To learn everything you ever wanted to know about public-sector unionism, its history, and its impact on the labor market, just read this great paper by my colleague Eileen Norcross, “Public Sector Unionism: A Review.” She does a really good job of explaining the fundamental differences between private- and public-sector unions. For instance, she writes:
In the larger policy debate over the role of public sector unions, there is a tendency to blur the lines between the history and goals of the private sector union movement and those of the public sector union movement, and thereby misunderstand their unique effects. The public sector union movement shares a link to the history and institutional structure of private sector unionism, yet they are also distinct movements, differing in origins, goals, approaches to bargaining, philosophies, and effects. These two unionisms operate in different spheres. Private unionism operates as a labor cartel within the market economy and thus affects the profitability of firms, economic growth, the supply of labor, and consumer prices. Public sector unions function as a monopoly provider of labor within a bureaucratic-political realm. Public sector unionism introduces an unelected body into policy-making, thereby undermining the sovereignty of the state. Public sector employees are able to influence through political lobbying of their ―employer-sponsors‖ or politicians, who may seek to enhance union employment as a means of expanding their constituency.
To be sure, both kinds of unions operate as a labor cartel, but their effects on the labor market are quite different. In the private sector, unions are able to secure wages for their members that are often higher than the competitive market wage, but that in turn reduces the demand for labor: “While private sector unions are able to increase wages for their members, these gains come with an economic tradeoff: fewer jobs for nonunion employees, lower corporate profits, and higher prices for consumers.”
Public-sector unions, however, manage to secure higher wages through employer negotiations and manage to increase the demand for their labor through the political, legislative, and regulatory processes. As a result, they manage to increase wages more than private-sector unions can. The final impact on total employment is unclear, however, as Norcross explains.
The article contains many more interesting discussions of collective bargaining and the institutional stability of public-sector unions. A must-read.
Problem - I don't like private sector unions either. They've wrecked every industry they have touched.
The right continues to play pattycake while the left plays to win, for keeps.
Reply to this commentLinkReport AbuseIt should be noted that the ability to drive up labor costs without improvements in productivity, or in teachers union, severe loss of productivity in that it take 16 yrs to achieve what formerly was done in 8, if achieved at all for many, is a major driver of price inflation and a severe drain on the ability to provide old age pensions.
Or more professionally stated:
The greatest danger to an adequate old-age security plan is rising prices. A rise of 2% a year in prices would cut the purchasing power of pensions about 45% in 30 years. The greatest danger of rising prices is from wages rising faster than output per man-hour.... Whether the nation succeeds in providing adequate security for retired workers depends in large measure upon the wage policies of trade unions.
Reply to this commentLinkReport Abuse-- Sumner H. Slichter
“While private sector unions are able to increase wages for their members, these gains come with an economic tradeoff: fewer jobs for nonunion employees, lower corporate profits, and higher prices for consumers.”
Actually, it also results in fewer jobs for union employees. Private sector unions can only succeed when the companies they are supplying labor to have monopoly or oligopoly power (witness the UAW and the big three automakers.) Once the company monopoly/oligopoly fails as they always do without government intervention as consumers seek lower costs and investors seek higher returns, the private sector unions fail also.
What is ironic of course is that the left which abhors private enterprise monopolies, need those monopolies for their labor monopoly.
Reply to this commentLinkReport AbuseOkay here's the part that I'm not clear on.
You say:
"Public-sector unions, however, manage to secure higher wages through employer negotiations…"
So is this the bad part, individuals joining together to represent a common interest? Are we just against this type of activity for public employees or for everyone? Are we saying public employees should have less rights than people who don't work for the government?
Then you go on to say:
"…and manage to increase the demand for their labor through the political, legislative, and regulatory processes…"
So we're against people lobbying for beneficial political, legislative and regulatory processes? Again, are we against this just when it involves public employees or dairymen, farmers, manufactures, bankers and insurance companies too?
Don't get me wrong I'm all for it I just don't understand why we start with elementary school teachers instead of wall street bankers. I kind of suspect that while we might be successful in limiting the ability of kindergarten teachers to do such things we'll probably never get around to applying the same principle to anyone else.
Reply to this commentLinkReport AbuseGoyoMarquez: Try reading the whole article again. This time with an eye towards understanding it, rather than just trolling it looking for quotes you can take out of context.
The problem is that public unions form a defacto monopoly on the supply of labor. Wall Street bankers don't.
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