Unions and the Obama Administration-Becker

Are the Democratic-controlled Congress and President Obama very much pro union? Unquestionably. Do the economic effects of unions on the welfare of workers as a whole justify that union bias? No. Has their pro-union orientation seriously retarded the recovery from the recession? Probably. The following discussion tries to justify these answers.

The pro-union orientation has been demonstrated in many ways. Posner gives a few examples, and I will add some more. The automobile industry would not have been bailed out so generously were it not for the political power of the United Auto Workers. The alternative would likely have been bankruptcy without a federal bailout, which I favored. Bankruptcy without government involvement would have cut health and other fringe benefits of autoworkers more sharply, and might have led to more plant closings in the industry. It would also, however, have led to a more robust recovery of the surviving American auto companies, and possibly even in the longer run raised employment in auto plants located not in the South because wages and fringe benefits would then have been lower at these plants.

An important example this past week offers another illustration of the pro union orientation. For the first time the US has cited for labor violations a country, Guatemala, that is a free trade partner with the US. That the American government has the presumption to interfere in the labor policies of another country is disturbing in itself. All commentators agree, however, that it was done at the urging of American unions. This was likely an attempt to reduce the competition of goods and services from Guatemala and especially from other free trade partners-such as Mexico-for goods made by unionized American companies.

Congress tried to pass, and President Obama supported, The Employee Free Choice Act to eliminate private elections for union certification. Fortunately, enough moderate Democrats and Republicans have been able to beat back these proposals, and they have been shelved, perhaps only temporarily.

Economists distinguish competitive from monopoly unions. A competitive union system, like Japan’s, has unions at companies when the employees of these companies prefer to bargain collectively. However, competitive unionism does not allow a single union to control the majority of companies in the same industry, which is monopoly unionism. The US typically has monopoly unions, such as the steelworkers union, autoworkers union, or service workers union, but a long time ago the Clayton Act of 1914 explicitly exempted unions from anti-trust laws under most circumstances.

Monopoly unions do tend to raise the earnings and fringe benefits of workers in the industries where they exist. This is seen from the ridiculously high fringe benefits that the United Auto Workers unions squeezed out of American auto companies during the days when they were profitable but not well managed. Higher union earnings come partly at the expense of the profits of the industries unionized, but also at the expense of lower employment than would have occurred with more competitive wages and other benefits. The prospective employees priced out of jobs in unionized sectors seek employment in other sectors, which lowers the earnings of workers in these latter sectors. The net effect is a misallocation of labor compared to an efficient allocation, and possibly even a reduction in the income received by workers as a whole, including workers in the non-union sectors.

During this recession, wages did fall for many workers, but mainly among non-union workers. A telling example is what happened at many state and local governments that are in serious fiscal difficulties. Since wages of their union workers have been set by contract, they were forced primarily to cut wages of administrative staff and other non-union employees. For example, the state of Illinois has the largest fiscal deficit as a percent of its budget of any state. It required many of its high level non-union employees to take 24 unpaid leave days, or about a 9% cut in their salaries, since the state government cannot touch the wages of their many unionized employees.

As Posner indicates, only about 7% of all non-government American workers are unionized, compared to over 35% of workers at federal, state, and local governments. During the past 40 years, the fraction of unionized civilian workers fell steeply-and not only in the United States- while the unionization of government workers fell only a little. It might seem unlikely that workers which comprise only about15% of the total labor force would have a major effect on the speed of the recovery from the recession. 

The real threat to a robust recovery on the labor side has come from employer and entrepreneurial fears that once the economic environment improves, a Democratic Congress and administration will pass pro-union and other pro-worker legislation that will raise the cost of doing business and cut profits. In this way the obvious pro-union-pro-worker bias of the present government has contributed to a slower recovery, especially in labor markets. This helps explain the depressingly slow decline in unemployment rates and in the number of workers who have given up looking for jobs.

 

 

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Unions have brought people through rough economies before so I can see where you are basing your position. I am not sure that is the answer though. Many union workers are unemployed and looking for work as well.

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