Here’s what the AI Overview says:

The impact of US unions on innovation and competitiveness is a subject of ongoing debate, with research showing both negative and positive effects. The outcome appears to depend on a variety of factors, such as industry context, the nature of labor-management relations, and the specific goals of the union. 

Some studies suggest that unions can hinder innovation and firm competitiveness through several channels:

  • Reduced R&D spending: By increasing labor costs and capturing a portion of a company's profits (known as "rent-seeking"), unions can reduce the amount of capital available for reinvestment in research and development.

  • Lower patent output: Research using data from US union elections found that successful unionization led to a significant decline in the number and quality of a firm's patents within three years. This was attributed to cuts in R&D and the departure of innovative inventors.

  • Decreased productivity: Some studies suggest that the rigid work rules sometimes associated with unions, particularly in traditional manufacturing, can decrease management's flexibility and efficiency, thereby hindering productivity improvements.

  • Discouragement of technological adoption: Historically, some unions have resisted the adoption of labor-saving technology, fearing job losses. While this resistance is often unsuccessful in the long run, it can temporarily delay innovation and technological change.

  • Wage compression: Unions tend to compress wages by raising pay for lower-skilled workers while capping earnings for highly-skilled workers. This may discourage high-performers and inventors, causing them to leave for non-unionized firms where their productivity is rewarded with higher compensation.

  • Investment shifts: In response to unionization, some firms have been found to move their innovation activities away from states with a high degree of union success. 

Conversely, other evidence points to ways unions can boost productivity, innovation, and competitiveness:

  • Employee voice and reduced turnover: Unions give employees a collective voice to address workplace issues, rather than simply leaving ("exiting") a job they are dissatisfied with. This can increase employee morale and reduce costly turnover, preserving firm-specific human capital and institutional knowledge.

  • Improved employee well-being: By advocating for better wages, benefits, and working conditions, unions can enhance employee satisfaction and engagement. This can lead to greater organizational commitment and motivation, which can indirectly contribute to productivity.

  • Shock effect and efficiency: The pressure of higher union wages can act as a "shock" that forces management to improve efficiency, adopt more advanced production methods, and invest in technology to remain competitive. This effect is particularly noted in less well-managed firms.

  • Encouragement of innovation: Some theoretical arguments suggest that the job security provided by unions may give employees the confidence to experiment with novel ideas without fear of being terminated for failure. This "employee protectionism" can foster a climate of innovation.

  • Promoting training: Unions often promote and provide formal training, which can lead to a more highly-skilled and productive workforce. This can enhance a company's competitiveness.

  • Addressing market failures: Unions can correct for labor market failures, such as a lack of competition for labor (monopsony), by pushing for higher wages and better working conditions. This can benefit not only union workers but also boost wages for non-union workers, leading to higher consumption and broader economic growth. 

The "Atlantic divide"

Notably, some research has identified an "Atlantic divide" in the union-innovation relationship. While US studies often show a negative association, studies in Western Europe, where different labor relations systems are common, frequently find that unions do not depress innovation*. This suggests that institutional context and the specific nature of collective bargaining and labor laws play a critical role in shaping the impact of unions*.

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* An example would be in Denmark, where unions contribute to innovation and competitiveness through the cooperative "flexicurity" model. This model allows employers to hire and fire as needed to adapt to changing market conditions and adopt new technologies quickly, combined with the country’s strong social safety net that provides income security during job transitions, and government-funded training and education programs to help unemployed workers re-enter the workforce. [That was me, not AI].

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Selected Sources:

Beauregard, Pierre-Loup, Thomas Lemieux, Derek Messacar, and Raffaele Saggio. Why Do Union Jobs Pay More? New Evidence from Matched Employer-Employee Data. No. w33740. National Bureau of Economic Research, 2025. https://www.nber.org/system/files/working_papers/w33740/w33740.pdf

Belman, D. and Block, R.N., Bargaining for Competitiveness: Law, Research, and Case Studies Richard N. Block, ed. Kalamazoo, MI: W.E. Upjohn Institute for Employment Research, 2003. DOI: 10.17848/9780585469652.ch3 https://research.upjohn.org/up_press

Bradley, Daniel, Incheol Kim, and Xuan Tian. "Do unions affect innovation?." Management Science 63, no. 7 (2017): 2251-2271. https://doi.org/10.1287/mnsc.2015.2414

Laroche, Patrice (2020) : Unions, Collective Bargaining and Firm Performance, GLO Discussion Paper, No. 728, Global Labor Organization (GLO), Essen https://hdl.handle.net/10419/226657

Palagashvili, Liya and Revana Sharfuddin. “Do More Powerful Unions Generate Better Pro-Worker Outcomes?” Mercatus Working Paper, Mercatus Center at George Mason University, May 2025. https://www.mercatus.org/research/working-papers/do-more-powerful-unions-generate-better-pro-worker-outcomes

“Promoting Social Partnership in Employee Training: Country Report Denmark” German Economic Institute,  2018.  https://www.etuc.org/sites/default/files/publication/file/2018-06/DK_Country%20report%20Denmark_final_0.pdf  

Smith, Anthony E. "Trade Unions and the Process of Technological Change." Thomas S. Kuttner (éd.), The Industrial Relations System-Le système de relations industrielles. Actes du 29ème congrès de l'association canadienne ds relations industrielles (1993): 489-505. https://doi.org/10.1016/j.labeco.2023.102386

“The Danish labour market”, Denmark.dk. Accessed September 1, 2025.  https://denmark.dk/society-and-business/the-danish-labour-market