A narrative of the mainstream media these days seems to be that unions are having a resurgence. For instance, the UAW’s strike actions last year led to a contract that included significant pay raises, and the UAW also managed to unionize its first foreign-owned automotive plant earlier this year.
Unions have also recently succeeded in organizing a few Starbucks, a Chipotle, and a Trader Joe’s, and the Teamsters announced in April that it would push to establish union representation amongst Uber drivers.
One industry which union activists have sought to unionize is the pharmacy sector. Employees at two CVS pharmacies recently voted to form a union with the Pharmacy Guild and the Las Vegas branch of CVS subsidiary Omnicare also voted to join the same union. The Guild says it has numerous other organizing efforts ongoing across the country.
However, none of these add up to a unionization “moment,” and there is no reason to think pharmacists are particularly well-positioned to benefit from organizing. While unions can obtain higher compensation for some workers in a handful of industries, the extent to which they can accomplish this crucially depends on the characteristics of the particular labor market and the costs they impose by doing so--in terms of lost jobs and the significant dues associated with union membership--are often not worth the benefits. That’s almost surely the case for the pharmacist market.
While there’s a reflexive impulse to help workers in low-wage industries by forming unions, the reality is that unions are most effective at extracting higher wages without concomitant employment losses in a few well-defined situations.
For starters, unions work best when the workers they hope to unionize constitute a relatively small proportion of total costs. For instance, the International Longshoremen’s Union has pushed up wages for their workers to almost unheard-of levels for blue-collar workers: Starting salaries in California ports approach $100,000 a year and foremen can make over a quarter million dollars a year.
Port owners acquiesce to such salaries in large part because worker costs are a small fraction of total operating costs: These days, longshoremen operate the cranes that take shipping containers off of ships and then place them onto trucks or railroad cars. A twenty percent increase in labor costs only results in a slight increase in total costs--not enough to either induce the port owners to spend more money trying to further economize on labor (which their contracts largely disallow anyway) or for their customers to seek alternative ways to get their goods to the market and bypass the ports.
A union’s ability to obtain higher wages without impacting employment also depends on how easy it is to replace workers with robots, machinery, or other capital. Professional athletes in major sports, for instance, are all but immune from being replaced, and the last few collective bargaining agreements have resulted both in higher wages and more jobs in the league.
Each of these factors work against the notion that unionizing pharmacists would result in gains for them. Pharmacists are already well-paid, with an average annual salary approaching $140,000, not including benefits. This trumps almost everyone else who works at a drugstore save for the manager, which means they constitute a significant share of the costs of operating a drugstore.
What’s more, there is a ready substitute for people getting their drugs from their neighborhood drugstore, which is to have their drugs delivered directly to their doorstep. Indeed, most healthcare plans are prioritizing direct delivery: Not only does it reduce costs but also because it significantly increases drug adherence, which improves health outcomes, further helping healthcare plans to save money.
And healthcare plans can easily move their distribution of drugs from physical pharmacies to direct deliveries without impacting those costs at all--and they will do so if pharmacy costs increase significantly.
A lot of the union rhetoric in the last few years has been little more than wishful thinking. There are situations where unions can extract higher wages without reducing employment but they are relatively few, and it’s unclear whether it’s a net benefit for workers if the cost of a 20 percent wage increase is a 20 percent decrease in employment in a sector.
Union representation has been declining as a percentage of the labor force since the 1970s and just six percent of private sector employers are members of a union. The decline is not a manifestation of workers having a worse deal than before, although that’s how it’s often interpreted: Steve Rose, perhaps the world’s leading expert on income inequality, has shown that the ostensible “hollowing out” of the middle class, to the extent that it has occurred, is because millions of households have moved up the income ladder and into the upper middle class.
The millions of union jobs lost in the last three decades--such as the proverbial assembly line workers--have been replaced by different jobs, many of which pay more and are more rewarding in any way.
Unionizing highly-skilled and mobile workers who can easily change employers within their community--such as pharmacists--is a solution in search of a problem, and whose costs for workers will undoubtedly exceed their benefits.
