Key Points

  • Moody's Ratings said a series of high-profile union victories over the past few months could strengthen the labor organizing trend—a trend that, while eroding corporate profitability, may lower employee turnover in the long run.
  • Citing data from the National Labor Relations Board, Moody's noted that union election petitions surged 27% in the year ending September 30, reaching the highest level in over a decade. During the same period, workers won 73% of elections, the highest rate since at least 2014.
  • "We expect increased union recognition and density to negatively impact employer profitability, but unions often bring lower employee turnover, which may offset the higher labor costs they entail," Moody's analysts said in the report.

In-Depth Analysis

It should be noted thatonly 6% of the private-sector workforceis unionized, a share that has been shrinking for decades. According to Bureau of Labor Statistics data from January, union membership in the private and public sectors combined fell to 10% in 2023, down from 20.1% in 1983, the first year of the data series.

Nevertheless, unions have won a series of high-profile disputes in the private sector in recent years, achieving limited but tangible gains.

Most immediately, members of the International Association of Machinists and Aerospace Workers (IAM) are scheduled to vote Monday on a contract proposal from Boeing that has been endorsed by the union's negotiators.

More than 33,000 IAM members will consider whether to accept a 38% wage increase over four years, along with concessions on pensions, job security, and bonuses,the union said in a statement Friday. Workers had previously rejected multiple contract offers and have been on strike since September 13.

"By reaching this agreement, IAM union members have earned the opportunity to ratify a contract that will set a new standard for their industry," IAM International President Brian Bryant said in the statement.

"A contract like this will send an inspiring message to all American workers who want to join a union or have been mistreated by their employers," Bryant said.

Moody's noted that union militancy has intensified since the start of this decade. According to BLS data, work stoppages involving 1,000 or more workers rose to 33 last year, thehighest level since 2000。

Moody's said organized labor has "won record contracts in traditionally unionized industries, such as auto manufacturing, and is making inroads in sectors where union penetration has historically been low," specifically citing achievements at Starbucks and in the food service industry.

"As the labor market cools, workers' bargaining leverage may weaken, but a series of high-profile union victories, coupled with the strongest public support for unions in nearly 60 years, will likely further embolden unionized and would-be union workers in 2025," Moody's said.

Moody's noted that unions use their "monopoly power" over labor supply to secure a larger share of profits.

"But unions also provide workers with a platform to voice opinions on work processes and conditions, which encourages workers to choose 'voice' over 'exit,' thereby reducing voluntary turnover," Moody's said. This influence "may be particularly significant in low-wage industries, where turnover costs are high and union demand is likely to persist."