*Do Unions Hinder Job Growth? *Economic theory predicts that they would.
We buy less of everything, including labor, if its price goes up, or
its value goes down. Labor unions often raise the price of labor by
increasing pay for their members, and decrease the value of their labor
by imposing restrictive work rules. (Some American managers will tell
you that the work rules are a bigger problem than the pay, since work
rules can make it impossible to increase productivity, except by
substituting machines for men.)
Economist Robert Barro offers some indirect evidence that unions have
that effect in practice
<http://online.wsj.com/article/SB10001424052748704150604576166011983939364.html>,
as well as in theory.
There is evidence that right-to-work laws---or, more broadly, the
pro-business policies offered by right-to-work states---matter for
economic growth. In research published in 2000, economist Thomas
Holmes of the University of Minnesota compared counties close to the
border between states with and without right-to-work laws (thereby
holding constant an array of factors related to geography and
climate). He found that the cumulative growth of employment in
manufacturing (the traditional area of union strength prior to the
rise of public-employee unions) in the right-to-work states was 26
percentage points greater than that in the non-right-to-work states.
There are arguments for unions. Union supporters would tell you that
unions can make labor costs more /predictable/, and can lessen the
chances of wildcat strikes.
And I don't doubt that one can find examples where unions have had those
good effects. But I suspect that Barro is right, and that reducing the
power of unions is, on the whole, one way to increase economic growth.
- 8:11 AM, 28 February 2011
*More analysis* from Robert Samuelson
<http://www.washingtonpost.com/wp-dyn/content/article/2011/02/27/AR2011022702873.html?hpid=opinionsbox1>,
including this:
To members, unions exist to win higher wages and fringe benefits,
and in this, they mainly succeeded. In 2006, union wages in the
private sector were about 19 percent higher than those in comparable
nonunion firms, estimates economist Barry Hirsch of Georgia State
University. The wage premium can endure if higher productivity
(a.k.a. efficiency) justifies higher wages or if companies can pass
along costs to customers. The productivity advantages of unionized
firms are scant, Hirsch says. The formula worked, because many
heavily unionized industries were dominated by a few large firms
with similar labor costs. These could be recovered in higher prices.
The United Auto Workers could receive higher wages and benefits than
they would have gotten in a free market as long as cars and trucks were
almost all built by the Big Three. But when Toyota, Honda, Nissan, and
all the others, came into the US market, that was no longer practical.
(American car buyers paid more for their cars, because of that UAW
domination, and we exported fewer cars because of those higher prices.)
- 10:28 AM, 28 February 2011 [link]
<http://www.seanet.com/%7Ejimxc/Politics/February2011_4.html#jrm9650>
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