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.