David R. Henderson  

Effect of Unions

This Changes Nothing... The Entitlement Outlook...

The discussion of the misnamed Employee Freedom of Choice Act is taking place at the local level as well as nationally. In our local newspaper, Chris Fitz wrote a pro-EFCA letter to which I responded. My response is below:

"Let's give him a fair trial and then hang him." That's the essence of what Chris Fitz wrote in his May 8 letter endorsing the misnamed Employee Freedom of Choice Act (EFCA). Fitz says he wants the Board of Supervisors to have a "full public discussion" of the federal proposal to change the law on unions. Once the board has discussed it, he writes, it can endorse EFCA. What kind of discussion is that? If everyone knows at the beginning how the discussion will turn out, it's not much of a discussion.
So let me start a real discussion. Fitz claims that the added power that EFCA would give to unions would "build wages and benefits among workers." But many economists who have studied the monopoly power of unions would disagree. Economists agree that unions use their monopoly power to increase wages. But at these higher wages, employers employ fewer people. The workers who lose their jobs or don't get hired in the first place move to the nonunion sector, where the increased supply causes nonunion wages to fall.
Most of the gains of union workers are at the expense of nonunion workers.

For more on the union wage premium, see Morgan Reynolds, "Labor Unions," and the references therein.

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CATEGORIES: Labor Market

COMMENTS (5 to date)
Rimfax writes:

Didn't you just walk into his trap of "then ALL workers should be union workers"?

I think that you would be better served to show how unions holding government-enforced labor monopolies damage their industries and their economies. That universal unionization wouldn't resemble a worker's paradise as much as it would teams of cannibal rats on a sinking ship. (Please pardon my ineloquent rhetoric.)

David R. Henderson writes:

Dear Rimfax,
It's the right question to ask, but no, I didn't fall into the trap. Instead, I bumped up against the newspaper's 200-word limit for letters.
Assume all workers are unionized and each union raises wages above what they would otherwise have been. Now the analytic framework to use is not the demand curve for labor at the industry level but, rather, the overall demand for labor. This, too, will be downward-sloping. So at a higher wage, fewer people are employed. The shorthand for this is spelled E-U-R-O-P-E.

Richard A. writes:

The market mechanism that protects labor is the labor shortage. Anytime an employer gripes that they have a labor shortage, they are admitting that they are underpaying their employees.

Paul Eich writes:

I find people listen more when I can make a case that unions hurt workers. They are wired to defend all of the usual attacks on unions, but don't always expect to hear how bad they are for those that unions are intended to serve. This has provided a great way to talk about that topic, thanks David. Paul

Asa Kim writes:

I've been a member of the Masters, Mates, and Pilots Union (affiliated with the ILA) and I've also been a supervisor for a company managing union personnel.

After both experiences, I can tell you first-hand that unions are an inefficiency to businesses and to the personnel themselves,... and looks like to non-union people as well...

The problem is that unions focus on serving themselves at the expense of the businesses products and services, rather than for the good of the company. This results in a counterproductive internal control system!

Thanks for bringing this up Dave!


* I'm no longer in either industry and couldn't be happier

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