Unions: From the People Who Brought You Weekends

Unions: From the People Who Brought You Weekends May 13, 2008

I found this exchange between Jonathan Alter and Mickey Kaus fascinating. According to Alter, unions have largely been venal, short-sided, and generally bad for society. Yet he thinks we ought to expand their power and influence in the hope that they will behave in a more enlightened manner. Alter’s concern (in his words, “unskilled workers are getting the shaft”) is of course legitimate, but so far as I can tell his line of reasoning is pretty much the “politician’s logic” from Yes, Prime Minister: Something must be done. This is something. Therefore, we must do it.

But perhaps even Alter is insufficiently appreciative of the value of unions. I know that for a lot of people (including a lot of Catholics), that unions are beneficial to workers and to society as a whole is less a question of fact than an article of faith. My apartment is across the street from the headquarters of a union local, and in front of the building they have erected a giant digital billboard, across which constantly scroll slogans about how if it wasn’t for unions we would all be living in conditions of squalor and near slavery. The actual evidence on the point, however, is not nearly so stark.

According to a survey of 200 economic studies by H. Gregg Lewis, the wages of unionized workers were on average 15% higher than the wages of comparably skilled non-union workers. Other studies have found the wage premium to be as high as 30% (mind you, this is an overall average; union wage premiums tend to be low or non-existent for industries that are highly competitive and high for industries that aren’t). A 30% wage premium is nothing to shake a stick at, but it’s not anywhere near large enough to explain that enormous gains in living standards that have occurred over the past 150 years, and given that even at their peak only about a third of U.S. workers were unionized, one has to say that perhaps the guys across the street from me are overstating the case a bit.

Granting that unions do raise the wages of their members, the question arises: how do they do so. One possibility is that they do so by raising worker productivity. If workers want a bigger slice of the economic pie, the best way to get it is to help make the pie bigger. This possibility, however, does not seem all that plausible. As Kaus points out in the above exchange, unions typically demand (and receive) promotion based on seniority rather than merit and restrictions on the ability of employers to fire less productive workers, both of which hamper productivity. Unions are also notorious in opposing automation, job combination, or other measures that allow a company to do the same job with fewer workers. I know that some people have argued that unionization increases morale, which increases productivity, but it’s hard to believe that any such gains are largely enough to compensate for the loss productivity from union work rules, and if the “unions increase productivity” theory were true, then it would be a mystery why employers weren’t pushing unionization on their employees, rather than resisting it.

If unions don’t increase the size of the metaphorical economic pie, then any larger slice for them must come at the expense of a smaller slice for someone else. The only question is who. I see three plausible candidates: 1) non-union workers, 2) consumers, and 3) the employers themselves.

1. Non-union workers: To the extent the price of labor is governed by supply and demand, decreasing the supply (by, saying requiring an employer to only employ union members or otherwise restricting access to employment) will result in an increased wage for the members of a particular union member, though this increase will come at the expense of other workers, who will be forced to find other, less attractive work. Back when unions were thriving, this used to happen quite explicitly. Many unions, for example, were limited to whites and/or men, and I don’t think it’s a coincidence that the beginning of the decline in unionization coincided with the rise of the Civil Rights and Women’s Liberation movements, both of which made discrimination against those groups much more difficult (in his book Third Ways, Allan Carlson argues that the inclusion of a ban on sex discrimination in hiring in Title VII was a major cause of the decline of unionism in America, and while he doesn’t mention the banning of racial discrimination, the same argument would apply).

These days, however, the ability of unions to explicitly restrict membership is limited (organizations like the state bars still have this power, but that’s a topic for another day). Employers are not allows to discriminate against potential employees on the basis of union membership, and while some states force new employees of unionized businesses to join the union within 90 days, the union cannot refuse to accept such employees as members. There are still limits on immigration, but for the most part unions lack the ability to directly restrict the supply of labor so as to raise their wages. And in any event, while the benefits to union members from unionization may come at the expense of non-union workers, they can’t come solely at their expense.

2. Consumers: If unionization results in higher wages for workers, won’t employers simply pass those increased costs on to the consumers in the form of higher prices? Perhaps. But it’s not as if, prior to unionization, companies were charging consumers less than they could have simply out of the goodness of their hearts. Prices are governed by supply and demand, and while an increase in the cost of a product to an employer may change the price at which it is most profitable to sell that product, it is unlikely that this higher price will fetch the employer as high a rate of profit as he otherwise would have made. Particularly where the employer has to compete with other companies that don’t share these costs, his ability to raise prices to cover his costs may be quite limited.

3. Employers: One might think, therefore, that the bulk of any increase in union wages must come at the expense of employers, rather than non-union workers. While this isn’t quite a win/win scenario, bettering low wage workers at the expense of employers is a trade off most people would be willing to make.

The situation, unfortunately, is not quite so simple. While decreasing the profitability of unionized businesses may not seem problematic in itself, the long term consequences of this lost profitability are less than desirable. The less profitable a business is, the less likely it is to expand or to invest in capital equipment and technological improvements that will increase worker productivity, and the more likely it is that it will be forced to cut employment or even that it will go belly up (and keep in mind, the lost profitability suffered by the employer includes not only the higher wages, but also the lost productivity due to union work rules).

Over time, this lower profitability will tend to discourage new entrants into the industry where unionization can’t be avoided, while encouraging new entrants where it can. To the extent that unionized industries are protected from competition, either by legal restrictions or by other factors, the effect of all this may be diminished (it should not be surprising, therefore, that government employees are disproportionately represented among union members). Ultimately, though, to the extent that unions raise member wages at the expense of business profitability, they are doing so only at the price of their own eventual destruction.

All of which is a much, much too long way of saying that if you want to help low wage workers in America today, longing for a return of old-style unionism is probably not your best bet.

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  • “As Kaus points out in the above exchange, unions typically demand (and receive) promotion based on seniority rather than merit and restrictions on the ability of employers to fire less productive workers, both of which hamper productivity.”

    Interesting that you invoke merit here. Seniority rewards loyalty, a non-market good. Criticism of this aspect of unionism is another instance of market totalism, where economic efficiency must be the highest good.

    Should employee loyalty never be financially beneficial? No, I think. While perhaps employers ought to be free to fire whomever they wish regardless of the length of their service, this is hardly self-evident.

    Lots of anti-union polemic treats employers as individualistic entities who rarely collude with powerful forces within their industry and their government. In the ideal world of Econ 101, they channel their self-interest only into fair economic competition.

    Self-interest doesn’t work that way. Unions have often presented themselves as a counterbalance within society to corporate self-interest, wrongly understood. Anyone who’s had a horrible, entrenched boss can see the benefit of an external counterweight a union provides.

    What’s really odd about unions is that so many of them now represent government employees. To me, this seems like a clear rejection of the ideal of public service.

  • Blackadder

    Kevin,

    The point is that union work rules hurt productivity, which means that any wage premium union members get has to come from some other source. Perhaps those rules are valuable for some non-financial reason (though I would question whether Seniority really is a way of rewarding loyalty, unless it’s loyalty to the union we’re talking about). Even so, that doesn’t change the analysis.

    As for why unions predominant among government employees, I would think the answer was pretty obvious: government services generally aren’t subject to much competition.

  • On this question, I have to side with Pope John Paul II, who called unions “indispensible” to a modern, just society. In the abstract, the simple idea of people of a craft or industry forming an association to build up social solidarity and to advocate for what they democratically determine to be their legitimate interests seems so fundamental that one cannot imagine any objection. Yet the strident opposition some have to unions is by many considered evidence that when powerful corporations have their influence challenged, they strike back with force.

    The labor movement has not only been successful at raising the wages and benefits of its own members, but of workers in general. Unorganized employers raise wages to the industry standard to ward off unionization. But the negotiated collective bargaining agreement is not just a matter of wages and benefits. Workplace safety, the right to rest and religious observance, recourse against workplace discrimination, and other issues of human dignity are also a substantial part of labor’s goals.

    No union agreement requires an insubordinate or unproductive employee to be retained. Nor does the union have any ability to make unilateral demands on the employer. Both labor and management must agree to the contract and it would be in the realm of silliness not to say that management has the upper hand in this, including matters which labor is prohibited by law from even raising in negotiations.

    As a one time steward for the United Steelworkers, I can tell you the above post contains a number of simply factual errors which to me suggest the author does not have a very good familiarity with trade unionism or the National Labor Relations Act. But this point I will concede. Unions have all of the faults common to other organizations of representative democracy. Those faults and shortcomings are real, but if one believes they are intolerable, then he might start with moving to abolish the representative democracy that is even more dominant in our society, the Constitution and government of the United States.

  • Katherine took the words right out of my mouth.

  • Seniority rewards loyalty

    Well, it’s supposed to, but more often than not it rewards a bunch of lifers who aren’t willing to learn new procedures. They have no choice but to be “loyal”. Younger guys are willing to learn new procedures and machines and are generally smarter and more productive, but they have to be laid off first because they lack “seniority”. One “senior” slacker that a client firm was trying to can was the master of grievances and threatened lawsuits. Luckily they caught him drunk so they were able to can him.

    Unions could be something good if they really cared about protection, personal development — more than the numbers, but in reality they’ve become just another lawyer-driven middleman skim scheme. The best thing for employers to do is to start a number of alias businesses instead of one big one to keep the target off their back.

  • Pauli, best I can tell, you take a Calvinist view of the nature factory workers and a grace filled view of the nature of company bossess.

  • Blackadder

    Katherine,

    If there is anything in my post that is factually inaccurate (as opposed to simply claims or arguments you disagree with), I would appreciate it if you could tell me what they are. Obviously you have more direct experience with labor unions in the U.S. than I, and it’s quite possible that there could be parts of my post that don’t reflect the relevant law or how unions operate in fact, but simply stating that there are inaccuracies in the post without telling me what they are doesn’t help me any.

    I recognize that unions often claim that increases in non-union pay are the result of unions. I just don’t find that claim all that plausible. It’s not as if Microsoft pays its non-union computer programmers what it does because they want to keep pace with their unionized counterparts. I also don’t think the analogy between unions and representative democracy holds, for a variety of reasons. From the fact that representative democracy is good in one area (say, electing the President), it doesn’t follow that it would be good elsewhere (say, electing the Bishop).

  • T. Shaw

    Believe it or not, I’m one of your most right wing, neanderthal nihilists, and I am a union VP. My experience: we stews have to drive our lawyers. Maybe that’s because they’re on salary and not retainer, and we’re closer to the action.

    Our bosses have to live with what the higher bosses give them – don’t see where Grace and Calvin come in. They don’t have much discretion with contract and corporate policy. They’re usually also caught between that rock and that hard place.

    My worst experience was with an employee that allowed wrath (one of the seven deadly) to take hold of his life and I had to try to defend him as he committed job suicide. He refused to heed my counseling and advice and is sadly ‘gone’ in more ways than just his job. “Forgive all injuries”, including imagined.

  • Blackadder

    I would add, lest I be misinterpreted, that I am not opposed to unions. I question the wisdom of some features of the law currently governing unions in the U.S. (as I gather Katherine does as well), but that is a subject probably best left for another day. The main point of my post was not that unions were bad, but only that they were neither the cause of the current standing of workers in the U.S., nor the solution to current ills.

  • Rita

    Unions are communits and i’m against them.

  • Michael Enright

    Blackadder–

    I’m not sure there is one answer to your question. It is probably different for different types of unions with different functions supporting different laborers at different times in different places.

    I would like to point out one problem with the way you look at the issue. You treat the laws of supply and demand as if they exist in a moral vacume. The price people are willing to pay for an object is not metaphysically given or arbitrary. People may be willing to pay more if they know that the workers who made a product are not being mistreated. Unions often work to educate people on how union products are preferable because those who made it are being treated better. Furthermore, it is a moral impearative that people do not knowingly purchase items that are produced by immoral means i.e. the mistreatment of workers. By doing economics this way and assuming that the demand for a product is and should be independant of the conditions of the laborers is to remove morality from the disussion. Quite frankly, it is the kind of “value free” economic reasoning that gives libertarians a bad name.

    .

  • “I recognize that unions often claim that increases in non-union pay are the result of unions. I just don’t find that claim all that plausible. It’s not as if Microsoft pays its non-union computer programmers what it does because they want to keep pace with their unionized counterparts”

    I think that is an example of your misunderstanding or at least misanalysis. Computer programers are almost wholely unorganized, so there is no issue of the non-existant programmers union raising wages of non-union workers. On the other hand, here in Washngton, DC, the hotel association and the union negotiate the contract for the major unionized hotels and with the ratification of the contract, the large non union hotels adopt a similar (though slightly lesser) wage and benefit package.

    I would also ask if you come up with a better example than the election of bishops. Bishops are to represent God (who I hope and pray does elect them!).

    Going back to your original post, I think you place the Taft-Hartley Act’s ban on the closed shop at a later point in history than it actually was.

  • Pauli, best I can tell, you take a Calvinist view of the nature factory workers and a grace filled view of the nature of company bossess.

    I possibly did a poor job writing then, or you did a poor job reading. I’m criticizing a system in which merit played very little part, corruption was encouraged in a de facto sort of way and all manner of dysfunction resulted (inefficiency, cronyism, eventual shutdown of the business). I was very critical of my client’s managers at the time for not trying to remedy the corrupt conditions on the shop floor. But the constant threat of grievances and lawsuits intimidated them. They were not “grace-filled” any more than other people; they just liked the idea of going home at 6:00PM (factory workers left at 3:30PM, BTW) to be with their families instead of staying a few hours filling out forms related to grievances, etc.

    Many of the shop floor workers who did work well were moved into quality assurance and management, so it was not an us-vs-them “kept down by the man” situation.

    When that company announced they were closing the plant down, I witnessed the most amazing things in the following year. Grievances were filed every week, usually involving race. My best guess is that a black guy would promise to split a $20,000.00 payout with a white guy if he could claim the dude called him the N-word. This was enabled by lazy management, though, for wanting to settle everything out of court and settling 95% of the time. Management — in my view — was to blame for being too “hands off”, but it was their defense mechanism against the widespread abuse.

    The company sponsored training for everyone interested to become certified inspectors and QA workers to help them find work in their field. The union was completely “hands off” in this regard; they were just collecting tribute payments until the place finally closed. They didn’t care what happened to the workers. There was even anti-union stuff posted in the worker’s men’s room!

    All the work moved to Singapore. Problem solved.

    My conclusion isn’t that unions are bad; I think a union can and should be a good thing. But often it isn’t, it’s just another layer of management with all the same issues of any other proteced elephantine bureaucracy: greed, bloated salaries, laziness, apathy, wielding power for aggrandizement of the organization. We should guard our adulation of unions and voice our praise for anyone, union or management, who promote personal and professional development.

  • Unions are communits and i’m against them.

    What kind of a unit? 🙂

    This is the kind of statement, even had the spell-checker been on, that doesn’t advance the argument of those critical of unions. The truth is that unions were once much better and did many good things, e.g., they improved horrible conditions, made sure workers didn’t have to work on Sunday, etc.

    In my opinion, unions in general have become detrimental to business and are a business model unto themselves. There is nothing keeping them from corruption and even the word on the street isn’t 100% thumbs up for unions anymore. I heard of a local leader in Cleveland making $300K. Sweet, but hope not to many people find out.

    I’ve witnessed a situation where one firm in an industry which was constantly hiring employees from a competing firm literally down the block who mistreated employees. The competing firm eventually had to improve it’s treatment of workers and its damaged public image to retain employees and business. Everyone benefited from my friend’s firm and no unions were involved in the scenario. Obviously a case can exist where there is no “righteous” company in a given region, hence the need for unions to be a knight on a white horse. But at this point the knight is old and fat and can’t fit into his suit of armor anymore.

  • Blackadder

    Michael,

    I agree that some people are willing to pay a higher price for a product if they know it was made using union labor, just as some people are willing to pay a higher price for a product if it was “Made in the U.S.A.” or “certified Fair Trade” etc. The evidence, however, seems to be that this increase in demand isn’t enough to compensate for the wage premiums and lost productivity that unionization brings.

    On the issue of whether economics is or should be value-free, I would say that it’s important to distinguish between economics as a science, and the economist as a person. If I am a historian, say, then there most certainly ought to be a moral dimension to my work, both in that I should conduct my research with honesty and integrity, and that I may be motivated by some specifically moral purpose. And once I reach my historical conclusions, there may be all sorts of moral lessons that can be drawn. But what wouldn’t be proper would be for me to say: “x shouldn’t have happened, therefore it didn’t,” or “y should have happened, therefore it did.” Likewise, if unions lower productivity, then they lower productivity. Saying that this shouldn’t be the case won’t change that fact.

  • Blackadder

    Katherine,

    I think you miss my point. Many businesses set their wages based on where other businesses have set their wages. But from the fact that business A sets its wages based on the wages of business B, it doesn’t follow that if it weren’t for business B, business A workers would never get a pay raise. After all, if business B went out of business, it’s not like business A would set its wages at zero. It would simply find some other measure of where it should set its wages.

    P.S. You’re right about Taft-Hartley. My impression was that it passed in the mid-1950s (a silly mistake, given Taft was already dead by then). In fact it was passed in 1947. I’m afraid I don’t see anything in the post on which such a change of dates hinges, however.

  • Michael Enright

    BA–

    What do you mean by “productivity”? Why is it important? Surely a company that can demand employees work very harder for less will be more productive. Is that a good goal? Is the point of productivity questions to ask how to treat workers to get the most out of them, and make sure they get no better than that?

  • In my opinion, unions in general have become detrimental to business and are a business model unto themselves. There is nothing keeping them from corruption

    Try the Landrum-Griffeth Act. In fact, no private institution is subject to the anti-corruption oversight as labor unions are — not business, not the Church, not academia. Original sin is real and no one can guarantee no bad apples, but in a world of Enron and other business swindlers, labor looks pretty good. BTW, every union officer’s salary can be viewed on the Depatment of Labor’s website. If only Mrs. McCain had the same level of scrunity.

    I’ve witnessed a situation where one firm in an industry which was constantly hiring employees from a competing firm literally down the block who mistreated employees. The competing firm eventually had to improve it’s treatment of workers and its damaged public image to retain employees and business. Everyone benefited from my friend’s firm and no unions were involved in the scenario.

    Your presumption that all bossess are virteous and all workers are vice-ridden is not a view of human nature I share.

  • P.S. You’re right about Taft-Hartley. My impression was that it passed in the mid-1950s (a silly mistake, given Taft was already dead by then). In fact it was passed in 1947. I’m afraid I don’t see anything in the post on which such a change of dates hinges, however.

    The civil rights movement had it’s height during the 1960’s (I know, I was there). None of the CIO unions organized in the 1930s ever had a color bar. Very few other unions ever had a color bar, mostly a few railway unions and they were well on their way to intergration by the 1940s. Labor was without a doubt ahead of society on civil rights and a major force in the enactment of civil rights legislation. Remember it was AFL-CIO Vice President A. Philip Randolph who organized the 1963 March on Washington even though Dr. King’s speech stole the show.

    On the other matter, you’ve lost me. I don’t know anyone else who does not agree that when a critical number of employees in an industry are organized, the union rate impacts the industry standard. Copy cat wage increases is the term of art of labor economists.

  • Your presumption that all bossess are virteous and all workers are vice-ridden is not a view of human nature I share.

    Katherine, this is why I have a hard time taking you seriously. You need to read more carefully. My story pointed out that only one boss was virtuous, the ther one was arguably milking his workers, and I made no mention of workers being “vice-ridden”. In my 2nd scenario, these people were hired by the “virtuous” boss for a higher wage and benefits because they were good workers and undervalued. My point was that sometimes there is not a need for an extra layer of management called a “union”.

    My first story was meant to illustrate how a union complicated the shutdown of a plant that it helped necessitate to begin with. Interference in the market may be well-intentioned but bad, unintended consequences may still ensue and the wise acount for these.

    I realize that the plural of anecdote is not data, but the lazy rhetoric of union as panacea has become tiresome and your line “labor looks pretty good” recalls the fable of the blind men and the elephant.

  • Pauli —

    But if you are raising this as anecdote rather then the nature of labor-management relations, i don’t think you are making a case for your cause.

    Unions, good or ill, are not another layer of mangement. Management is accountable to the stockholders. The Union leaders are elected by the workers. As the church teaches, workers have a natural law right to organize for the advancement of their legitimate interests. There are virtuous employers, yes. But the existance of virtuous public officials does not let as dispense with election or virtuous newspaper publishers let us dispense with a free press.

  • jimklasz

    now if only some of you had spent a life time in fon the factory floor or worked in the construction industry ,you would have a far better ground for argument. As it is you make it seem,and sadly so,silly.

  • Blackadder

    “The civil rights movement had it’s height during the 1960’s.”

    Which also marks the beginning of the decline of unionism. It’s true that not all unions were explicitly discriminatory. Many, however, were discriminatory in practice and/or benefited from the discrimination present in the wider society.

    “On the other matter, you’ve lost me.”

    Think of it this way: what would wages be like in those hotels if there no hotel had ever been unionized? If you want to say they’d be lower, that’s a fair argument. If you want to say that they’d more or less be where wages were in the early 1900s, I don’t think that makes much sense. Whatever the benefits of unions, they can’t be credited (or, I should say, can’t credibly be credited) with the bulk of the benefits in wages that have occurred over the past 100 years.

  • “The civil rights movement had it’s height during the 1960’s.”

    Which also marks the beginning of the decline of unionism. It’s true that not all unions were explicitly discriminatory. Many, however, were discriminatory in practice and/or benefited from the discrimination present in the wider society.

    No, in fact it no union had a gender bar and the few ever had a color bar. By 1950 only two non-CIO railway unions had a color bar. Union membership would continue to rise. The courageous actions of the CIO unions, particularly such faithful Catholics as Phillip Murray and Jim Carey, in expelling the Communists from CIO unions probably caused disruption that stalled union growth after the war. The de-industrialization of the 1970s and 1980s, along with illegal and immoral company refusal to recognize the civil and divine right of workers to form a union would be the primary causes of the decline in membership that occurred in the 1970 and 1980s.

    No institution, not even the Church, was in the forefront the civil rights movement the way the labor movement was.

    As Dr. King also said “Negroes in the United States read the history of labor and find it mirrors their own experience….The labor-hater and the Negro-baiter is virtually always a twin headed creature spewing anti-Negro epithets from one mouth and anti-labor propaganda from the other mouth”

    “On the other matter, you’ve lost me.”

    Think of it this way: what would wages be like in those hotels if there no hotel had ever been unionized? If you want to say they’d be lower, that’s a fair argument. If you want to say that they’d more or less be where wages were in the early 1900s, I don’t think that makes much sense. Whatever the benefits of unions, they can’t be credited (or, I should say, can’t credibly be credited) with the bulk of the benefits in wages that have occurred over the past 100 years.

    I would again let Dr. King speak for me “The labor movement was the principal force that transformed misery and despair into hope and progress. Out of its bold struggles, economic and social reform gave birth to unemployment insurance, old age pensions, and, above all, new wage levels the meant not mere survival but a tolerable life. The captains of industry did not lead this transformation; they resisted it until they were overcome. ”

    From where we stand today, it seems impossible to us that our society would allow workers to be treated the way they were 100 years ago. So you conclude that without the labor movement, we would have still achieved the social progress we did. But that is about like saying that since today we see slavery as so impossible to defend, had there not been an Abolitionist Movement, we still would had ended slavery.

  • the prophet max

    Are unions corrupt? No doubt, as is any human institution, including the ones that trandscend humanity, like the Church.
    On the other hand, looky here. I am a union member, and guess what? I’m not rich, but I earn a living wage. My wife steys home with the 5 children, albeit not in splendor. I get generous annual leave, not to mention paid sick leave.
    If I did not earn paid sick leave I certainly would have lost my home some years ago, when I suffered a series of devastating medical crises: I was off work for 6 months.
    Because I had earned so much paid sick leave, I was never without a paycheck during this long convalescence. I shudder to think what would have happened were I in a non-union job.
    For that matter most of the social safety net we take for granted is the direct result of the labor movement.
    Commies? Nah, just (disproportionately) Catholics.