OPEN UNIVERSITY MARCH 7, 2007
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by Eric Rauchway
Tyler Cowen has devoted a number of recent posts to complaining about labor unions. In his latest, he says, "I've unearthed Barry T. Hirsch's useful and serious [2003 Institute for the Discussion of Labor] piece, which looks at whether the Freeman-Medoff pro-union work from the 1980s has held up," quotes the finding that evidence relating to union's effects on productivity is "less than clear-cut," and concludes, "I am genuinely puzzled why the highly intelligent segment of the left-wing blogosphere is so attached to the legal encouragement of labor unions."
I can't speak for the left-wing blogosphere, or even its intelligent segment: but I can unearth papers, too. Here's Freeman's National Bureau of Economic Research working paper from 2005. Why would anyone remain attached to labor unions? Because productivity isn't everything, and maybe isn't even a problem:
any evaluation of the benefits and costs of unionism has to balance the costs due to monopoly wage or compensation setting against the economic benefits that unions bring through lower turnover, improved productivity, more desirable distributions of compensation between wages and benefits, reduced dispersion in pay for workers, and the political success of unionism in advancing the well-being of workers broadly....
[Freeman's own] empirical assertions [in What Do Unions Do?] about what unions do to wages, dispersion and inequality of pay; fringe benefits; quits and turnover; profitability; job satisfaction; human resource management policy; and political activity and outcomes, appear robust over the past two decades....
In 1995 the [World] Bank's World Development Report stated that "Free trade unions are a cornerstone of any effective system of industrial relations that seeks to balance the need for enterprises to remain competitive with the aspirations of workers for higher wages ...unions can help raise workplace productivity and reduce workplace discrimination."... Part of the Bank message has been that represession of unions in developing countries can be associated with excessive intervention and regulation by the state....
... in the US, unions have arguably contributed to aggregate economic growth through a very different mechanism: by increasing the savings of American workers through union negotiated defined benefit retirement plans.... Since pension fund moneys are deferred compensation and thus savings, these figures show that unions increase the savings of American workers and thus the supply of capital for economic growth. Given that saving and investment rates are highly correlated by country ... this can be expected to increase investment and growth.
Why would anyone encourage unions if they might suppress overall economic growth? Apparently because they might not, and meanwhile they confer other advantages.
2 comments
to the legal encouragement of labor unions because the trade union movement shares the left wing's political instincts. The decline of labor unions in the private-sector workforce is a long-term trend of great concern to the Left. But these latest, arguably undemocratic, efforts to inject vitality into unionism smack of desperation. I agree with the Left that the unions played a key role in making the manufacturing-era American economy fairer, and thus helped produce a stabler and freer society. But those days are over, for a lot of different reasons, and the truth is that the unions--along with many of the manufacturing firms their members worked for--never adapted. Instead, they fell back on simplistic "it's all the employers' / Republicans' fault" arguments. They've been saying this for thirty years. You see columns like Harold Meyerson's in today's Washington Post, where he blames the present workforce turmoil on those nasty Reaganite union-busters. Meyerson bemoans the passing of the era of one job, one employer, and everything taken care of for life. Liberals like Meyerson tend to minimize, or ignore altogether, the realities of worldwide competition, and that union intransigence played a big part in the decline of American manufacturing dominance. Even if Nancy Pelosi could wave a magic wand and restore to the unions the share of the workforce they had, say, in 1955, would that lead to the rebirth of the type of labor contracts that US Steel had with its workers in that era? The only reason firms were able to agree to those terms in the first place was because of a level of American economic dominance that cannot and will not happen again. The real question is how can workers achieve the type of job and benefit security in today's economy that their grandfathers used to enjoy? Actually, the question really is "can such security be gained at all?" And if so, what role--if any--do unions play in that? Filling that role is what will restore the unions, not artificial, membership-level inflating measures like card checks.
- Claudiusmarcellus
March 7, 2007 at 12:34pm
Security seems to be at the bottom of the agencda in certain circles. It is commonly argued that security undercuts productivity in the workplace; discourages continuing educational(and skills) advancement by workers;is at cross currents with globalization and is probably suspect from a moral point of view by compromising competitiveness. How did the pundits get into such a trap?
- LawrenceGulotta
March 13, 2007 at 11:37am