Everything changed when she took another cleaning job. This one was unionised under 32BJ SEIU, a collective of property services workers, and one of the fastest growing private sector unions in the country. She began earning $17 an hour, had access to health care and moved off government assistance. She even had the ability to take vacation to spend time with her children.

Some see unions an anachronistic, or, worse yet, a threat to free-market capitalism. But unions represent a broad swath of American jobs – teachers, engineers, pilots, farmers, doctors and even rocket scientists. There is now a Freelancers Union which seeks to use collective bargaining for freelancers seeking health care, benefits, and insurance.

Suggested reading

Why did union leaders abandon the workers?

By Paul Embery

Since the birth of the nation, unions have existed in various iterations. After the Great Depression in the early 1930’s, tensions had escalated between workers and firms due to deteriorating working conditions. In 1935, President Roosevelt stated to Congress that “the rights of employees freely to organize for the purpose of collective bargaining should be fully protected,” and his New Deal was enacted. It made a host of sweeping reforms aimed at strengthening the battered economy and providing guidelines for basic working conditions. The New Deal helped to re-strengthen unions, which had waned through the roaring 20’s.

Unions maintained an important role in American working life for decades, but then declined again. In 1983, about one in five Americans were part of a union – today, only 6.4% of private sector workers in America are unionised and less than 11% of total workers. This represents a considerable decline in workers’ ability to band together and advocate for their collective rights.

Similar to the Gilded Age of the late 19^th century, American capitalism today has moved from a model of competing companies in each industry, to a highly concentrated economy with a few dominant firms controlling most industries.  Workers now have to negotiate with monopolists and oligopolists for wages and benefits – and with minimal union participation, companies have capitalised on the fact that workers are isolated and dispersed. All kinds of strange phenomenon show up that disempower workers. A few examples:

• Mandatory arbitration – workers have no legal right to sue their employer in court, or as a group, and must work out any grievances privately with the employer and an arbiter. Today, 56% of private sector, non-unionised workers are forced into mandatory arbitration, and of those, 23% are also denied any access to class action lawsuits.
• Non-compete clauses – non-competes now cover almost 18% of the entire American workforce. Nearly 40% of workers have signed one in previous jobs.
• Wage theft – A study by the Economic Policy Institute found that 2.4 million workers lose $8 billion annually (or an average of $3300/year per worker) due to minimum wage violations alone. This is a quarter of their earned wages.

It’s not only corporates who have benefited from low worker power – the government has cashed in as well in the form of excessive occupational licensing requirements (where workers require a form of permit to perform their job). Workers must pay fees, go through lengthy educational training, or be of a certain age.

In some industries where consumers need to be protected, licensing is important – like healthcare and education. But does the state of Louisiana really need to make hair braiders undergo 500 hours of training for a hair-braiding license? According to one national study, 73 occupations have a greater average training burden than emergency medical technicians, including bartenders, massage therapists, and tree trimmers. It is harder to become a barber, than it is an EMT. Seventy years ago, around one in 20 American workers needed an occupational license. Today, it is one in four.

Some people will point to the ugly side to unions as justification for banning them from the workplace. The 1954 film On the Waterfront depicts a squalid tale of corruption and crime in a New York longshoreman’s union, and in many way things haven’t changed. The list of union corruption cases is long over the past few years – last year, Rome Aloise, the treasurer of the Teamsters, was found guilty on multiple corruption counts.

Yet crime perpetrated by CEOs in the cases of Enron, Worldcom, Valeant and other companies never raises arguments that CEOs should not represent management or shareholders. Crime is the problem, not unionisation.

Though unions have been criticised for becoming entrenched entities that protect their own interests, it is more helpful to think of them as a mechanism for collective bargaining power. These entities represent one of the only collective forces that workers have to advocate for themselves.

What’s more, unions actually raise the standard of living for all working Americans. Inequality is inversely related to union membership. An important paper by Jordan Brennan of the Levy Economics Institute found that “the commodified power of large firms depresses economic growth and exacerbates income inequality while the countervailing power of organized labor mitigates inequality and produces significant inflationary pressure.”

Workers now face pressure on all sides – governments that require excessive licensing to work, and corporates that require workers to accept employment on their terms. Without any form of countervailing power, American workers are left to fight alone.

It is a toxic cocktail for the average American. The hangover from increased corporate power is real, with many struggling to meet basic needs, like Angel Rivera. The balance of power has swung too far in favour of the corporate giants. Unions have an essential role to play in rectifying that by providing a platform for workers to demand what is rightfully theirs: a living wage, healthcare, and peace of mind for them and their families. And in the process, it might just restore some faith in capitalism’s power to increase prosperity for all.

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How low-paying businesses profit from us all

By Peter Franklin

In many areas in the United States, a cosmetology license is required to work with hair, but Clayton was told she wouldn’t need one for braiding. In 2009, however, an anonymous email appeared in her inbox: “It is illegal in the state of Utah to do any form of extensions without a valid cosmetology license. Please delete your ad, or you will be reported.” Returning to the state licensing board she was told that she would, in fact, need that license.

The requirement was ridiculous – the mandatory classes would not even teach the techniques used in her braiding, which were, after all, traditional techniques learned in Sierra Leone. And the required coursework was estimated to cost between $9,000 and $19,000. Even at the low end, that’s roughly twice as much as Clayton makes in a good business year.

Clayton turned to the courts, arguing that the occupational licensing requirements infringed on her right to work and earn a living. Finally, three years later, she won a reprieve and returned to braiding.

Luckily, hairdressers in the UK are subject to less regulation than their US counterparts. While they are often required to register with local governments, it is a far less stringent process than obtaining a license. But even having to ask the government for permission before beginning to serve customers is overly bureaucratic.

Overall in the UK, around one in five workers must be licensed for their work. A further fifth that must register before working.

The justification for such onerous requirements is consumer protection, but the academic research on occupational licensing shows that rather than benefiting consumers, licensing primarily helps protect those who are already licensed from competition. In other words, it closes off the industry to people who might struggle to obtain a license, possibly due to cost, while creating higher prices for consumers.

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The closed world of the 'enlightened' middle class

By James Bloodworth

Studies of occupational licensing in a variety of countries have generally shown that licensing creates a ‘wage premium’. A 2018 estimate published in the Eastern Economic Journal found, for example, a 16.9% premium for licensed opticians compared to unlicensed opticians. That means people paid more for glasses and other needs than they would have in an unlicensed state.

And in the European Union, researchers found that, averaging over both country and occupation, the average overall premium is around 4%, accounting for the country and occupation in question – but they also found that the premium varies considerably and may be as much as 19% for some workers.

It is often argued that the extra costs associated with licensed businesses are the price of higher quality services and goods – but there’s little evidence of that. The authors of the opticians paper conclude: “By and large, optician licensing appears to be reducing consumer welfare by raising the earnings of opticians without enhancing the quality of services delivered to consumers.”

The higher prices also mean that people visit licensed occupations less often. With less business activity, there are fewer jobs in the licensed sectors than there would otherwise be. This is not a small effect either. Again, it varies by occupation, but estimates by European labour scholars Maria Koumenta and Mario Pagliero suggest as many as 705,000 jobs may be lost because of occupational licensing. They write, “Depending on the occupation, there could be between 3% and 9% more people working in a given profession should access requirements be made less stringent.”

This tends to hit those most in need the hardest. Clayton, for example, had fled her home country because of a civil war. She had few other options available to her. Similarly, other research by Koumenta and Pagliero suggests that licensing an occupation deters foreign workers from entering the field – representing higher costs that the consumers are forced to bear.

Although minorities seem to suffer disproportionately from licensing requirements, it also depresses employment for the entire economy­ – potentially closing off opportunities for millions. In a 2006 book, University of Minnesota professor Morris Kleiner estimated that job growth in an occupation grew 20% slower in states that licensed compared to states that did not. And in 2011, Kleiner and two other economists from the National Bureau of Economic Research used back-of-the-envelope calculations to show that occupational licensing may result in 2.8 million fewer jobs in the US. That’s a huge, negative impact on employment opportunities for people living in states with licensing.

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Elitist Britain is a closed shop

By Paul Embery

Given these formidable costs, it’s clear that alternatives to licensing are at least worth exploring for certain occupations. The most obvious place to start would be removing the licensing requirements for occupations where there is no obvious need for it. In Scotland, for example, tattoo artists need a license, whereas only registration is needed in Northern Ireland – and Northern Ireland doesn’t appear to experience undue numbers of accidents or complaints compared to Scotland.

Or window cleaners, which in Scotland again requires a license – it’s far from clear what benefits a license is providing to customers when they are both uninterested in, and unaware of, the licensing process, as several reports note. Online review systems are just as effective, likely more so, in helping ensure consumers get a high-quality window wash.

In fact, consumers’ ability to use review sites to cut down on the information gap between consumer and provider makes the need for much of the ‘protection’ that occupational licensing is meant to provide obsolete.

Ultimately, consumers will be better off if unnecessarily burdensome licensing requirements for certain jobs are removed or relaxed. The problems that licensing sets out to solve are more likely to be prevented simply by the competitive process, as one business strives to serve its customers best. More than anything, occupational licensing protects industries from competition and erects high barriers to entry for new workers, closing doors to those most in need of a chance to work.