There is no free-rider problem with sectoral collective bargaining

“But tell me, why would people want to join a union if there’s an industry agreement that applies to them anyway?” This is a common objection one hears when talking to trade unionists from countries where company-level bargaining dominates. The so-called “free-rider” problem is a major concern for unions not only in Europe but also in the US. 

David Madland, a senior fellow and the senior adviser to the American Worker Project at American Progress, investigated the issue, reviewed the literature and published his findings. The bottom-line is that “sectoral bargaining can support high union membership”. 

While the free-rider argument is intuitively appealing (why pay dues when the benefits are free), the evidence points in the opposite direction.  

First, cross-country comparisons show that countries with multi-employer or sectoral bargaining tend to have much higher union density than countries with company bargaining only.  

Second, countries that have dismantled their sectoral bargaining systems (e.g. Australia, New Zealand and the United Kingdom) have subsequently experienced massive declines in union membership. Conversely, Uruguay, which developed sectoral bargaining, saw more workers join unions.  

Third, case studies provide further evidence. Take Amazon, a company that is particularly difficult to organise. Amazon only ever engages with trade unions to the extent it is legally required to do so. Countries with sectoral bargaining systems, such as Italy and Belgium, have a more conducive environment for organising. 

But how can this be explained? Madland suggests a few reasons: 

• Less union busting under sectoral bargaining. With a sectoral agreement, employers are less incentivised to fight union organising and recruitment. Regardless of the number of members, they apply the conditions anyway.  
• Sectoral bargaining provides cover. Sectoral agreements tend to provide better security and protection for workers who want to join unions, making the threshold for joining much lower. 
• Level playing field: The fact that sectoral bargaining creates a level playing field between employers makes undercutting strategies less likely and also protects union jobs. Indeed, without sectoral standards there is constant pressure on workers to work for lower standards. 
• Sectoral bargaining opens the door: Sectoral bargaining increases the organising potential of unions. Through sectoral agreements, unions can gain access (and provide benefits and services) to workers in more companies and different types of companies, such as SMEs.  
• Incentives remain: While industry-level bargaining removes one of the main incentives to join a union, it is not the only incentive that workers have. Unions are still attractive for their workplace representation and bargaining (in addition to sectoral bargaining). 

Overall, these effects tend to be stronger than the free-rider effect as we see that sectoral bargaining is associated with higher union density. Madland concludes: “The research is clear: Sectoral bargaining typically increases contract coverage in ways that do not hinder union membership. Rather, sectoral bargaining can encourage worker engagement and make their efforts more likely to succeed, creating a virtuous circle that boosts union membership. Thus, sectoral bargaining can support high union membership.”