First we have Wal-Mart promoting diversity and now conservatives giving unions some due. The item in question is a post, “Do Unions Increase Productivity?” on the Economist’s Free Exchange, which is generally fairly right-wing in orientation (although I’m sure they’d describe themselves as free marketeers). This post in turn was engendered by a post on UCLA law professor Professor Stephen Bainbridge’s blog (worth reading, BTW).
I’m sympathetic to unions, if nothing else as a check on corporate power (efforts by HMO doctors to unionize, if effective, would also be pro-consumer, since one of the doctors’ big beefs is the way the insurers intervene in their provision of service, for example, by allowing doctors only a prescribed number of minutes per patient). But it’s also fair to point out that unions do a lot of things that are more for the benefit the union than the workers they represent’ thus the rents they extract from companies may not in fact produce corresponding benefits to members. Efforts by the SEIU, the service workers’ union, to find win-win opportunities in the bargaining process and share gains, may also establish a model for other unions.
The Free Exchange piece also unwittingly admits to a problem. The education union is deservedly, a favorite target. But the argument made is that teachers’ pay isn’t very attractive for college graduates, hence, the teachers’ quality isn’t high enough to compensate for the work restrictions imposed by the union. Um, isn’t that an argument for paying teachers more?
From Free Exchange:
….unions often offer resistance to new work processes that might increase efficiency, and not just ones that would decrease labour demand….Unions also spend a lot of time trying to work in featherbedding provisions to their contracts—forcing companies to use more people than are needed for a given job….it should put a drag on average productivity….
But when conservative corporate law blogger Steven Bainbridge avers that, at the very least, unions do not decrease productivity, one must take the argument seriously.
To be sure, unions often do very good work. New York’s Local 3 (electricians) is widely known for the slow pace at which union jobs proceed, but also for the extremely high quality of their installations. This is not inconsistent with economic theory. Union electricians get paid more to do the same work, which predicts that they will get more skilled workers than non-union shops, and the workers will be more keen to keep their jobs. Plus the union, eager to prove that there is some sort of value proposition to employing their workers, enforces a higher standard on its members….
One possibility is that, to the extent that unions do increase productivity, they do so by forcing less competent workers out of the labour market, because they are not worth union pay. In teaching, where the average wages are nothing special for the target, college educated applicant pool, this doesn’t work. Indeed, by compressing wages, it makes the problem worse….
Some thoughts on markets where unions will produce higher productivity:
1. There are opportunities for deploying capital to replace low-skilled labour
2. The union wage is higher than the average prevailing wage for the workers’ cognitive endowments and/or educational level
3. There are significant transaction costs to finding and retaining labour, such as the construction trades, where it is more efficient to call the union labour hall and tell them to send over 50 guys than hire them individually
4. The work easily lends itself to classification and regularisation
5. Productivity is easily measured
Presumably if the good professor is correct, those higher productivity shops offset the lower productivity of union shops elsewhere, producing, on average, no result.