Saturday, February 17, 2007

The Sad Irony of Unions

Unions help those they represent by trying to raise wages above what they would otherwise be. To the extent they succeed, they reduce the demand for labor in unionized shops. That means more workers have to find employment in non-unionized shops, pushing down wages there. That's especially tough on workers with limited skills and education. The sad irony of unions is that they can only improve the lot of their members at the expense of other workers.

~George Mason economist Russ Roberts in today's LA Times


MP: Empirical evidence shows that industries with the largest union wage premiums are precisely the industries with the largest declines in the employment of unionized workers. The tradeoff then is short-run gains of above-market wages for long-run losses of employment for unionized workers. And the other sad irony is the more successful unions are in the short-run, the worse off they and their industry will be in the long-run. Exhibit A: UAW and GM, Ford and Chrysler.

6 Comments:

At 2/18/2007 3:43 PM, Anonymous Walt G. said...

Professor Perry:

You always seem to equate labor unions solely with wages. Just like professors’ tenure, they are much more than that. They are a social movement to improve the lives of the average worker. Workers and the owners of capital have some areas with conflicting agendas, so a give-and-take bargaining process is necessary.

Labor unions improve the security of non-union and union members and salary and hourly alike. Do you suppose that the US-based Japanese auto companies would pay the wages and treat their employees as well as they do if it were not for labor unions? I don't. They don't do that out of kindness. It's a business decision to keep the unions out of their organization. Labor unions should probably receive dues from them for providing the union-threat wage premium. They are currently getting a free ride. A lot of people benefit from the labor union osmosis.

Actually, and easily conducted research bears this out, labor unions were started primarily to provide safe working conditions, pride, and dignity for their workers. Wage and compensation issues were secondary concerns. If management wants to pay more than they can afford for their workers, that's their business decision and their superiors should hold them accountable for it. I don't fault CEOs or sports' stars for the wages they make because that's a decision made by the board of directors or team owners oftentimes using confidential information. Why should I condemn organized labor for doing the same thing? Can’t afford it: Don’t pay it.

Sadly, a need for labor unions was demonstrated two weeks ago at our location. We had a possible work-related fatality of a worker. In the past, GM always provided ventilation above the requirements of OSHA; all we had to do was ask. Now, however, to cut manufacturing costs, GM does not pay for anything if OSHA does not require it. So, as a union, we have to fight for our members’ health and safety to augment, what we feel, are OSHA’s sometime substandard protections.

Here’s what happened: A new operation was installed and put into production that used a potentially toxic compound. GM stated that no ventilation was required by law. However, the union insisted ventilation be installed, won the grievance, and was in the process of installing it. A fire in this operation occurred before the installation was completed. While a female worker was removing a smoldering barrel after the fire, she collapsed and subsequently died. Although the reason for her death has not been determined, OSHA and local authorities are treating her death as an industrial accident. Would the ventilation system historically installed before production start-up prevented her death? Possibly we will never know, but it might have. How many lives have been saved in the past because we had ventilation that the union demanded over OSHA requirements? That’s unknown, too. I’ll let the board of directors look out for the stockholders’ wealth while my union looks out for my health.

Although labor union representatives and managers will have to work together to survive in this globally competitive world, the workers’ health and dignity does not have to be reduced in the process. What good is any wage or benefit if you don’t live to enjoy it?

I’ll appreciate the security my union provides me while you appreciate the security your tenure provides you. We aren’t really that much different: Are we?

 
At 2/18/2007 9:12 PM, Blogger Mark J. Perry said...

From Professor Roberts' article in the LA Times:

"Maybe unions aren't so crucial to worker well-being. When more than 90% of the private-sector labor force isn't unionized, why do 97% of us earn above the minimum wage? If our bargaining power is so pitiful, why don't greedy employers exploit us and drive wages down to the legal minimum?

The simple answer is that bargaining power comes from having alternatives. Even in the absence of unions, employers have to treat workers well to attract and keep them. In a workplace as dynamic as that of the United States, where millions of jobs are destroyed and created every quarter, a company's ability to exploit workers is greatly limited by how easy it is to find another job.

Ultimately, it is competition among employers that protects us from exploitation. Even those who would seem to be the most vulnerable — immigrants who struggle to speak English, for example — can earn much more than the minimum wage simply because of competition for their skills. Cleaning people routinely earn $20 an hour, more than most cities' so-called living wage."

 
At 2/19/2007 7:17 AM, Anonymous Walt G. said...

Professor Roberts makes some strong points. I agree in a perfect world workers would not need protections from employers, but we do not live in a perfect world. That’s one of the reasons professors covet tenure: Isn’t it? Who wants to be fired without just cause or due process? Contrary to popular opinion, bad workers are removed following proper procedures while others are protected from supervisors who just don’t like them.

Workers need protections that unions provide because they are powerless alone. Capitalists pool their money and create corporations, so why should workers be vilified for the same type of organization?

I believe that labor unions need to find ways to work with companies to stay profitable. Together, with trust and clear thinking, we can be competitive with anyone in the world. A company that declares bankruptcy or goes out of business hurts everyone concerned.

 
At 2/19/2007 8:22 AM, Blogger Mark J. Perry said...

Most college professors, at least the better and more productive ones, don't support tenure. Like unions, tenure is an outdated historical legacy from a time period in the past, and has little value or justification in today's world. I suspect one day it will end, and be replaced by a new system of 5-year renewable contracts or something.

 
At 2/19/2007 11:50 AM, Anonymous Walt G. said...

I agree. With the vast improvement in technology that allows the information necessary to make an informed choice, competitive pressures will allow superior people and products to thrive and survive.

In this new global economy, we have to work smarter and not necessarily harder. Additionally, we have to be willing to adjust and change the workplace model to the new era. I believe the concept of changing union is more benefiacl than eliminating them. After all, one of the first qualifications companies in the 21st century are looking for is the abilty for one to work in a team. Why can unions morph into that new paradigm?

 
At 2/19/2007 12:10 PM, Anonymous Walt G. said...

Sorry about the sloppy writing above. I guess I hit publish instead of preview. My rough drafts are really rough!

 

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