Will the Decline in Union Membership be Reversed? Becker

Unions strongly supported President Obama during the presidential race, and naturally they expect some pay back. A first step would be passage of the so-called Employee Free Choice Act that was supported by both President Obama and Vice-President Biden when they were in the Senate. This act would provide, among some other things discussed by Posner, public voting by employees on whether they want to form a union. I do not like public voting since workers might then be intimidated into voting in favor (or against) a union. Secret voting gives a truer picture of worker attitudes toward unions. While public voting and other pro-union legislation would tend to increase the number of union members, the economic and social forces are aligned against any major comeback by unions. Union membership has been declining ever since 1954 when it peaked at 28% of total employment -unions' share of nonagricultural employment was then 35 %. During the subsequent half century the union share declined more or less continuously, and now is only about 11%. A mere 7% of private sector employees are unionized. The one bright spot in the union picture is the growth in their share of government employees to about 37%. The overall decline in union membership is seen also from its sharp decline with the age of individuals: the union share of workers is highest among those aged 45-64 at almost 15%, which significantly exceeds the 11% for workers aged 25-44, and the only 5% union share for workers under age 25. Older workers are more likely to be in declining more unionized industries,while younger workers are in the newer less unionized sectors. The development of what is essentially a non-union private sector of the American economy is due to basic economic and social forces, not to the politics of Congress and the President, for union membership declined under Democratic as well as Republican administrations. The decline of jobs in manufacturing and in heavy industries, like steel and autos, clearly contributed to the overall decline in unionization since large manufacturing companies have been more unionized than other companies. The shift of jobs to smaller service-sector firms has also had a big impact since unions have been unimportant in these firms; also significant was the deregulation of the communications, transportation and utilities industries. The degree of unionization within each private sector has also fallen greatly, as can be seen from the rapid growth of non-union workers in the automobile sector, particularly among foreign carmakers who produce in the South. For example, membership in the United Automobile Workers union (the UAW) has declined by more than one-third since 1970 as a much larger number of cars were imported from Japan and other countries, and as foreign companies set up mainly non-union plants in the Southern part of the US. The growth of imports and the shift of employment overseas also have adversely affected the power of unions since international competition from cheaper producers has eroded the ability of unions to raise earnings of their members. In the early days of the unionization movement, unions sometimes increased worker security by providing health and retirement benefits and payments to unemployed union members, and often enforced fair and non-discriminatory rules about discharge and promotions. Non-union companies and governments are also now offering health and retirement benefits, and they have codified their personnel relations, which also considerably reduced the advantages of being in a union. These forces apply to other developed countries as well, and many of them, especially Anglo-Saxon countries like Great Britain and Canada, also have had large declines in union membership. The declines in union numbers is much less in some countries, like Sweden and Norway, where governments enforce large scale bargaining between unions and employer confederations. But even in these countries, globalization has severely constrained the economic power of unions. From the 1930s to the 1960s, unions enjoyed considerable popularity in public opinion. I remember being surprised when a graduate student to hear the arguments by Milton Friedman and some of my other teachers that unions were often monopolies that benefited their members at the expense mainly of other workers. As various arguments hostile to unions became more common during the past half-century, public opinion shifted against unions. Unions are considered too selfish, sometimes corrupt, as with the well-publicized troubles of the teamsters union, and they are no longer believed considered necessary to protect employee interests. Given this radical shift in public opinion, and the fundamental economic and social forces that contributed to the decline of unions, it is unlikely that the new Congress and new President would push for radical pro-union legislation, despite the impressive victory in the past election of the Democratic Party, and the strong financial and other support the larger unions gave to this party.

Comments

[Jack]

I wonder if Prof Becker is committing to Friedman's beliefs, or just tossed this one in gratuitously?

"I remember being surprised when a graduate student to hear the arguments by Milton Friedman and some of my other teachers that unions were often monopolies that benefited their members at the expense mainly of other workers."

No mention, it seems, of the individual going up against the far better organized oligopolies such as Walmart and the like, alone?

No mention of productivity gains greatly outpacing median wages that would clearly indicate some form of leveling the "playing field?"

Nothing about those barely below median HH income ($50K) earning enough to maintain even a modest living standard??

No speculation as to how our current economy can prosper as rising costs eat what little discretionary income those of median income and below once had???

"and they have codified their personnel relations, which also considerably reduced the advantages of being in a union."

........ "codified" eh? Handy!

[M]

While I agree with almost everything Professor Becker says substantively, I must questions his dismissal of the public's perception of unions. Perhaps, if unions were very unpopular our current President wouldn't have pressed so hard for pro-union measures during the campaign. I strongly believe that pro-union sentiment thrives amongst politicians because it is quite easy to sell such sentiment as "looking out for working folks" or "defending the middle class." In fact, the average middle class voter would respond well to such overtures despite the negative publicity received by unions such as the Teamsters.

[Goose The Tax Dog]

Another factor that might be mentioned is the shift from labor-intensive to labor-efficient production technologies. Fewer workers are needed to produce a car in 2009 than were needed in 1970, and one might expect this to have cut into the relevance and clout of organized labor.

[Cato]

Don't mistake political pandering for an even moderately well-functioning proxy for national popularity. Political pandering is designed to do one thing (in the context of a campign): garner votes. Influence, organization, issue-salience, resources, possession of incriminating evidence: these are the things for which a politician's pandering could be seen as a functioning proxy. 'Popularity' is, at best, several degrees removed from any of those items. In short, that the campaigns make their requisite stops at the tired union headquarters throughout the country (often only days apart from their requisite stops at e.g. The Chicago Club, where they denounce 'those infernal unions!') reflects but little upon general attitudes toward unions.

[Jack]

M points out: "Perhaps, if unions were very unpopular our current President wouldn't have pressed so hard for pro-union measures during the campaign." I'd agree.

The politics surrounding the words "strengthening the unions" and the subjects popularity is likely related more to the frustrating exhibited by the divergence between productivity and wage gains. As the graph at the bottom of "The End of the American Dream" indicates even college educated employees are not making any significant gains.

http://news.bbc.co.uk/2/hi/business/5303590.stm

For many of the reasons/excuses both Profs Becker and Posner cobble together it may not be traditional sector or company unions or even newer models such as SEIU, but one thing is sure that pinched by all that has taken place there will be tremendous political pressure to "make it right" for more employees.

If not addressed in the private sector I'd predict the problem will be addressed in the public sphere via more "socialistic" additions; we're already seeing the move for more EITC, and medical care along with dealing with pensions could easily mean that taxation would be one of the means by which falling wages and income inequality will be addressed.

I'm not much of a fan of a scenario in which wages continue to diverge from productivity followed by all sorts of patchwork such as expanding EITC, and a host of "low income" subsidies end up being the "middle class" norm while fewer and fewer very wealthy individuals pay higher and higher taxes to fund the patch job thus creating a society in which most feel they are dependent on government transfers while those at the top lament they are paying for all the transfers. We're on a very unhealthy course.

As the article concludes: "So for politicians of all parties, trying to understand how the average family can gain a greater share in future prosperity may prove one of the biggest electoral challenges of the year." Indeed, and for many years to come.

[Jim]

It is hard to decide which is more responsible for the decline in the US manufacturing base, the unions or the management. I suspect that both were greedy and shortsighted. But I digress; We all know that advocate organizations live on and on for their own selfish reasons long after there is no need for their function. I wonder if the unions fall into that category

[rpjohnston]

god help us if this is passed

[Richard]

It is hard to decide which is more responsible for the decline in the US manufacturing base, the unions or the management. I suspect that both were greedy and shortsighted.

When unions go on strike, an employer is faced with the following choice: 1) pay wages that are higher than are justified by supply and demand in the labor market; 0r 2) shut down operations. If they follow course #1, that will eventually lead to course #2, anyway. So how can you call management "greedy", when that happens?

No mention, it seems, of the individual going up against the far better organized oligopolies such as Walmart and the like, alone?

The individual has a right to withhold his or her services from one employer, and go to work for another. All an employer such as WalMart can do, when it needs to fill a certain job in a certain store, is to pay enough, so that someone takes/keeps a job in their store, rather than going elsewhere. I don't see what a union can bring to that situation, that the law of supply and demand does not already provide to such an employee.

[Jim]

Richard,

It should be very simple for management to evaluate the lives of their employees and to be concerned that they can live decent lives along with their families. To do otherwise would seem to indicate that they are trying to maximize profits at the expense of their workers. That might be good MBA stuff but it doesn't work in the long run. After all, what is "an economy" for if not to provide the people in it the opportunity to sustain themselves for the purpose of "living". When there are managers who cannot comprehend that and believe that the ultimate end is to please the board abd stockholders each month and don't have the cajones to say otherwise, you get unions who make the job much tougher and force on management what it could have done without the coercion, not to mention the government idiots getting involved. It is very difficult for the politicians to intervene if I am running my businees in an enlightened and generous way.

[Jack]

Richard sez: "The individual has a right to withhold his or her services from one employer, and go to work for another. All an employer such as WalMart can do, when it needs to fill a certain job in a certain store, is to pay enough, so that someone takes/keeps a job in their store, rather than going elsewhere. I don't see what a union can bring to that situation, that the law of supply and demand does not already provide to such an employee."

However the individual has no effect on the market, and a closer look at "supply and demand" will show that the price of generic labor and commodities will fall below the costs of production w/o intervention. That is why all advanced nations have a minimum wage law.

In addition, it's not a "free market" a we've the Gspans and Bernankes at the big valve in DC charged with tightening it down whenever LOW end wages threaten to rise. You see CEO and upper end wages aren't seen as "inflationary" and have risen hundreds of percents while median and low wages have remained flat or fallen. Kinda sounds like the last gilded age/depression that spawned the unions?

As Jim indicates, for the most part the employees generate the wealth and should participate in the profits, and, of course, the economy can not fly on the one wing of wealth at the top.

At the bottom of this article is a graph showing the divergence of wages from productivity gains, is there anyone here who can explain why "supply and demand" has not brought wages in line with productivity? Or what will bring these lines back in line?

http://news.bbc.co.uk/2/hi/business/5303590.stm

[Greg]

Today, Caterpillar announced it is slashing 20,000 jobs from its workforce. One wonders how many of those jobs could have been saved if, for example, Congress had passed the CAFTA, and Caterpillar was allowed access to Central American markets. Instead, union-led opposition forced the Democrats to kill passage of the bill. Speaker Pelosi tied herself into rhetorical knots attempting to rationalize such a short-sighted decision. Union power and political influence is a deadly, job-killing machine.

[Jack]

Greg....... I too had been wondering why CAFTA was not a slam dunk but the reasons seem fairly complex and perhaps not a hit in the CAFTA nations and the resistance here not likely to be only that of "the unions".

http://lasolidarity.org/CAFTA_report/CAFTAYear2_monitoring_eng.pdf

Apparently NAFTA pushed over a million Mexican farmers off their land as our subsidized corn was substituted, then as we further subsidized putting corn into the fuel tanks of our gas guzzlers prices soared to the point that tortillas became unaffordable.

I saw a report on Haiti some time ago and while it would seem like an advantage that Tyson chicken and our, heavily subsidized, powdered milk were cheaply available but their own dairy and poultry businesses were crushed. Cheaper goods but higher unemployment. One asked "What is our niche?" There was no answer.

Ha! with the US flooded with cheaply available goods but suffering from $800 billion trade deficits, I'm wondering more than a bit about "our niche" as well.

Perhaps trade agreements, like business agreements, are better arranged bilaterally instead of as multi-nation umbrellas? Don't know........ but wondering.

[Jack]

The Union Way Up
Monday 26 January 2009
by: Robert B. Reich, The Los Angeles Times

America and its faltering economy need unions to restore prosperity to the middle class.

Why is this recession so deep, and what can be done to reverse it?

Hint: Go back about 50 years, when America's middle class was expanding and the economy was soaring. Paychecks were big enough to allow us to buy all the goods and services we produced. It was a virtuous circle. Good pay meant more purchases, and more purchases meant more jobs.

At the center of this virtuous circle were unions. In 1955, more than a third of working Americans belonged to one. Unions gave them the bargaining leverage they needed to get the paychecks that kept the economy going. So many Americans were unionized that wage agreements spilled over to nonunionized workplaces as well. Employers knew they had to match union wages to compete for workers and to recruit the best ones.

Fast forward to a new century. Now, fewer than 8% of private-sector workers are unionized. Corporate opponents argue that Americans no longer want unions. But public opinion surveys, such as a comprehensive poll that Peter D. Hart Research Associates conducted in 2006, suggest that a majority of workers would like to have a union to bargain for better wages, benefits and working conditions. So there must be some other reason for this dramatic decline.

But put that question aside for a moment. One point is clear: Smaller numbers of unionized workers mean less bargaining power, and less bargaining power results in lower wages.

It's no wonder middle-class incomes were dropping even before the recession. As our economy grew between 2001 and the start of 2007, most Americans didn't share in the prosperity. By the time the recession began last year, according to an Economic Policy Institute study, the median income of households headed by those under age 65 was below what it was in 2000.

Typical families kept buying only by going into debt. This was possible as long as the housing bubble expanded. Home-equity loans and refinancing made up for declining paychecks. But that's over. American families no longer have the purchasing power to keep the economy going. Lower paychecks, or no paychecks at all, mean fewer purchases, and fewer purchases mean fewer jobs.

The way to get the economy back on track is to boost the purchasing power of the middle class. One major way to do this is to expand the percentage of working Americans in unions.

Tax rebates won't work because they don't permanently raise wages. Most families used the rebate last year to pay off debt - not a bad thing, but it doesn't keep the virtuous circle running.

Bank bailouts won't work either. Businesses won't borrow to expand without consumers to buy their goods and services. And Americans themselves can't borrow when they're losing their jobs and their incomes are dropping.

Tax cuts for working families, as President Obama intends, can do more to help because they extend over time. But only higher wages and benefits for the middle class will have a lasting effect.

Unions matter in this equation. According to the Department of Labor, workers in unions earn 30% higher wages - taking home $863 a week, compared with $663 for the typical nonunion worker - and are 59% more likely to have employer-provided health insurance than their nonunion counterparts.

Examples abound. In 2007, nearly 12,000 janitors in Providence, R.I., New Hampshire and Boston, represented by the Service Employees International Union, won a contract that raised their wages to $16 an hour, guaranteed more work hours and provided family health insurance. In an industry typically staffed by part-time workers with a high turnover rate, a union contract provided janitors with full-time, sustainable jobs that they could count on to raise their families' - and their communities' - standard of living.

In August, 65,000 Verizon workers, represented by the Communications Workers of America, won wage increases totaling nearly 11% and converted temporary jobs to full-time status. Not only did the settlement preserve fully paid healthcare premiums for all active and retired unionized employees, but Verizon also agreed to provide $2 million a year to fund a collaborative campaign with its unions to achieve meaningful national healthcare reform.

Although America and its economy need unions, it's become nearly impossible for employees to form one. The Hart poll I cited tells us that 57 million workers would want to be in a union if they could have one. But those who try to form a union, according to researchers at MIT, have only about a 1 in 5 chance of successfully doing so.

The reason? Most of the time, employees who want to form a union are threatened and intimidated by their employers. And all too often, if they don't heed the warnings, they're fired, even though that's illegal. I saw this when I was secretary of Labor over a decade ago. We tried to penalize employers that broke the law, but the fines are minuscule. Too many employers consider them a cost of doing business.

This isn't right. The most important feature of the Employee Free Choice Act, which will be considered by the just-seated 111th Congress, toughens penalties against companies that violate their workers' rights. The sooner it's enacted, the better - for U.S. workers and for the U.S. economy.

The American middle class isn't looking for a bailout or a handout. Most people just want a chance to share in the success of the companies they help to prosper. Making it easier for all Americans to form unions would give the middle class the bargaining power it needs for better wages and benefits. And a strong and prosperous middle class is necessary if our economy is to succeed.

[lower back pain]

ou see CEO and upper end wages aren't seen as "inflationary" and have risen hundreds of percents while median and low wages have remained flat or fallen. Kinda sounds like the last gilded age/depression that spawned the unions?