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Brooks Wilson's Economics Blog: Freeman on Unions

Friday, March 25, 2011

Freeman on Unions

I am under the general impression that unions are, on the whole, not good for an economy.  In “Barro on Public Employee Unions and Collective Bargaining,” I drew from Robert Barro’s article “Unions vs. the Right to Work” to express something close to my opinion.  Barro’s most significant paragraph read
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.
I am not a labor economist nor have I spent many hours poring over the economic literature on unions so I will my opinion with a little humility and offer a second, more favorable evidence-based opinion on the impact of unions.  Richard B. Freeman is labor economist who, with colleague James Medoff, wrote “What Do Unions Do?”  They come to the conclusion that unions are a net benefit to society.  Freeman explains their conclusions in “Richard B Freeman on Labour Unions.”
[We] looked at unions from two perspectives: first, what we called the monopoly face of union – unions acting as raisers of benefits for their members – and second, the voice face of unions, or how unions represented labour in the workplace and in the body politic, giving voice to people who otherwise wouldn’t have had much say. I think, in the long run, this is the stronger and more important face of unions.

The first thing unions do is to raise wages for working people, and that obviously benefits the working people. They also increase the kind of benefits that workers want. So, if workers want pensions, the unions negotiate for that. If workers want maternity leave, that’s what they bargain for…>

Because unions make working life better for workers, they lower turnover in unionised workplaces. Employers with unions traditionally have workers who stay longer and contribute to raising the productivity of the enterprise. Employers also get more credible information about what workers really want in the workplace, because the union representatives are democratically elected and they really speak for the workers. So a good, functioning union is a real positive…
Often, a union that exercise market power is a bad thing, but not always.  For example, professional athletes need a union to protect their interests from owners.  I might add that job protection through unions may allow union members to acquire skills that are specific to a certain employer and not easily transferable to another job.  This protection also increases productivity.  Public unions may be differently placed.  Freeman continues 
Public sector unions are different in an interesting way. Private sector unions can do very little to raise the demand for their services. But public sector unions can try to convince voters that we need more police and better education. By politicking, they can help public sector employers raise the funds to provide more and better public services. They have that unique attribute.
I might add that public officials have less incentive than private employers to limit union gains in wages, benefits and number of jobs available.


  1. I am also in agreement that unions as a whole are not great for the economy. Union members think that its fantastic up until they're all laid off because their company can't afford to stay open. In the unions that I have been familiar with what has eventually happened is union members made more and more demands on the company until the company no longer had the money to operate. You can't run a company based on what the employees want. It should matter instead on what is going to help the business grow. I'm not saying that it excuses companies that will not give raises or any incentive to work there, but I am saying that it matters greatly if the company is spending so much money to make their employees happy that they cannot take new ventures and risks that are necessary to get ahead. Unions also just tend to give employees a way to throw fits and act out about things that would normally get them fired. Why should they be allowed to receive high payment or fantastic benefits if they don't do nearly as much work?

  2. I believe unions had their purpose when they first began. When work conditions were truly dangerous and the pay was extremely low, unions were beneficial. Now they are a drain on companies. Neither the government or unions should be setting labor wages, the market should be. Take GM for example, the wages paid to a production line worker is very high not to mention the benefits and retirement that go along with it. It is no wonder they had financial problems.
    Unions should set wages in accordance with the market.

  3. I agree with Colter that unions served a great purpose when they first began. I am also from the north, where "union" isn't a bad word. The majority of my family works for unions - a nurse, a cop, and a construction worker. In Texas, I was married to a union worker (pipeline welder) so I don't have the negative connotation as some against unions. The benefits provided are more than just pay wages - insurance, the backing of an entity larger than yourself (such as malpractice insurance), and job availability, especially in the pipeline industry where contracts are awarded to the union. Workers pay their union dues and can choose to pay into voluntary funds for times of hardships where you can petition the fund for money for unforseen expenses, such as an on the job injury. That being said, I also know the negative side, when workers go on strike, the greed that is associated, etc. I think unions as a whole can take more time to find a better balance between what is good for the members and employees and what is good for the consumers.

  4. I find the geographical point an interesting one. Generally, a person who is raised in a region of the country with strong union ties tends to be pro union, while people raised in a right-to-work state like Texas tend to be weary of them. I think we could learn a lot from studies such as Mr. Barro’s geographical research. It would be interesting to see how these finding stand up over a long period of time and economical changes.