Thursday, December 13, 2007

unions "less important than we think"?

From Morton Marcus (hat tip: News-Tribune)...

I think he means that unions cause less damage than is commonly thought. Assuming competitive markets, the flip side of that is that they don't yield as much benefit as their proponents believe either. (This is similar to policies like the minimum wage: if the wage floor increases wages significantly above equilibrium, it will yield benefits and costs for the affected population; if not, it won't!)

Uncle Uriah Marcus visited us on Thanksgiving. It took over a week to recover. He blames "the @#%$# unions" for most of our state's woes. Uncle Uriah asserts "them big unions scares businesses away from Indiannie."

A sample of his views:

High property taxes: It's the teachers' union fault because they keep pushing up their earnings and reducing their responsibility.

Well, it does contribute somewhat. We know that 1/4 of the recent 24% increase in property taxes connects to increased local spending-- and much of that is on schools, and some part of that is connected to that interest group. States with prevailing wage laws have it worse-- unions support laws that reduce their competition, increase their effective wages, and increase taxes.

From there, Marcus points to a litany of other (at most) minor issues-- before pointing to the political impact of public sector unions.

Government: Union members vote as they are told to, as a block, and thus can destroy or make any candidate in any election, anywhere in the state.

Well, that's a bit of an exaggeration. But beyond that, there is some/much truth to the claim: it is politically risky to run counter to the desires of a potent special interest group! Depending on the state/region-- and especially within local politics where fire and police interests are so strong-- this can be anything from a modest to an overwhelming issue.

What do unions bring with them? One thing is a questionable certainty: union members earn more than their non-unionized comrades. In 2006, the premium earned by union members was 30 percent over those not in unions. But that may not be comparing comparable jobs.

It may be that the specific industry is more important than the presence or absence of unions in determining wages. For a fair comparison, we'd have to have data for union and non-union workers doing the same jobs, in the same places. Rather than unions scaring businesses from Indiana, may be the firms already here which pay high wages discourage new entrants.

It should be noted that Marcus is careful here with data that are often abused.

What's the bottom line?

Unions-- as labor market cartels-- are good for those who supply labor (workers) in those markets. But as with other cartels-- especially when they have a legislative agenda to benefit themselves at the expense of others-- there are significant social/economic costs for consumers, taxpayers, and other workers. In particular, at the end of the day, unions are pro-union not pro-worker per se.

Are unions a primary explanation for economic growth or its absence? No. But how can artificially higher wages and taxes be a good thing for an economy? The larger issue is that pro-union legislation is typically correlated with other policies which are harmful to an economy. (I'll blog on this, based on a recent WSJ article, shortly.)


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