With a large employer like GM, or rather a Chicago "employing cartel", doesn't a monopoly union prevent form a monopsony?

Are there any economic explanations for the fall of Union adhesion? I remember my labour economics teacher used to explain that unions managed to obtain social benefits for everyone, so they were falling victim of free-riders of their struggles. Would you agree with that, or would you rather try to explain the fall by litteracy, temp job or the apparition of other forms of socialization?

If we move toward national health insurance, unions may have a rebirth as they organize health care workers, perhaps even physicians. Odd historical switch, as unions were once viewed as balancing the power between workers and employers. In the future the government might be seen as having too much control over the employment contract and the unions viewed as protecting the health care employees from the government.

Unions seen as a defense against exploiting employers replaced with unions fighting a too powerful government.

If so what happens to the projected savings that national health insurance advocates claim will occur? What about the political nature of such union contracts?

DanC

"Unions seen as a defense against exploiting employers replaced with unions fighting a too powerful government."

The only source of union growth is in government. You know, full benefits, pensions after 20 years, high quality world class government. The poor wretches.

And, if you want to see what unionization/government partnership does over time, try Detroit. Do not like the city size experiment, try Michigan state, New York state or Massachusetts, all on a union city type financial death spiral of losing population, fleeing young people, fleeing tradesmen and small to medium business, an elderly population, an immigrant and welfare population and expensive local, city and state union workers who are welded to one Party, and all with un-funded pensions and debts.

Yeah, give me more of that..

But, I suppose it is only because high tax, low quality, high cost has not been done right.

While you note several ways in which government unions are a special case, you seem to avoid any discussion of how they should be treated. It seems to me that a union of government employees, because its gains come at the expense of all taxpayers in society (rather than of allocators of capital) and its employer can never be bankrupted by excessive generosity, will almost certainly tend to be harmful to society as a whole.

Economics explains the GM/UAW situation. At one time, the UAW was a monopolistic supplier of labor and thus had every right to demand and receive monopolistic wages. The UAW can be as capitalistic as anyone. Of course, when the cars from Japan started rolling in our ports, the auto makers and UAW could not adjust to this new economic phenomena
Our Federal government played a part in distorting the labor market and thus bears some responsibility to auto retires. During WW II and Korea, the greatest economic fear was demand-pull inflation. Thus, contracts “negotiated” during that time pushed labor costs way into the future, rather than giving autoworkers immediate cash. The War Labor Board had to approve of all union contracts. We are paying for these economic decisions of 45-60 years ago.

To Paul

That was irony.

Unions were justified as a way to deal with the perceived imbalance in power between employer and employee. Legislation to protect unions was often supported with the claim that the employer was too powerful and the thumb (or heavy hand) of government was needed to adjust the imbalance.

I find it ironic that unions are increasingly in the public sector given this history.

To Joe

Nice try but... GM did not expect retires to live so long or for health care costs to increase at such a rate. Little to do with government policy on the issue. GM didn't set enough money aside and the unions didn't see a problem for many years either.

Next, the big three built products that American consumers increasingly rejected. Losing so much market share made the companies top heavy with legacy costs. The government had little to do with Detroit building products people didn't want.

My take on labour disputes is that they should be modelled as a 'prisoner's dilemma' -- the union and the company would both be better off cooperating (i.e., sharing the pie), but each side will be tempted to defect (appropriate the largest possible slice of the pie) -- this situation also resembles the "bilateral monopoly problem" in economics

Interesting and informative posts by Becker and Posner, as always. I think I understand, roughly, the arguments against the unionism of today, the $30 per hour + health care unionism, but I'm curious whether the same negative aspects of unionism apply to earlier unions in American history that lobbied for what we would consider the most basic levels of humanity in the work environment.

Suppose that it takes monopolistic unionism to force an employer to install safety equipment on machinery that has a significant risk of cutting off a worker's limb if he's unlucky or isn't careful. One could say that the workers know going into the job that it is dangerous and would then command higher market wages for it because of the extra danger. The higher equilibrium market wages should be in the quantity of what the loss of a limb costs a worker, discounted in the expected chance of this loss actually happening. This higher market wage would in turn induce the employer to install that extra safety machinery so that the job isn't as risky so that it doesn't command the risk premium in wages. But the fact that the safety equipment isn't installed suggests that the extra expense of the safety equipment is more than the risk premium the employer has to pay to workers so they'll take the job.

This reveals, then, that the workers would rather take the job with the extra risk of bodily disfigurement and the extra wages rather than the same job without the risk of bodily disfigurement but without the higher wages either. Coercing the employer to install the safety equipment is inefficient because now the employer, and by Adam Smith society also, has to devote more resources to the problem of worker disfigurement than is necessary, leading to marginal job losses and price increases of the final product, and the workers can't have the extra risk/extra wage job that they prefer.

I'm an amateur economic observer so I don't know if this logic is right, and if I'm wrong on something then somebody feel free to say something, but if this logic is right then it suggests that any regulation of the work environment, by the government or by concessions to monopolistic unions, is undesirable.

But how can this be? Aren't there laws protecting coal miners that have reduced lung cancer some umpteenth percent without too much costs being imposed? I don't know it just seems odd that workers have been getting screwed throughout history,enduring loss of life and limb and the most miserable and degraded work conditions, especially in earlier times like the 19th century, and yet economic logic says that there isn't anything that can or could have been done about it beyond having competition. By the way, sorry for the lack of paragraphs. I put them in as I'm writing but they're taken out somehow in the post preview.

Adam: We're all amateur observers, but you seem to be doing good at it because you are asking and thinking about good questions.

Interesting and informative posts by Becker and Posner, as always. I think I understand, roughly, the arguments against the unionism of today, the $30 per hour + health care unionism, but I'm curious whether the same negative aspects of unionism apply to earlier unions in American history that lobbied for what we would consider the most basic levels of humanity in the work environment.

........... for all of my life and the history I've read of before, the "negative aspects" seem to be discussed more than the positive aspects.

Suppose that it takes monopolistic unionism to force an employer to install safety equipment on machinery that has a significant risk of cutting off a worker's limb if he's unlucky or isn't careful. One could say that the workers know going into the job that it is dangerous and would then command higher market wages for it because of the extra danger. The higher equilibrium market wages should be in the quantity of what the loss of a limb costs a worker, discounted in the expected chance of this loss actually happening. This higher market wage would in turn induce the employer to install that extra safety machinery so that the job isn't as risky so that it doesn't command the risk premium in wages. But the fact that the safety equipment isn't installed suggests that the extra expense of the safety equipment is more than the risk premium the employer has to pay to workers so they'll take the job.

......... I don't think any union, then or now, operates on a monopolistic level and their managements are wise enough to know that if they kill the golden goose they too are out. While some might claim an industry such as shipbuilding was "killed" by the unions, but truth is we could never compete in a such a labor intensive industry once countries like S. Korea geared up after the War.

.....What DOES happen is that union safety guys are skilled in what they do and by working to protect the worker, also lower the premiums paid for Workmen's Comp and as you point out at the margins there are squabbles about how much safety at what cost. NO lone employee could know the dangers much less assess them for pay premiums or hold much sway with management on lowering the risks.

This reveals, then, that the workers would rather take the job with the extra risk of bodily disfigurement and the extra wages rather than the same job without the risk of bodily disfigurement but without the higher wages either. Coercing the employer to install the safety equipment is inefficient because now the employer, and by Adam Smith society also, has to devote more resources to the problem of worker disfigurement than is necessary, leading to marginal job losses and price increases of the final product, and the workers can't have the extra risk/extra wage job that they prefer.

I'm an amateur economic observer so I don't know if this logic is right, and if I'm wrong on something then somebody feel free to say something, but if this logic is right then it suggests that any regulation of the work environment, by the government or by concessions to monopolistic unions, is undesirable.

........... here you may be bringing up a broader topic than you suspect. One CAN live in such a society and I'd guess that China might be one today where one just takes their chances and rarely gets an adequate risk premium.

.......... We all too often discuss our economic system as if it were separate from our democracy. But it's not and should not be separate. Instead we as public policy makers decide how much "efficiency" we sacrifice for clean air, safer working conditions, not risking birth defects and the like.

But how can this be? Aren't there laws protecting coal miners that have reduced lung cancer some umpteenth percent without too much costs being imposed?

............... Exactly. And of course spending $1,000 for per miner for safety would seem very cheap for the guy who's taking the risk, but the tab of a million bucks is not all that welcome in the board room. Alone? you take what they offer, with the UMW you call the men out if it's unsafe.

I don't know it just seems odd that workers have been getting screwed throughout history,enduring loss of life and limb and the most miserable and degraded work conditions, especially in earlier times like the 19th century, and yet economic logic says that there isn't anything that can or could have been done about it beyond having competition.

.......... You've hit it just about right, though arguably feudalism hardly generated enough surplus that serfs would have been much better off had they gotten a fair share. As capitalism developed, capital is almost always much stronger than labor, especially generic unskilled or lower skilled labor. Perhaps Walmart is a good example today, they have created a very efficient "category killer" model of retailing that has generated tremendous growth and the company enjoys one of the fattest bottom lines in the history of the world, yet they are known for low pay and few benefits, while Costco is doing as well and pays much higher wages. Walmart employees should unionize, but it's a tough row to hoe as Walmart simply closes a unionized store and opens another a few miles away.

By the way, sorry for the lack of paragraphs. I put them in as I'm writing but they're taken out somehow in the post preview.

.. It came out fine........ you seem curious about these issues and might satisfy much of your curiousity by getting about any beginning econ text and kind of rummaging around in it; the principles are not difficult but neither are they intuitive. I hate to mention, for fear of insulting, but, if you are new to econ, the ".......... for Dummies" series has an Econ book which I've not read, but have been helped by others of those series. Jack

I really admire the way you approach to tackle this matter which became a global issue . I will be observing your future works and submitting my own views and results of my personal researches.

What is everyone talking about? Unions are fantastic for automakers...just look how they are helping Toyota, Honda, Hyundai, Kia...

Union membership in many industries in the United Kingdom is showing a decline, mainly because of the strict control of union disputes and strike action by the UK government.

Historically it was the conservative run government in the UK during the early 90's that introduced such rigid control of the unions, but that was continued by the labour lead (tony blair) government, which angered the unions considerable, because a vast amount of financial support is made to the labour party in the UK by the unions.

Many union members felt that the laws against union strike action meant that the UK government could not only control the public sector pay negotiations, but it also seemed as if they were on the side of the big private companies as well.

Over recent years this has meant that many union members have decided to vote with their feet and leave their unions, because it does not seem to make any difference whether they remain as a union member or not.

The unions in the UK in the past were able to make guarantees to their members with regard to the pension and healthcare arrangements with their employers, but not only have the unions lost their strength, many companies have not invested enough money in their pension funds to cover the requirements of their employees at retirement and many are also advising their employees to make private pension and healthcare arrangements for themselves.

Truth: Interesting theory. However it appears that Toyota has become the largest car mfg in the world by beating Ford, GM and C in markets where unions are not a factor.

BTW don't those marques you mention occupy most of the top ten slots for safety and fuel economy?

Geez now you have me recalling how "Detroit" put themselves "up the creek" back in the 70's fuel crisis too. And wasn't it clever of Honda to adopt the fuel efficient and clean CVCC technology WE developed to make our WWII tanks more efficient and give them a longer range for its reliable little cars? Honda really made some inroads, back then, when Detroit's response to higher air pollution standards was that of building rigs that hogged gas and wouldn't idle.

Oh, wait! There was another reason I bought that Honda in '75 over a Chevy Nova or C's "K" car and that was the excellent traction front wheel drive offered on the icy streets of Anchorage. Am I right to recall that in '75 only Toronado and perhaps one model of Cadillac offered us the many advantages of front wheel drive?

Geez, it's almost the same today, isn't it? In the mountainous or wintery areas of the US it seems as though the reliable Subaru all wheel drive rigs are as plentiful as Chevies and Ford once were. Have any of our "domestics" built anything to compete with the Suburu line? other than the spendy and not so reliable Jeeps or Jeep Eagles?

It's interesting to consider the line up of cars you mention, and I can't help wondering what role the UAW guys might have played in Detroit's decision to put most of its eggs in the top heavy, gas-hogging "SUV" basket?

Wait! I nearly left out one innovation that may justify American chest-thumping of "We're the best" and "Japan being good copy cats" and that was Iococca's mini-vans back in 1984. I bought one of those too. Remember? They too were built by our UAW guys and were sold very profitably by the millions. Perhaps because they filled a niche?

These days I kinda lean toward diesels as their inherent efficiency provides excellent mileage in town as well as at highway speeds, whereas hybrids with all their batteries and complicated technology shine only in the stop and go driving of the city. But, curiously? only VW offers a spunky, quiet and moderately priced diesel car and wagon that passes our air pollution standards and gives excellent fuel mileage.

Puzzling too is Detroit having bought many of the diesels for P/U over the last 20 years from companies such as Cummins and selling them as $5,000 upgrades over a gasoline engine, instead of mass producing diesels of their own that should not cost twice as much as the gas engines.

Is there something of a pattern of conceding these "niches" to others and then blaming the working people for their failures?

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I find it interesting that as private sector unions have declined in power and influence, public sector unions have become more powerful. Specifically, municipal workers unions and teachers unions in many cities have been very influential in stalling reform efforts that would provide the accountability sorely needed. So while globalization has been an important factor in the decline of private sector unions, this has had very little effect on public sector unions which have entrenched the status quo.

The entire labor union ‘industry’ has been in a dramatic decline in recent decades. But if we look into separate industries, we may find a different story, for example, the security market after the 9.11. (The Bureau of Labor Statistics estimates there will be nearly 1.5 million guards in the U.S. in 2010, up from 1.1 million in 2000. This industry also has high turn-over due to the low cost for maintaining security guards.) The labor unions in this industry are experiencing the fast or fastest growth now.

Like a businessman with great freedom under the umbrella of labor law exemption, the labor unions can do whatever as a strategic competitor: Choose the fast-growing or emerging industry with higher turn-over, merger the smaller labor unions, cooperate with the suppliers (employers) or take corporate campaign against those un-cooperators.

More words about the ‘partnership’ with employers, unlike the previous hostile attitude against employers, some labor unions are modernizing theirs strategic approaches to employers in order to take into account their competitive business needs. They try to increase the cost not only for one employer but for the majority of employers in the same industry. Through collective bargaining agreement with the majority but not only one employer, labor unions reduce union-employers’ concern about their increasing cost in the competitive market.

It is a little hard to say the above labor unions are still the pure labor unions. To gain more members from employers through a partnership means they have to sacrifice something too. Hopefully, the sacrifice is not the employee’s benefits or the union-employers’ competitor’s interest.

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