Bleg--Wages, Unions, and Productivity:
I have a couple of sentences in a forthcoming manuscript that I'd either like to provide further footnote support for, delete if they are not true, or provide citations on both sides if the issue is disputed:
(1) there is no historical correlation in the U.S. between levels of union membership and wage growth; and
(2) wages during the Lochner era (approximately 1897 to 1937) and beyond rose with productivity.
(3) Workers' wages, working conditions, and standards of living rose consistently from the 1880s through the early 1920s despite massive immigration of unskilled workers.
If you can help, please provide citations in the comments.
http://www.jstor.org/stable/2171852
http://www.jstor.org/stable/146319
Baaah to empiricism.
For cites to this and other studies that don't support your thesis but you might consider throwing in after a "but see," check out my article, "Homeland Security vs. Workers Rights? What the Federal Government Should Learn From History and Experience, and Why, 6 U. PA J. of Labor and Employment Law295, 338-42.
My boy Slater has blasted holes through this canard over and over again, on this very site. You better strike this one.
(2) wages during the Lochner era (approximately 1897 to 1937) and beyond rose with productivity.
Maybe productivity rose concurrently, but that was merely tangential to wages rising as a result of unions. See 1 above for the appropriate cites.
(3) Workers' wages, working conditions, and standards of living rose consistently from the 1880s through the early 1920s despite massive immigration of unskilled workers.
They rose after Upton Sinclair's landmark work forced them to.
Slater, get in here and help me slander this capitalist roader before he publishes this travesty! ;-)
It has lots of graphs and comparison about various cost of living changes from the 1890s to the present. Some of the best ones are minutes of work it took to buy specific things at different points in time.
Intuitively we might suspect this to be true, but how would you ever model it?
Take the government worker subset (please!). Even if you can claim that they're taking taxpayers' money, the response would be that their work raises others' wages.
For this scenario to work, the newly unionized sector would need to grow slower than it would have otherwise, hiring fewer people and/or laying some off at the onset. This is generally an accepted view of unions, they protect their human capital at the expense of nonunionized workers. Unless one were to show unions increasing the labor demand in an industry this is at least a viable explanation, and in fact any slowing of growth caused by unionization at least opens to the potential that avg wages would decrease. If the union wage rates and number of union members grow faster than the decrease in labor demand and corresponding wage drop throughout the labor market then maybe they are a good thing in this regard, if not...then not.
For the more recent period, here's some data on a closely related point
http://ideas.repec.org/a/ilr/articl/v58y2005i3p335-352.html
Case proven, in that one instance, but try spreading that analysis out over an entire economy. Now you're into the social sciences, and that's no science at all.
Also along the lines of what R.S. was saying, if your claim is that higher pay in industries with relatively high union rates somehow created lower pay in industries with relatively lower union rates, that would seem like a really tough thing to prove, in terms of causation.
And when you say "wages rose along with productivity," be careful about whose wages. Union advocates would argue that unions help lower- / working- /middle-class folks specifically with wages; indeed, the point is to "spread the wealth" to the line worker types. Aggregate numbers can be very misleading.
For example, the Economic Policy Institute (and others) have shown that worker productivity increased significantly in the last couple of decades of the 20th century, but that working/middle class incomes remained flat or actually declined. Of course, some other folks were getting pretty rich during that time -- wage inequality was rising dramatically. EPI and others link this sort of development to the decline of the labor movement. Even if you don't buy that, I hope you are breaking down what you mean by "wages."
Finally, wages don't tell the whole story. As D.B. must know, one of the main goals for unions in the late-19th and early-20th centuries was a reduction in working hours. So one would have to take that into account. And if you are going to talk about "working conditions" generally, you would have to include health and safety (studies show OSHA is enforced more where there are unions, as a generalization) and things like just-cause discipline/discharge protection, which unions bring to working class folks that they don't get otherwise.
All three claims seem potentially problematic in a law-review article, though. Wage determination is an entire sub-discipline of economics, and the relationships of immigration, unionization, and productivity to wages are the subject of thousands of papers, so broad claims aren't likely to survive careful scrutiny, especially if you want to imply causative theories.
The problem with this argument is that so many factors besides unions affect productivity, and so many factors besides productivity affect wages, that is hard to see how it could be adequately proven or disproven.
The whole idea of unionization, though, is to make labor more expensive an input in the unionized firm. Ordinarily it doesn't work unless the entire industry is unionized or the unionized firms have special advantages, and unless foreign competition is kept out(see GM, chrysler, Ford vs. the foreign car firms). If the entire industry is unionized, then wages rise--- and employment falls as a necessary consequence (demand curves for labor slope down just like any demand curves). This reduces demand for labor in the entire economy, and thus will reduce wages of nonunionized workers (workers who can't get a union job because of reduced employment leave the industry and compete with workers in other industries). Since union job wages rise and nonunion fall, theory cannot predict whether the average will rise, though inequality among workers will surely increase.
Really? At least part of the idea of unionization is that workers who are more in control, have better conditions and are healthier, will be more productive.
Some data indicates that, but can you firmly assign that wage stagnation to a lack of spreading the wealth? Might it also not be due to the introduction of so many women to the workplace... and more competition for jobs, and thus lower wages paid?
This is what I mean about social science. It's worse than global warming models. There will be so many variables and weightings and peripheral factors involved... it winds up being voodoo.
Go right-to-work, and let the chips fall where they may. I don't see a data-driven analysis providing actionable output, in this case.
Can I personally? I'm not a trained economist, so no. I do know that E.P.I. and other folks who have studied it do take into account increased numbers of women working -- that's why you have to look carefully at numbers on "household income" for example. But I agree with you that causation is very tricky here, which is why the very next sentence after the bit you quote I wrote, "even if you don't buy that. . . "
And while I don't want to start a big debate off the topic D.B. brought up, especially since you and I are actually agreeing on this trhead, but . . . . Right to work just means that the union and employer can't agree to have some portion of union dues be a requirement of employment. So when a union organizes a workforce, nobody has to pay dues. But the union still has to represent everyone in the bargaining unit, dues-paying or not. Which creates a pretty obvious free-rider problem.
However, for those anti-union, right-to-work may be the only true compromise point possible. We're not going to un-ring the bell and do away with unions, however we can move closer to a higher plane of individual liberty, which RTW might provide.
Historic unions covered skilled tradesmen such as locomotive engineers. The new unions covered everyone in an industry, including unskilled laborers. The two should be decoupled in any study, because the wage premium, if any, for an unskilled worker should be due to the union's efforts and not simply supply and demand, as for a machinist or welder.
Progress did not necessarily mean improved working conditions. Both of my wife's grandfathers died from inhaling mine dust, which had not been an issue till high speed drills with special alloy tips had been invented.
Workers did not necessarily stay in their jobs. Skilled and educated immigrants often had to take menial jobs when they arrived, but worked their way out of them. From my study of my ancestry, one uncle who worked in a saloon when he arrived was a real estate salesman 20 years later.
Of course, this doesn't speak to the correlation in the US between Union membership in wages, nor does it imply causation, correct?
Likewise, crime is higher in cities. Would someone like to argue that the crime causes the abundance that draws the criminal?
Looking at the raw figures (1968 to June 2008), productivity grew 110%, with real compensation growing 103% using traditional price-deflator methods. However, another method (more robust), obviates the minimal discrepancy that does exist.
It's important to note that productivity gains vary depending what price-deflator you use. Martin Feldstein has done some recent work in this vein, and it's worth checking out (assuming you have access to NBER papers). The gist of his argument was that post-WWII wages stayed tightly interconnected with labor productivity, once correcting certain flaws that use another price deflator.
As for productivity growth and labor unions, from 1995 to 2007, it grew an average rate of 2.55%, with most gains occuring in informational technology (a highly non-unionized sector).
Wage growth is not only related to productivity, but capital utilization, or "capital deepening". High-tech firms that require substantial capital are more prone to capital deepening productivity gains, which accrues more to the owners and managers of capital, as opposed to those individuals who mix their labor with the provided capital to make a product.
As for labor unions : have you checked out the work of Barry T. Hirsch of Georgia State University? He has a few papers on the effect of labor unions and productivity.
Please don't tell me that your arguement is that because correlation is due to causation in one case that it's true in every case?
The Feldstein paper: http://www.nber.org/papers/w13953
Right-to-work is interesting, though I wonder if its principles aren't broader than just unions. In effect, it's a public-policy determination that individual freedom of action ought to trump freedom to enter into exclusive contracts: that is, we should not permit unions, effectively acting as labor-selling corporations, to enter into exclusive contracts with employers, even if both the union and employer agree to the contract. Mightn't that principle apply to other kinds of exclusive contracts, too? As an independent craftsman, should I have the right to sell to any willing buyer, regardless of whether that buyer may have signed exclusive procurement deals with other suppliers? Some conceptually similar issues come up with minimum-price doctrines (should Amazon have a right to sell any book for any price they wish to a willing buyer, regardless of what minimum-pricing deals they may have signed with their supplier?).
My case is that every union I've come into contact with has been a reactionary institution bar none. When the UAW shut down Spring Hill, that was the last straw (When it was first built, the UAW colluded with corrupt Olds execs to strangle Saturn in its crib - the Olds execs got what was coming to them, the UAW keeps right on keeping on, on the public tab).
I see the NEA RIFfing my friends while older, three times more expensive teachers keep raking in the dough, I see government employee unions bankrupting state governments, I see unions pricing minorities out of domestic markets and lobbying hard for protectionist policies to keep those overseas down too, I see union and management going through the motions of bargaining while they team up to rape future generations.
The Codger Boom and their sycophants can argue about the behavior of ideal unions or how great they were back in the good old days until they're blue in the face, average people have to deal with the reality on the ground, and it ain't pretty. And, yes, the CEO's union is the worst of all, thanks for asking.
Enough!
This all likely lowered productivity and wages per worker, but it's not much of critique, particularly as the economy's tremendous growth during this period meant that most industrial workers were still able to realize substantial increases in real wages.
Where unions have an industry-wide monopoly and don’t have to compete among themselves for the supply of their commodity, union wages go up relative to the wages of the people that have to buy their goods. Car makers controlled by the cartel have to raise prices to compensate unions at monopoly inflated rates (or try to sell an inferior product for the same price). Since their customers had to pay more of their income to buy products at inflated prices, they have less income to spend on other products and they are relatively poorer. The businesses that these customers would have otherwise patronized suffer too. Therefore the non-unionized subsidize the union cartels.
So what would happen if everyone belonged to a labor cartel? Wages would keep going up, while the value of their products would not, which is inflationary. The strongest cartels will win and lately the public employee cartels have been winning, since they have no competition. Cartels exist when other people have to subsidize them.
Unfortunately for the auto unions, they lost control of their monopoly in the marketplace. They are trying and somewhat succeeding in maintaining their monopoly politically.
So yes, union wages go up, but at the expense of the non-unionized.
This analysis assumes that there's no profit margin, or at least that the profit margin is at the bare minimum level needed to keep players from exiting the market. In the general case, the proportion of increases in costs (from unionization or anything else) that come out of price increases vs. out of profit decreases depends on the market, its profit margins, the reasons for those profit margins, demand elasticity, and so on.
Featherbedding and the elevation of seniority over skill drive me to distraction. I benefit greatly from being in a teacher's union, but tenure is too hard to lose and I see better younger teachers let go in favor of some poor older ones. Bogus. But it is also bogus to blame unions for bankrupting State governments. States are in trouble because of falling revenue and because politicians of all stripes have been unwilling to say no to various interests, unions included, but the public unions are hardly the most corrupt part of this puzzle. Every few years a farm bill gets passed with billions in subsidies to already enormously profitable agribusinesses. Teachers being able to afford to own a home is not such an outrage. And in regards to generous pensions, keep in mind that many (most?) public employees cannot collect social security even if they worked in the private sector for part of their careers and would otherwise qualify. (This also means our take home pay is 6% higher than it otherwise would be).
I've seen umpteen arguments on this blog about the sacredness of contracts. Let the buyer beware and all that. In business, if you cut a good deal, good for you, right? If it wasn't worth it to the other party, they wouldn't have entered into the contract, right? People are rational. If they aren't expected to take on the consequences of their decisions, capitalism is lost in a sea of moral hazard.
Of course, now we are off the rails and everything will be renegotiated. Ironically, resentment over the relative insulation of unionized public sector employees could lead to real pressure on the pension benefits, especially for new and younger workers.
You're welcome. I look forward to reading your final product.
Re "right to work," again, there is a huge free-rider problem. As long as unions have a legal obligation to represent all members of the union bargaining unit, I think it's entirely fair to allow a contract that requires members of the bargaining unit to pay dues. I've personally represented folks in arbitration hearings who weren't paying dues to the union because it was a RTW jurisdiction, and it's really odd.
And Dave N. makes a good point for libertarians. RTW makes it illegal for a union and an employer to enter into an agreement about terms of employment even where both sides want to agree to it. How "libertarian" is it to ban that? If an individual doesn't want the benefits and costs of a union, the individual is entitled to (i) oppose certification of the union and then push for decertification if he loses on the certification; or (ii) finding himself in the minority, he could always seek other employment.
The unskilled workers benefit as a result of the cartel, as somebody mentioned above.
The biggest mistake the UAW skilled tradesmen ever made was coupling their wagon with the floor sweepers and guys cutting the lawn and screwing bolts onto bumpers. It's outrageous that those subgroups all make similar wages. Skilled tradesmen are worth more than floor sweepers.
The UAW skilled tradesmen had no choice, however. They were outvoted. This is a problem with some bargaining units, they will devolve to the lowest common denominator, imo.
Once you get away from the big labor cartels, and government employee cartels, this is less of a problem, and organized labor seems more rational and results oriented. Skilled labor is rewarded, and benefits from collective bargaining are allocated more equitably.
The comment that DB is coming up with conclusions before he has a cite is hardly problemmatic, even if it is true (which it is not). If he were a judge, it may be a problem, but he is writing an article. It is not as if it is his first piece that is not a love letter to unions. Indeed, he has a book in that realm.
So, as a union lawyer to ya'll - chill out a bit. Also, Mr. Slater is your article located anywhere for free online?
"I've seen umpteen arguments on this blog about the sacredness of contracts. Let the buyer beware and all that. In business, if you cut a good deal, good for you, right? If it wasn't worth it to the other party, they wouldn't have entered into the contract, right?"
What kind of contract is it when the payor* is not a signatory? Execs/politicians know that when the bill comes due, they'll no longer be responsible, the union members know that when it comes due, they'll still be the beneficiaries. Everybody wins, except the future generations taxed without representation.
Raw, unalloyed injustice. Yes, and agribusiness sucks too. Guess that makes it all ok then.
* - yeah, whatever, too narrow. The meaning is clear.
No justice, no peace.
Got it. Apologies.
My first full-time employer owned morning and evening papers in the same town. The morning paper staff joined the Newspaper Guild. The company offered to set up an independent union for the afternoon paper, on the understanding that it wouldn't do any of the things unions normally do, but that whatever pay contract the Guild negotiated, the afternoon paper would get $5 a week more.
Per Son: Send me a private e-mail (I post with my real name, I teach at the University of Toledo College of Law) with your address and I'll send you a copy. Always happy when somebody apart from my mother is interested in my work. And please call me Joe.
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