The Corner

Responding to Kersey

My union political director guy writes:

Jonah:

Thanks to Paul Kersey for his response. If nothing else, the exchange is worthwhile just to see “there’s nothing in economic theory that says that unions have to be a drag on an economy” printed in NRO.

1. While some unions may pursue short-sighted policies that undermine productivity, that hardly distinguishes them from management or any other economic actor, e.g. bankers who went crazy for credit default swaps. The question is do unions promote productivity in general. For example, job banks encourage automakers to find other productive work for employees who would otherwise contribute nothing to the economy. That is why we need to focus on the correlation between high levels of collective bargaining coverage and per hour worker productivity.

2. The best apples-to-apples comparison between Europe and the U.S. is not levels of union membership, but % of the workforce covered by a collective bargaining agreement. In Europe many agreements are extended beyond just union workers to all workers in an industry or sector. Between 1970 and 2000 the CBA coverage rate in the U.S. fell from 26% to 14%. In the rest of the OECD, it dipped only slightly from 71.8% to 67.7% (mostly in non-EU countries). Thus we don’t really have a case of “rising productivity and falling union density”. The economy that lost CBA coverage density lost it’s productivity lead.

3. “Per-unit labor cost” and “productivity” are not the same thing. The first compares goods produced to worker pay. The second compares goods produced to amount of work hours needed. Unions increase the productivity by increasing per-unit labor cost. An employer has an incentive to find ways for the worker to get more done in an hour. The worker has the same incentive because he knows he will benefit from his own productivity increase. The whole economy benefits when workers can produce more in less time. Paying workers less for the same amount of work simply takes from one group and gives to another, leaving the same size pie.

4. As for the auto industry, don’t blame the UAW, for high U.S. health care costs, the high dollar, and overpaid U.S. managers.

Click to access 66692b04c9f900c12f_jhm6ivvay.pdf

The high union manufacturing sector is one area where the U.S. has held onto its productivity edge.

“Of the 20 richest countries tracked by the U.S. Bureau of Labor Statistics, the United States ranks 17th in hourly pay for production workers in manufacturing. . . Of the 16 nations with higher compensation for production workers in manufacturing, the United States ranks behind only Ireland (a nation with a manufacturing workforce less than 2% as large as that of the United States) in terms of “value-added per employee” (a rough measure of productivity).”

5. I agree with Paul that U.S. labor law is too all-or-nothing and too focused on contracts with individual firms. SEIU President Andy Stern has made a similar point. But no conservative would give up a modest policy improvement to pursue a radical overhaul. So if the Employee Free Choice Act will lead to stronger unions and stronger unions lead to greater growth in worker per hour productivity, then we ought to support it. After passage, we can think about minority union bargaining rights or industry wide contract extensions.

Update: Yes, yes, I know there are responses to this stuff. It will have to wait until the morning though.

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