Who wins when union workers strike?  

The United Auto Workers’ rolling strikes at auto manufacturing plants across the nation are disrupting automobile supply chains. As much as robotics have become important components in such facilities, human workers continue to serve as a critical link in keeping vehicles rolling off assembly lines.  

Once a critical mass of employees joins the picket lines and stops facility production lines, a cascading effect of shutdowns ripples through the automobile supply chain. The risks grow with each passing day, with more assembly lines shutting down, and all parts and materials suppliers affected.  

Then there are the secondary and tertiary effects, including local restaurants and entertainment venues that get hit as smaller paychecks mean less disposable income for workers. The net effects is that more people are laid off across multiple sectors of the economy.  

President Biden plans to walk the picket lines with striking workers soon. He may end up regretting such actions. Elected officials should allow private-sector negotiations that do not threaten our national security to run their course. They should not be using their political weight to resolve differences or pick favorites, which Biden has clearly indicated.  

The UAW provides strikers $500 of weekly assistance during strikes, which is taken from the UAW’s Defense and Strike Fund. This is less than what most UAW members typically earn. Temporary workers earn $680 per week, while top-end workers earn nearly $1,300 per week.  

If strikers earn more than $600 per year in strike assistance payments, they will receive an IRS 1099-Misc to file with their tax returns. These forms are used to account for miscellaneous income, making the strikers independent contractors with the union, not employees. It also permits them to deduct any expenses while striking, using an IRS Schedule C, adding a level of complexity to their tax filing next April.  

So where does this strike assistance money come from? UAW members pay union dues, which support the operations of the union. This includes lobbying efforts, which totaled over $25 million across the past four election cycles (2016, 2018, 2020, and 2022).  

Member dues also fund the Defense and Strike Fund, with the percentage paid by workers based on whether this fund is above or below $850 million. The fund currently sits at around $825 million, or just below the $850 million threshold. Coincidently, this provided an incentive for union officials to draw down the fund to keep the dues percent paid by members at the higher level.  

Of course, weekly strike assistance is being paid for by the workers, back to themselves if they go on strike. So the UAW’s business model is designed around preparing for strikes.  

UAW’s books support this observation. Total UAW assets in 2021 were $1.18 billion, meaning the Defense and Strike Fund accounts for around 75 percent of its assets.  

It is reasonable that employees of unions continue to get paid at their regular salary during strikes, which would include the UAW president and local union presidents, though this cannot be confirmed with publicly available information. The latter earn, on average, $178,000 annually — significantly more than the workers themselves.  

Yet will workers benefit from striking? They will earn less while the strike continues and gain a modest pay raise and added benefits once it is resolved. This means that the workers assume the risk of taking on short-term pain in exchange for long-term gain. What remains unknown is the time it will take to recoup the lost wages.  

Data collected by the Employment Policy Foundation, a right-leaning think tank, suggested that workers gain little from striking. In contrast, the Economic Policy Institute, a left-leaning think tank, believes that strikes benefit workers. As with most controversial issues, the truth is likely in-between, and must be evaluated on a case-by-case basis, rather than with blanket, one-size-fits-all conclusions.  

The UAW leadership likes to highlight the pay gap between their members and CEOs. But this misrepresents pay inequity. Comparisons to non-union, salaried workers in the organization that have parallel education, training and/or skills would be more appropriate. This would shine a brighter light on how well — or poorly — union members are being compensated.  

What should also be communicated is the pay gap between union members and the president of the UAW, whose total compensation is reported to be $267,000. Such a disparity is likely justifiable, even though it is several times higher than the typical UAW member.  

Nonunion automobile manufacturers such as Honda and Toyota keep their wages near union wage levels, giving their workers no incentive to unionize. This provides some indirect value to UAW negotiations across the industry, though there is no way to know for certain what pay scales would look like in a counterfactual world with no unions anywhere. Then again, wages are just one component of compensation packages, making comparisons more nuanced than most outsiders realize.  

Ultimately, companies need their workers, and workers need their employers. A strike is an elaborate game of chicken in which each side waits to see who flinches first. The final resolution will be a compromise, as it should be. Employees deserve to be paid fairly, and companies deserve to earn a profit that accounts for the risks they assume. That is economics 101.  

That may be why profit-sharing is a viable path in the future, reducing the need for unions and giving workers some of the risks and access to more of the rewards that come with operating a company.  

In the final analysis, companies give away more than they want, and workers accept less than they would like. Both agree on terms that are not their ideal, though in any winning negotiation, perhaps that is how it should be. 

Sheldon H. Jacobson, Ph.D., is a professor of Computer Science at the University of Illinois at Urbana-Champaign. He applies his expertise in data-driven risk-based decision-making to evaluate and inform public policy. He has studied aviation security for more than 25 years, providing the technical foundations for risk-based security that informed the design of TSA PreCheck.