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Brooks Wilson's Economics Blog: Barro on Public Employee Unions and Collective Bargaining

Wednesday, March 9, 2011

Barro on Public Employee Unions and Collective Bargaining

The dispute in Wisconsin between Governor Walker and the teachers union has brought a lot of  political heat but little economic light with both sides claiming moral high ground but offering little evidence why that ground is theirs.  In “Unions vs. the Right to Work,” published in the Wall Street Journal, Robert Barro makes four contributions to the debate:  He offers a statement of economic theory concerning unions, a brief history of state law regarding collective bargaining, evidence of the impact of collective bargaining, and future battleground states between unions and state governments trying to impose fiscal discipline.  I will summarize Barro’s first two points and use quotations to summarize the remaining two.  The article is well worth reading.

Collective bargaining through unions gives its members market power in setting wages and for this reason was considered an antitrust violation.  As time passed, unions were granted exemptions from antitrust laws by the Clayton Antitrust Act of 1914 and the National Labor Relations Act of 1935.  Currently, 38 states allow union shops and 22 recognize the right to work. 

Barro presents evidence that unions impede economic growth.
There is evidence that right-to-work laws—or, more broadly, the pro-business policies offered by right-to-work states—matter for economic growth. In research published in 2000, economist Thomas Holmes of the University of Minnesota compared counties close to the border between states with and without right-to-work laws (thereby holding constant an array of factors related to geography and climate). He found that the cumulative growth of employment in manufacturing (the traditional area of union strength prior to the rise of public-employee unions) in the right-to-work states was 26 percentage points greater than that in the non-right-to-work states.
Barro predicts states that will witness battles over collective bargaining.
In general, the most likely arenas are states in which the governor and both houses of the state legislature are Republican (often because of the 2010 elections), and in which substantial rights for collective bargaining by public employees currently exist. This group includes Indiana, which has recently been as active as Wisconsin on labor issues; ironically, Indiana enacted a right-to-work law in 1957 but repealed it in 1965. Otherwise, my tentative list includes Michigan, Pennsylvania, Maine, Florida, Tennessee, Nebraska (with a nominally nonpartisan legislature), Kansas, Idaho, North Dakota and South Dakota.  


  1. Everanit Lopez9/3/11 7:08 PM

    I think collective bargain started out for a good cause. Now the members of these unions are taking advantage and are asking more than what the states need to provide.

  2. I think unions are a symptom of what is wrong in America today. I belong to a union but I very seldom agree with what unions do. They are somewhat like our federal government. They want more and more to give to its members. Like our federal government giving more and more entitlements to its citizens. The teachers in Wisconsin make close to double what the private sector workers are making. The private sector workers are the ones paying the teachers salaries. It sound like the teachersa unions and collective barganing are trying to kill 'the goose that laid the golden egg."

  3. I have yet to hear a good argument of why, in this day and age and with the amount of government regulation protecting American workers, labor unions continue to be relevant. As we have talked about in the past, with huge subsidies of American farmers, and artificially propped up market will eventually fail.

    I can't help but think about the higher than market pay rate, benefits and power that most Union members enjoy. Even with all of those benefits it never seems to be enough. At the turn of the century American workers needed strong union and governmental leadership to protect against human rights violations. One hundred years later it seems that the government, businesses and the American people need protection against some unions.

    Let's take the example of Mexicana Airlines. Last year Mexicana filed for bankruptcy stating that they had gone from posting multi-million dollar annual profits to multi-million dollar annual losses in 4 years. When the workers unionized 4 years ago they demanded pay and benefits many more times that of their American counterparts. Filing for bankruptcy angered employees who staged large angry protests in airports across Mexico. Mexicana stated that it was simply impossible to balance the books on what had been demanded and then offered to sell the entire airline to be owned and operated by the union for a price of one dollar. The union refused, knowing that it could not be done with current union demands.

    I'm not advocating throwing out unions all together, however, it seems to me that we have reached a place in history where laws are needed to be considered to control powerful unions unfairly propping up their job market.