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Sunday, September 30, 2007

"A New Road for American Unionism"

Clive Crook on unions:

A new road for American unionism, by Clive Crook, Commentary, Financial Times (free): The grand General Motors settlement ... may or may not be a turning-point for America’s car industry. But it certainly draws attention to the role that unions still play in the US economy. The plight of the country’s carmakers ... hardly makes the case for unionism, you might think. But many American workers see things differently; many politicians too.

The US has an unusually low rate of union membership. Barely 10 per cent of its workers are members (and as few as 7 per cent in the private sector), down from about 35 per cent in the 1950s. Whether you see this as a strength or a weakness most likely depends on whether you think the US economy is succeeding or failing. Weak unions make for flexibility and rapid growth in productivity, the engines of US economic pre-eminence. To see what strong unions do for industrial competitiveness, look at GM. But weak unions also squeeze wages at the bottom, worsen inequality and create economic insecurity, the issues that most preoccupy the country and its politicians. ...

American workers have often been cool towards unions. In the mid-1990s polls generally found that only about a third of non-union workers wanted to join one. In the past few years, the proportion has risen to more than half. The Democrats’ beefed-up pro-union line is faithfully reflecting this shift in mood. Both spring from the economic strains and insecurity of which so many Americans complain.

But is a recovery of union power a good answer to those problems? GM notwithstanding, the idea should not be dismissed out of hand. Certainly, enough of the wrong kind of union activity can wreck an economy. Britain made that clear in the 1960s and 1970s. But... Unions and works councils in Germany and Japan have not impoverished those countries. Unions do raise wages, sympathetic economists point out. When they do, it is usually in industries where product markets are not very competitive and there is a rent for managers to share with labour. When product markets are competitive, there is no rent to divide: the effect of unions on wages is then typically smaller and no economic harm is done.

Pro-union economists also point to evidence that productivity may actually be higher when a union is present... [But b]ecause of higher-than-competitive wages, employment is lower than it would have been. The insiders gain.... But outsiders are worse off.

As a rule, though, unions are bad at accommodating disruptive change – the very thing the US does best. The weakness of the country’s unions is surely no coincidence: they are weak because the economy is dynamic, and vice versa. American unionism has modernised lately, but much of what remains is still political and adversarial. Its body language says, we are out to get the bosses. ... Its agenda is anti-competitive and stridently protectionist, and consequently anti-growth.

The late Rudiger Dornbusch, ever a fount of economic wisdom, was fond of the maxim, protect the worker not the job. ... But if workers, not jobs, are to be protected, governments do need to step in. The list is familiar, and has a strongly Democratic flavour: more generous employment subsidies for the low-paid, high-quality education, universal health insurance and help for workers who fall victim to restructuring. Executing that lot is plenty for Democrats to be getting on with...

I've said that:

The union question is a hard one for me. I don't believe that the degree of market power workers and firms bring to the bargaining table is in balance. "Superstars" at the upper end of the income distribution have too much market power, and firms have too much market power at the lower end of the income distribution, where the lower end starts at fairly high levels of income.

Unions are one potential answer for workers at the lower end of the income distribution, but is a return to unions the best solution to the market power imbalance? Should we return to the past, or should we try to use the changing political landscape as an opportunity to build better institutions for both workers and firms, institutions that offer workers the same degree of bargaining power that unions provide, and the the same degree of income, health, and retirement security, but do so more efficiently? We already know how unions work, pretty much, but can we do better?

I don't think the competitive pressures of a global economy allow a return to a system where economic protection for workers is provided by the firms they work for, and because of that I believe that many of these protections will need to be provided by the government. Thus, for unions to be effective they will need to evolve into more effective political bodies capable of pressuring politicians for change on behalf of workers, and less concerned with the individual firm-worker relationship.

I think there was a change somewhere in the 1980s and 1990s that plays into this. There was a time when the benefits that unions were able to gain for workers were used by other workers, both union and non-union, as bargaining chips in negotiations. The question was, essentially, "They have health and retirement benefits, so why can't I have them too?" The public sector in particular played a key role in providing these examples, but so did GM and other such firms.

But the question seemed to change beginning in the late 1980s, and again public sector employees played a lead role. Instead of asking why can't I have the same benefits as they have, workers began to ask "Why should I pay for your benefits with my heard earned taxes when I don't have them myself?" And even among private sector employees, the idea that union workers made gains that benefited all workers seemed to fall out of favor. The gains that unionized workers made were no longer seen as something other workers could argue for and attain themselves.

My point is that there came a point when some sort of implicit solidarity among workers was broken. Instead of a gain for one set of workers being seen as a victory for all, for setting a new standard that all workers could argue for and attain, workers began to see themselves in competition. I'm not sure what caused this change, globalization, a changing political environment, or what, but the change did not benefit workers as a group.

But change seems to be in the air again and there are hints of workers seeing themselves as part of a larger group with common interests. Whether unions can capitalize on this and evolve into new institutions capable of effectively representing worker interests in the political arena remains to be seen. But I do think the best hope for workers is to become a more unified political force than they have been in recent years.

    Posted by on Sunday, September 30, 2007 at 01:08 PM in Economics, Politics, Unemployment | Permalink  TrackBack (0)  Comments (31)

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