions of sectoral bargaining and currently prevailing conditions. No matter what the effects, they likely do not cancel out the gains from increased organizing. Even under the lowest-case scenario, in which unionization rates in those industries align with the current U.S. private-sector average, the annual payoff is almost eight times the SEIU’s investment in NFFWU.

A final question is worth considering but beyond the scope of economic analysis. Presently, unions like the SEIU pursue an aggressive left-wing social agenda in addition to their left-wing economic agenda. There is no reason to believe that expanding their power, either by increasing coercive power in organizing or in sectoral bargaining, will change their inclination to advance social agendas. A surge in unions’ war chests on the order of these estimates could bring in up to $1.35 billion, greatly empowering the social-policy Left in addition to the economic Left. In 2022 alone, SEIU gave $30,000 to the Women’s March, $250,000 to Color of Change, and $50,000 to Demand Justice.

 

Appendix

Data

Download the data file here.

 Methodology for Computing SEIU Membership and Dues

By William Even and David Macpherson

The estimate of employment and payroll was obtained using data from the Quarterly Census of Employment and Wages (QCEW) for the following four industries with the corresponding North American Industry Classification System (NAICS) codes given in parentheses:

  • Limited Service Restaurants (722513)
    Travel Accommodation (7211)
    Home Health Care (6216)
    Janitorial Services (56172)

The sample period for the QCEW data included April 2021 through March 2022. This was the most recent data available when the analysis was completed. The employment and payroll estimates are for the private-sector and federal, state, and local government employees in the four industries of interest. Employment estimates are the average across the 12 months of data. Payroll estimates are summed across the four quarters of payroll data.

To estimate new membership in the four industries, we obtain state-specific estimates of the unionization rate (u) in each of the industries using data from the Current Population Survey from April 2020 to March 2022 and merge it to the QCEW data.[1] New membership in a given state/industry is estimated as employment times (1-u) where u is the industry/state unionization rate. New dues are estimated as 2 percent of annual payroll times (1-u). Annual dues per worker are calculated as annual dues divided by the estimated number of new members.

[1] The Current Population Survey (CPS) industries used were 7690 (Services to buildings and dwellings (except cleaning during construction), 8170 (Home health care services), 8660 (Traveler accommodation), and 8680 (Restaurants and other food services). It is important to note that the unionization rate assigned to limited-service restaurants is based on the unionization rate for all restaurants.

Michael Watson

Michael is Research Director for Capital Research Center and serves as the managing editor for InfluenceWatch. A graduate of the College of William and Mary, he previously worked for a…
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