Monday, March 19, 2007

Union Membership Down, Real Compensation Up

From today's Washington Post, "Union membership continues to decline nationwide, with 12% percent of wage and salary workers belonging to a union in 2006, compared to 12.5% in 2005."

And how are U.S. workers getting along with declining union represtation? Very well, thank you, see the chart above. According to BLS data, real compensation (wages and fringe benefits adjusted for inflation) is at an all-time and continues to increase despite declining union membership.

By request, data sources are as follows:
BLS data for union membership 1983-2004 available here.
BLS data for union membership for 2005-2006 available here.
BLS data for real hourly compensation are available here.

12 Comments:

At 3/19/2007 9:54 AM, Anonymous Massif said...

I'm prepared to accept that graph takes into account inflation (although it doesn't seem to be explicitly stated.)

But does it take into account unemployment levels? If poorly paid workers are losing their jobs (and they're the ones who are usually unionised.) then average income will go up, hiding the huge losses quite nicely.

 
At 3/19/2007 10:06 AM, Blogger Mark J. Perry said...

The measure is "real" compensation, which is adjusted for inflation.

 
At 3/19/2007 10:53 AM, Anonymous Walt G. said...

“A fundamental goal of a union is to change the relationship between labor and management. Again and again, when workers are asked what the union has meant to them, they say their fight for a union was a fight for dignity and respect.” Michael D Yates, Why Unions Matter (New York, NY: Monthly Review, 1998), 20.

Your chart does not include the variables necessary to determine union effectiveness. In my opinion, you are making an incorrect assumption that wages and benefits are the main reasons people form and join labor unions. You have to ask people who are in labor unions why they join unions; you can’t ask people who are not in unions why they aren’t and yield credible results. I think they call that content validity.

My research shows the main reasons people join unions are for dignity, respect, and security. Yes, wages and benefits are important, but not the top reasons. Do you have different findings?

It always amazes me that people buy life insurance, car insurance, health insurance, but not job insurance. I know your argument; in a perfect world, profit maximizing companies will either seek out the best labor or fail to survive. But, in my imperfect world, we have supervisors who don’t know, or who don’t care, about the company’s mission. Often, good intentions at the top do not make it unscathed to the bottom of the corporation.

For example, a supervisor will fire a perfectly good worker who is an asset to the company because the worker is going through a divorce or having problems paying their bills. Why fire a worker who cost thousands of dollars to train over a temporary setback? The payback for the company in those situations is just not there; it can be proven in a simple cost-to-benefit analysis. It does not make good business sense, and it disrupts people’s lives.

You also can’t assume that with the removal of a union threat, the non-organized businesses will continue to treat their workers well. Do you think Toyota would pay as well as they do without the UAW breathing down their neck? I don’t. I know the competitive manufacturing wage in the areas the Southern transplants operate in is much lower than they are currently paying. My research shows the competitive wage/benefit package is about $10-per-hour lower. As an economist, given that more applications are received than there are available jobs, why do you figure they do that?

I realize labor unions have many opportunities for improvement. However, we did not eliminate corporations because of Enron, or banking because of the S & L crisis: Did we? Let’s improve unions; not remove unions.

 
At 3/19/2007 11:04 AM, Anonymous Robert said...

Let me guess, you are using a national mean for salary data?

And that would have what relation to traditional union jobs?

Try meatpacking union membership v. median or modal meatpacking hourly wages.

 
At 3/19/2007 11:22 AM, Anonymous Anonymous said...

You do love these graphs with arbitrary axes and vaguely sourced data. It's a lot harder to see that you're cherry picking data to match your biases when we can't see what dataset you used.

You claim the measure is, "'real' compensation', but that's not dollars on your graph. How can anyone get anything valuable from this graph without understanding the formula for the "Real Compensation Index". Or do you just expect us to buy into your theory because the line with "Union" in the label goes down while the line with "Compensation" in the label goes up?

In short, can you post a link to the primary source data that you used create this graph? Thanks.

 
At 3/19/2007 11:33 AM, Anonymous Anonymous said...

Robert: He'd probably end up with somethig like this .

 
At 3/19/2007 12:24 PM, Blogger Mark J. Perry said...

I have used BLS data, and have added original sources/websites to the post. Please note that 1) the graph says: "Source: BLS," and 2) the Washington Post says only that the source is "BLS" for the data in its story. Therefore, it is probably not required to be more specific than "BLS" or "Census Bureau," etc., although I am always happy to supply specific websites upon request if they are not included in the post.

Further, the BLS "real compensation index" is based on a base year of 1992 = 100, just like the CPI, PPI or Industrial Production Indexes being based on 100 in a base year, etc.

 
At 3/19/2007 12:31 PM, Anonymous Victor said...

walt g.

I agree with much of your analysis about the roll of unions and what unions mean to the people that are members.

The one issue that I have with union membership is when the people lose the incentive to do their jobs properly, because they have no worries about losing their jobs. As you stated, unions are about respect. If the respect is not there on either side of the conflict, I think the system fails.

I personally feel one of the problems with the UAW is that the union members do not respect the people they work for. They no longer have to worry about performance, or wage reviews. If you are a UAW member, you get the benefits.

 
At 3/19/2007 12:38 PM, Anonymous Walt G. said...

By putting both data on the same chart you seem to be implying an inverse correlation between union membership and compensation costs. However, you did say "despite" as a disclaimer to dispel that notion.

I don't think the chart can be disputed. Union membership is down and real hourly compensations costs are up. A lot of the compensation costs are health-care related. Employees, employers, and ultimately consumers are all paying for those escalating costs. With an aging demographic that problem is only going to get larger.

 
At 3/19/2007 12:45 PM, Anonymous Walt G. said...

Victor,

You are right. We have to get better. We have to change with the times and realize that we are in a global market. Too many people think we can do things the next twenty years just like we did the last twenty years. It can't happen: we are not using the same business model. The labor union is not the problem: failing to change is.

 
At 3/20/2007 4:40 PM, Blogger Marco said...

Couldn't causality be the other way round?

 
At 3/20/2007 5:40 PM, Anonymous Anonymous said...

There seems to be no accounting for productivity increases here. This is a rather simplistic view of things.

(Much like your hilariously naive assertion that Ireland's success is merely based on changes to their tax code. Sure, that's all it takes. Let's abolish all taxes, and we'll all be rich beyond our dreams!)

 

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