Unions and Growth
Sebastian Mallaby says some smart things in this column but he needs to think more carefully about thinking more carefully about empowering labor unions:
Market reengineering is also in order. The government should stop distorting markets by subsidizing housing finance through Fannie Mae and Freddie Mac, clinging to trade barriers, or offering tax deductions that encourage overspending on homes and health care. The tort system, an outrageously wasteful way to compensate victims and discipline firms, should be reformed. And, given the object lesson from the collapse of the Big Three carmakers, government should think carefully before empowering labor unions further.
The growth of U.S. government need not be an economic disaster. Sweden and Denmark combine large public sectors with fast growth in GDP per capita. But to get away with big government, you must have smart government. Once the financial crisis is behind us, this should be the guiding principle of the Obama years.
Now look over here and you’ll see that the United States, allegedly threatened by our unions, has a union density rate of 12 percent. Sweden, on which Mallaby says we ought to model ourselves, has a union density rate of 78 percent. In Denmark, it’s 80 percent. And of course it’s not just Sweden and Denmark. You see much the same thing across northern Europe — large public sectors, fast GDP growth, and high levels of unionization. In Finland, union density is 74.1 percent. In Norway, it’s 53 percent. And even in the relatively un-unionized Netherlands it’s 24.4 percent — more than double what we’ve got in the United States.
What I would say about car companies and unions is this. We had a period of time in the United States when prevailing labor law made it viable to organize private sector unions in the teeth of management opposition. So a bunch of firms were unionized at that time. Then we more-or-less closed the door on such unionization. And then after the door shut, new car plants were opened in anti-union jurisdictions. That obviously put the unionized firms at a disadvantage. But that’s different from saying that unionization is killing the car industry — cars are made and sold in Europe just fine. Meanwhile, in a capitalist system over the course of decades and decades it’s just inevitable that some sectors of the economy will rise and others will decline. Since we’ve made it so difficult to organize new unions, and since things change over time, we have disproportionate concentration of our private sector unions in the declining manufacturing sector. But that’s not unions causing the decline, it’s just things changing over time. The union-dominated movie and television production industries have become more central to the economy over the same time period. These things just happen. In a decent economy, though, we need to make sure that as new industries rise the workforce in those industries has a realistic shot at forming unions and bargaining collectively.
39 Responses to “Unions and Growth”
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December 4th, 2008 at 11:52 am
So, I guess you’re meaning to say that the smart things in the column were those bits not quoted here, though it is certainly another valiant attempt to blame the housing crisis on Fannie & Freddie.
December 4th, 2008 at 12:02 pm
Consider this possibility. . . Over the past 30 years Wall Street (and major corporations) have come to dominate enough elected officials – in both parties – to impose their will.
It was not an organized plan – just good old capitalism with the gloves off – survival of the insiders.
Thus, union organizing is hard to accomplish. . . Mergers & Acquisitions eliminate quality jobs. . . Outsourcing eliminates quality jobs. . . Free trade eliminates quality jobs. . . Government privatization eliminates quality government jobs. . . But, all these activities – in the short run – dramatically increase profits, executive and shareholder incomes. . .
Are we now at the point where Wall Street and the Corporations – and their political enablers – have won? They have driven down expenses (wages and benefits) to near zero. Unemployment is on its way to double digits – and those with jobs are seeing expense growth outpace income.
The future would appear to offer more executive paper shuffling organizing outsourcing and free trade deals. Guarded compounds in the Hamptons and Palm Beach will protect the elites – South Africa in the good old days. . . One big problem though – White people in America have lots of guns – they know how to use them – and they have a long history of doing so.
December 4th, 2008 at 12:02 pm
“But that’s different from saying that unionization is killing the car industry — cars are made and sold in Europe just fine.”
I’m not sure that this is entirely true. How many new auto assembly lines have been built, say, in the last ten years in Western Europe? I don’t know, but I suspect the answer is very few. Instead, the big German auto firms have built new production in Eastern Europe, partially through captive local subsidiaries. I suspect that Fiat and the French auto firms are in a similar boat. Obviously, cars are built and sold in Europe, but I doubt that the European manufacturers are free of labor costs problems related to unions.
December 4th, 2008 at 12:11 pm
Back in the day, I took a course in the economic history of Sweden. I pissed off the professor by saying that Sweden tended toward socialism. His point was that the Swedish model wasn’t socialism, because the means of production were owned by the unions, rather than by the government. Whatever you call it, it seemed to work.
So I’d be fine with it if the UAW took over GM. It would be arguably less socialistic than a taxpayer bailout.
December 4th, 2008 at 12:14 pm
The man has a plan for everything. That is what makes reading him so funny. He cannot seem to appreciate that the world is a product of many thousands of generations’ worth of evolutionary adjustments, compromises, and innovations that he could not possibly hope to know about…nor can he imagine that there is any situation—no matter how remote or complex—that his own little mind cannot improve.
December 4th, 2008 at 12:17 pm
So, I guess you’re meaning to say that the smart things in the column were those bits not quoted here, though it is certainly another valiant attempt to blame the housing crisis on Fannie & Freddie.
OT: I was wondering the exact same thing myself—but, having already been first on the comment list with “Dude WTF?”—type remarks several times in the last few days, I figured I’d refrain.
December 4th, 2008 at 12:23 pm
Good points. If you’re doing the comparative analysis I would also look at factors that make the union relationship in the US so much more adversarial and unions more … unproductive in their demands than in different countries.
It may be something in the culture – we have the same phenomenon in litigation, where our parties are just more bitchy than parties in other countries.
On the other hand, it could also be how the unions came into existence and their recent relationship with government. The role that unions played in rebuilding Europe after World War II is just not something that we went through here.
Likewise, at the unionization rates you are talking about, you naturally end up with a much more diverse group of people who belong to unions, similar to how the expansion of stock ownership has changed the make-up and thus the outlook of the investor class. It would be very interesting to see what US labor mentality would be if we really did have 75%+ of the country belonging to unions, because obviously you would start to incorporate many different economic and social outlooks.
December 4th, 2008 at 12:24 pm
So what do the northern European countries have that we don’t have that allows their industries to be profitable even with high union participation?? How about nationalized health insurance?
December 4th, 2008 at 12:43 pm
MA, you don’t really understand this “blog” thing, do you? Is this your first time using the Internet? It’s exciting, isn’t it? But just like in real life, just because you can say something, doesn’t mean you should say it.
December 4th, 2008 at 12:51 pm
In European unions, management also belongs to the union, except at the very highest levels, resulting in greater solidarity. This could be why unions played a positive and less adversarial role in re-building post WW2 societies in Europe and Japan.
Here, because Taft Hartley prohibits management union membership, management tends to skim off talented workers and remove them from the unions. Taft Hartley should be repealed and unions made more inclusive.
December 4th, 2008 at 1:30 pm
Matt, I don’t think your point and Mallaby’s are actually contradictory. I think unions in the modern US are too strong, which is a different thing entirely from saying that they’re too common. Indeed, I suspect that one reason manufacturers here fight so hard against unionization is that unions, once established, have the ability to do some pretty annoying things.
E.g. I’d love a legal regime where unionization is easy but when the union goes on strike, management has the option of firing all the strikers and hiring new workers at whatever conditions they’re currently offering (if current wages are high enough that it would be easy to replace the current workforce, then it’s hard to say they’re too low). Similarly, I don’t like the fact that union-joining is under some circumstances mandatory.
But “unions are too powerful” is different from “unions are too common.”
December 4th, 2008 at 1:46 pm
I’d love a legal regime where unionization is easy but when the union goes on strike, management has the option of firing all the strikers and hiring new workers at whatever conditions they’re currently offering
You know what’d be even cooler? A legal regime like they had in the late 19th/early 20th Century, where when the union goes on strike,the state governor can order the militia to shoot the striking workers. I bet you’d love that too.
December 4th, 2008 at 1:51 pm
I suppose I should congratulate Yglesias on writing a good post on unions, for once. So, good job that man.
Anyway, Vermando:
1. Unions are much more diverse today than they were twenty years ago. For example, the unionization gap between men and women has declined by 80% since 1983; “Black workers were more likely to be union members (14.3 percent) than
were whites (11.8 percent), Asians (10.9 percent), or Hispanics (9.8 percent)” according to the most recent BLS report, although the percentage of Latinos in the labor movement is one of the largest growing populations in U.S labor.
But the point is taken that a union movement comprising 75% of the population would look different – although unions do tend to change people’s thinking in a more laborite direction, as can be seen by the vast difference in voting behavior between union working class whites and non-union working class whites.
That’s one of the reasons why the labor movement historically tried to diversify after WWII – in New York, for example, the unions tried to organize white collar office workers through the Office Employee Industrial Union (OEIU), and organized big parts of the insurance industry, and even Wall Street workers, but it didn’t last long. Similarly, the CIO’s Operation Dixie was a big push to organize the previously non-union South.
2. As for why management/union relations are less corporate than Europe – European management generally has accepted unions as partners, especially since 1945 (pre-war, not so much outside of Scandinavia), U.S management doesn’t. A good example is actually the Big Three and the UAW in the late 40’s; Walter Reuther was a very innovative social democratic unionist and wanted to establish a more corporatist system where the UAW was part of the management system (part of his vision of “industrial democracy”), and that’s where we get things like his campaign to increase wages without increasing prices and opening the books so that the union and management could decide on production and profits collectively, and to institute a shop steward system so that workers could organize production by themselves on the shop floor – he got turned down, and hence the Treaty of Detroit basically saw the UAW confine itself to issues not involving “prerogatives of management” and instead focus on wages and benefits.
December 4th, 2008 at 1:54 pm
Jadugal:
“E.g. I’d love a legal regime where unionization is easy but when the union goes on strike, management has the option of firing all the strikers and hiring new workers at whatever conditions they’re currently offering (if current wages are high enough that it would be easy to replace the current workforce, then it’s hard to say they’re too low).”
That is the current legal regime, that’s why the AFL-CIO tried to ban “permanent replacement workers” in the 1990s. Surprise! Permanent replacement workers don’t improve labor-management relations.
December 4th, 2008 at 2:34 pm
Jadagul
…management has the option of firing all the strikers and hiring new workers at whatever conditions they’re currently offering…
The entire point of being unionized is to compel ownership to bargain with you alone — and not with anyone who happens by on the street — allowing you to bargain for the highest price the utility of your labor can command — saving you from accepting the lowest price management’s relative power can compel you to.
Unions exist to change the default bargaining position of labor from desperate “fire sale” seller to indispensable “last lot” seller. Ownership’s position is always “last lot” seller.
Almost every other first-world economy uses some version of sector-wide to accomplish this remedy systematically — instead of at random workplaces through desperate struggles. Even second-world (Argentina) and third-world (Indonesia) free labor markets are catching on to sector-wide. Management reportedly likes it too: one less competitive strain (Richard B. Freeman).
French Canada practices the French “lite” version of sector-wide: non-union firms are simply subject by law to working under terms negotiated by non-union firms. Sector-wide has to be the most common sense labor practice in the world.
December 4th, 2008 at 2:35 pm
“Since we’ve made it so difficult to organize new unions, and since things change over time, we have disproportionate concentration of our private sector unions in the declining manufacturing sector. But that’s not unions causing the decline, it’s just things changing over time. The union-dominated movie and television production industries have become more central to the economy over the same time period. These things just happen. In a decent economy, though, we need to make sure that as new industries rise the workforce in those industries has a realistic shot at forming unions and bargaining collectively.”
Maybe, maybe not. The auto workers are allegedly a high skilled trade, much like an IT worker. IT workers almost never are in unions, yet they tend to get paid pretty well. Why is that?
I agree with the point about being unions possibly being too powerful. Unions in Detroit clearly block technological change. Do we want that? Unions in Detroit clearly make it difficult to fire bad workers. Do we want that?
I guess what I’m saying is that collectively bargaining for WAGES might be a good thing, while empowering a union to be capable of shutting down a business for things like anti-technology job protection might not be a good thing.
It seems to me that a lot of the productivity complaints that surround unions aren’t really associated with wages.
December 4th, 2008 at 2:36 pm
Or the problem could be that non-union wages are relatively stagnant or declining, and that our economy based on consumption has a problem when the majority of people have to cut back on consumption.
Just look for information about where the profits went this decade when productivity was increasing, were workers getting their fare share of that or not? Check out what the Economic Policy Institute reported on in 2005.
December 4th, 2008 at 3:11 pm
Japan, too. Their rate is around 18%. The workers’ paradises of South Korea and Hong Kong are the only industrialized countries I can find with unionization rates low enough to be comparable to the US.
December 4th, 2008 at 3:25 pm
What Mallaby says about the tort system is also fairly stupid. Tort is a silly sounding word. What it actually means is that when someone harms you, you are allowed to sue them. Corporpations would love to stop people from sueing them, but, oddly, they really want to retain their own ability to sue whomever they want.
December 4th, 2008 at 4:55 pm
Sebastian Mallaby? Totally wrong? Unpossible!
Shorter Jagadul: I want unions, and by “unions” I mean “groups of workers with no rights”.
IT unionization would increase the wages of IT workers greatly. My libertarian brother is constantly calculating the value that he creates for his employer and then quitting. I would speculate that most IT workers don’t want to unionize because they’d rather earn less money themselves than increase the wages for a bunch of poser noobs.
Has there been a time in this country when median real wages rose and unionization rates did not?
December 4th, 2008 at 5:04 pm
How is it that Scandinavia can have such high unionization rates? Is a much higher percentage of the population in manufacturing (or other unionizable work fields)? I could see doubling or even tripling our union memberships rates, but beyond that there are a lot of jobs that just don’t fit well with the union model.
December 5th, 2008 at 2:27 am
JonF:
It’s a cultural thing. In Sweden, for example, you get 80%+ unionization because: 38% of the workforce is public-sector and they’re all unionized, the Social Democratic Party is the party of the labor movement, so Social Dems join as a matter of course and they’re like 35-40% of the electorate, and the unions provide a lot of social services (unemployment insurance, banking, insurance, travel agencies, etc.)
December 5th, 2008 at 9:38 pm
PARIS : French President Nicolas Sarkozy and former Prime Minister Tony Blair will host a meeting of international leaders and experts in January to discuss the global economic crisis, the president’s office said Tuesday.
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