Unions and unemployment
The effect of organised labour

Does unionisation lead to higher unemployment?

American politics
Democracy in America

THIS response to Adam Ozimek comes two weeks late, which is pathetic. My excuse is that the post I wanted to write after reading his posts responding to me was one that I wasn't sure fell into an acceptable mode of blog posting. But what the hey, here goes: Mr Ozimek's arguments are pretty convincing, and I no longer entirely buy some of the arguments I bought before. I'm considerably more sceptical than I was before reading his posts that one could have more unionisation and higher wages in a sector without having lower employment in that sector. But I'm not sure I believe that the tradeoff is so inevitable that anyone who says "wages should be higher" must also acknowledge they are arguing "employment should be lower". And here's the part that might not pass the standards of the Blogger Ethical Review Board: I don't have much evidence to counter Mr Ozimek's argument. And I don't have the time to go looking for it. I'm just further towards Mr Ozimek's side of a grey indeterminate zone of uncertainty than I was when we started out.

To recap: Mr Ozimek's initial post argued essentially that when liberals say "wages should be higher" for workers in some sector, they should acknowledge that there's a tradeoff involved, and that arguing that wages should be higher than market rates means arguing for lower employment. I responded that as I understood it, the liberal argument was that for various reasons, corporations have been taking an increasing slice of overall national income as profit over the past 50 years, with less and less going to wages, that this was contributing to low consumer demand and increasing household debt, and that the ultimate result was lower growth and higher unemployment. Mr Ozimek responded, first, that there's no evidence that the declining share of wages in national income is related to declining unionisation; it seems to vary independently. Second, there's general agreement that unionisation in a sector depresses long-term investment in firms in that sector, that unionised firms are less adaptive than non-unionised ones, and that this is what has led to declining unionisation. I'd actually read the Barry Hirsch paper Mr Ozimek cites here, though not Mr Hirsch's book, so I recognised that finding. But as we so often do, I tended to more clearly remember the parts of the paper that fit with my predilections (unions can improve worker voice and participation, raising productivity) rather than the parts that undermined them.

I'm not going to go through Mr Ozimek's posts in detail because I don't have much to add to them. They're really good, and you should go read them. And if I were entirely convinced, I might still be able to reasonably support certain kinds of unions (the participatory German and Japanese kind, not so much the traditionally confrontational American kind) because they increase workers' voice and participation. Or I might be able reasonably to support unions as a political force representing the interests of average salaried workers in Washington, as Jacob Hacker and Paul Pierson do. But on Mr Ozimek's take, it's not reasonable to support unions without acknowledging that they lower employment.

In contrast to his well-organised and well-substantiated arguments, let me present two lumpy, poorly grounded reasons why I still don't entirely buy it. First of all, we have the employment performance of relatively unionised northern European economies in the Great Recession. Most northern European countries enshrine employment regulations which the average American would consider insane; it's absurdly difficult to fire workers for reasons of mere economic efficiency or mediocre performance. In normal times, this means European companies hesitate to hire people and move sluggishly to respond to opportunities and hazards. However, in the Great Recession, these economies preserved tremendous numbers of jobs that, under liberal American employment rules, would have disappeared. Unionisation in Germany, for example, seems to have enhanced middle-class incomes without leading to higher unemployment, says David Leonhardt:


The top 1 percent of German households earns about 11 percent of all income, virtually unchanged relative to 1970, according to recent estimates. In the United States, the top 1 percent makes more than 20 percent of all income, up from 9 percent in 1970. That's right: only 40 years ago, Germany was more unequal than this country.

Unemployment in Germany is now down to 6.1%. In the Netherlands it's an incredible 5.3%. America is hovering above 9% unemployment. It will likely take the United States many years yet to get back to full employment, which means the familiar picture of the 1980s and 90s in which American unemployment rates were several percentage points lower than those in northern Europe may be mirrored by a long period in which the reverse is true. If that turns out to be the case, I think it requires at least some rethinking about the effects of strong unionisation on employment levels over the course of the business cycle.

The second thing is that I am simply generically suspicious of arguments which advance the interests of rich people while arguing that when poor people unite to pursue their interests, they only make things worse for themselves.

That's all I got. I think this is a situation that happens frequently in blogging: the discussion proceeds until one side's capacity or determination to marshall evidence is exhausted. It's sort of like the first world war. I'm hoping Mr Ozimek imposes terms somewhat more generous than what Lloyd George wanted at Versailles.

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