Do unions raise wages?

[Rhea]

The answer is no, says professor Alex Tabarrok - we see no empirical evidence that unions raise wages of workers as a whole, evidence between heavily unionized countries and countries with low rates of unionization is discussed. They can, however, raise wages for some workers, primarily by restricting supply:

[youtube]https://www.youtube.com/watch?v=S3EUrI63SnA[/youtube]

Do any of the pro-union supporters who believe they raise wages have evidence they can post to suggest otherwise, that they raise wages for workers across the economy as a whole?

Is there a transcript available? How long is this video?
I';d rather not spend 4x the time to discover their idea so that they can blast my retinas with scary zoom-ins and music...

Basically I am wondering in "compared to countries without unions" which countries those are? Might be interesting to know, right?

 

[ksen]

Rhea, it won't be as effective without the scary zoom ins and music.

 

[lpetrich]

Then they claim that unions reduce wages by reducing productivity, citing the sole example of 1970s Britain. Which conveniently ignores umpteen counterexamples, not least ..wait for it.. their international poster child, the US, which had higher unionisation rates and lost more manhours per capita through strikes than Britain at that time. Ho ho.

Thanx for reviewing their work, CDJ. Their research seems very limited and selective.

 

[Rhea]

Rhea, it won't be as effective without the scary zoom ins and music.

Aaahh, "logic" that relies on drama and emotion? aka "snake oil"?

 

[lpetrich]

Related to this subject:

Power from the People -- Finance & Development, March 2015

Inequality has risen in many advanced economies since the 1980s, largely because of the concentration of incomes at the top of the distribution. Measures of inequality have increased substantially, but the most striking development is the large and continuous increase in the share of total income garnered by the 10 percent of the population that earns the most—which is only partially captured by the more traditional measure of inequality, the Gini coefficient (see Chart 1).

The authors then noted that different nations have had different amounts of inequality increase.

While our findings are consistent with prior views about the effects of the minimum wage, we find strong evidence that lower unionization is associated with an increase in top income shares in advanced economies during the period 1980–2010 (for example, see Chart 2), thus challenging preconceptions about the channels through which union density affects income distribution. This is the most novel aspect of our analysis, which sets the stage for further research on the link between the erosion of unions and the rise of inequality at the top.

The authors found these effects:

• Wage dispersion -- labor unions and minimum wages reduce it
• Unemployment -- not much evidence that unionization causes unemployment by forcing wages above "market-clearing" values
• Redistribution --
  

  Strong unions can induce policymakers to engage in more redistribution by mobilizing workers to vote for parties that promise to redistribute income or by leading all political parties to do so. Historically, unions have played an important role in the introduction of fundamental social and labor rights. Conversely, the weakening of unions can lead to less redistribution and higher net income inequality (that is, inequality of income after taxes and transfers).

• Bargaining power of workers and top income shares --
  

  Lower union density can increase top income shares by reducing the bargaining power of workers.

After discussing details of their research, the authors propose research into which labor-union activities are good for society and which ones are bad.

Whether the rise of inequality brought about by the weakening of unions is good or bad for society remains unclear. While the rise in top earners’ income share could reflect a relative increase in their productivity (good inequality), top earners’ compensation may be larger than what is justified by their contribution to the economy’s output, reflecting what economists call rent extraction (bad inequality). Inequality could also hurt society by allowing top earners to manipulate the economic and political system.

 

[ksen]

I appreciate what the IMF is doing here but srsly, smart people can be so dumb at times. The effect of decreasing unionization, or even anti-unionization, has been known for quite awhile but the IMF quotes above sound like it's something they've never heard of before.

 

[PyramidHead]

Unions, inequality, and faltering middle-class wages

• The union wage premium—the percentage-higher wage earned by those covered by a collective bargain*ing contract—is 13.6 percent over*all (17.3 percent for men and 9.1 percent for women).
• Unionized workers are 28.2 percent more likely to be covered by employer-provided health insurance and 53.9 percent more likely to have employer-provided pensions.
• From 1973 to 2011, the share of the workforce represented by unions declined from 26.7 percent to 13.1 percent.
• The decline of unions has affected middle-wage men more than any other group and explains about three-fourths of the expanded wage gap between white- and blue-collar men and over a fifth of the expanded wage gap between high school– and college-edu*cated men from 1978 to 2011.

An expanded analysis that includes the direct and norm-setting impact of unions shows that deunionization can explain about a third of the entire growth of wage inequality among men and around a fifth of the growth among women from 1973 to 2007.

As the video mentions, unions do in fact raise wages for the few lucky ones who are able to obtain membership in one, but at the expense of everyone else, resulting in a net loss overall (higher prices, lower wages, less efficient companies, lower levels of employment). This is evidenced by analysis of countries with high union membership vs those with lower union membership - there is no increase in prosperity to the working class in the high union membership countries.

Help me out here. How do union member get higher wages at the expense of everyone else but executives with earnings hundreds of times more than anyone else and corporations earning more and more profits (wages of capital) is not at the expense of everyone else?

How does that work?

Furthermore, wouldn't the take-home message be to increase union membership to the point where the vast majority of people are "lucky enough" to be union members and enjoy these higher wages?

 

[SimpleDon]

This video is part of the propaganda that goes pretty much along these lines,

"We want to increase wages and reduce income inequality, but we can't. The inter working of the economy prevents us from raising wages because the mechanism of the economy will compensate for higher wages by some other ill, increased unemployment, increased costs, etc."

There is a parallel line of propaganda that says,

"We want to increase wages and to decrease income inequality, but we don't know how to do it, we don't know why the wages of the 90% have stagnated while profits and the wages of the 10% have soared. We suspect that it is because of mysterious structural changes in the economy, ones that we have no control over."

Both of these are lies.

We know that the major effect of increased wages is lower profits.

And we know how to increase wages. The same way that we knew how to increase profits and suppress wages thirty five years ago, but in reverse, increase taxes on the wealthy, support more unionization, back off from globalization, increase the minimum wage, institute capital controls, etc.



The most effective way to increase wages and to decrease profits is to go to a form of sector negotiation of wages. Set minimum wage levels for the same work the same in every company in an industry sector. If everyone pays the same wage for a type of work there is no competitive pressure to lower wages. They have to compete in other areas, improved productivity for example.

 

[Bronzeage]

....

As the video mentions, unions do in fact raise wages for the few lucky ones who are able to obtain membership in one, but at the expense of everyone else, resulting in a net loss overall (higher prices, lower wages, less efficient companies, lower levels of employment). This is evidenced by analysis of countries with high union membership vs those with lower union membership - there is no increase in prosperity to the working class in the high union membership countries.

I love to see the way anti-union arguments bounce between sympathy for those who are "forced" to join a union and admiration for those who are "lucky"to join a union.

I was having coffee with a group of old friends and one of them, who happens to be a certified financial planner(not really sure what that means) made a nasty crack about unions. I said that was a strange attitude for a union member to take. He was a little offended that I would call him a union member, but I explained.

A union is group that keeps wages high for its member by restricting who can enter a particular job category, right?

He agreed, with a very irritating grin.

"You have a license from a state financial planner board, right? (that's the certified part). No one can become a certified financial planner without their approval, which limits who can be a financial planner, means you can charge higher prices. That makes it a union."

At the time, I was an auto mechanic. On any day of the week, I repaired anti-lock brakes systems, diagnosed malfunctioning airbags(known as supplemental passive restraints) and all the other electronic systems in a modern automobile. The was not, and still is not a state board to limit who could work on cars. I had many years of training and experience, but I only needed two things in order to be a mechanic. The first was a desire to work on cars. The second someone willing to pay me to do it. The rest was superfluous.

I don't know of a state in the Union where a person can charge money to represent a person in court, if he has not passed an exam administered by other attorneys. It doesn't matter how much time one spends in law school. In fact, you don't to go to law school. The Bar Exam is what allows one into the group.

There are similar state sanctioned boards for barbers, hairdressers, and even people who clip fingernails.

If we are going to bring unions into question and ask if they are really good for society in general, lets talk about all of them, not just the blue collar unions.

 

[SimpleDon]

This is also a good example of "one way is the best way" for the economy. The idea that there is only one way to run the economy irrespective of the conditions in the economy. We have been increasing profits and suppressing wages consistently for thirty five years now. The result is plain to see. We have too much income going to profits and not enough going to wages. We have too much supply, money available from the excessive profits, and not enough demand, which comes primarily from wages, to justify its use in productive investments.

And yet one of the two major parties consistently calls for more measures to further increase supply and to decrease demand. By further tax cuts for the rich while working to further erode unionization. It makes no sense. It is as if the means that they propose, decreasing taxes on the rich for example, are more important than the results of the policies on the economy.

 

[ronburgundy]

So you're tasked with promoting it, or you are one of the authors?

It is apparently far easier for you to go off on bizarre insinuations and red herrings than to actually address the content of the OP. Duly noted.

- - - Updated - - -

Unions, inequality, and faltering middle-class wages

• The union wage premium—the percentage-higher wage earned by those covered by a collective bargain*ing contract—is 13.6 percent over*all (17.3 percent for men and 9.1 percent for women).
• Unionized workers are 28.2 percent more likely to be covered by employer-provided health insurance and 53.9 percent more likely to have employer-provided pensions.
• From 1973 to 2011, the share of the workforce represented by unions declined from 26.7 percent to 13.1 percent.
• The decline of unions has affected middle-wage men more than any other group and explains about three-fourths of the expanded wage gap between white- and blue-collar men and over a fifth of the expanded wage gap between high school– and college-edu*cated men from 1978 to 2011.

An expanded analysis that includes the direct and norm-setting impact of unions shows that deunionization can explain about a third of the entire growth of wage inequality among men and around a fifth of the growth among women from 1973 to 2007.

As the video mentions, unions do in fact raise wages for the few lucky ones who are able to obtain membership in one, but at the expense of everyone else, resulting in a net loss overall (higher prices, lower wages, less efficient companies, lower levels of employment). This is evidenced by analysis of countries with high union membership vs those with lower union membership - there is no increase in prosperity to the working class in the high union membership countries.

And this is why most economics is pseudoscience, because they don't do any controlled studies and just make completely invalid comparisons, controlling for hardly any of the other factors, then draw causal conclusions. A major reason for the lack of Unions in some European countries is that government regulations on wages, prices, mergers and monopolies, combined with government services make unions unnecessary. In addition, there are strong cultural factors that impact wages. There is far more suspicion and negative views toward corporations in most of Europe, and demand and public pressure on ethical business practices. They do not buy into notions that excuse lack of ethics like "business is business". Without controlling for all of these factors and more, no between country analysis can reveal anything valid about the impact of unions. Their impact is context specific and they tend to arise where they are most needed and would likely have the largest impact.

 

[Loren Pechtel]

Unions raise the wages of their members versus non-members. I don't think that anyone is disputing that.

So the question of if overall unionization increases wages in aggregate is pretty much settled, ignoring the fallacious lump of labor arguments that is. It does.

10% of the population receiving 20% higher wages results in 2% higher wages in aggregate from simple mathematics.

But there are also spill over effects. Increased unionization will result in higher wages being paid to non-union workers. In part from the increased competition but also non-union employers will increase wages to try to keep the unions out of their shop, to avoid having the union voted in to their shop.

This spill over effect increases as the percentage of workers covered by unions increases.

There is also what we have been seeing recently a negative spill over effect where decreasing unionization results in the premium that union worker earn.

This negative spill over effect increases as the number of workers covered by the unions decreases.

You're assuming there is no downside--lower wages paid to non-union workers because the money has to go to the unions. This assumption is invalid.

 

[Jimmy Higgins]

The answer is no, says professor Alex Tabarrok - we see no empirical evidence that unions raise wages of workers as a whole, evidence between heavily unionized countries and countries with low rates of unionization is discussed. They can, however, raise wages for some workers, primarily by restricting supply:

[youtube]https://www.youtube.com/watch?v=S3EUrI63SnA[/youtube]

Do any of the pro-union supporters who believe they raise wages have evidence they can post to suggest otherwise, that they raise wages for workers across the economy as a whole?

Man, this is really going to suck because I've been hearing at IIDB, FRDB, TF about how Union workers are paid more thean their worth.

This seems like the most absurd of turns for anti-union points. See! Unions don't raise wages at all!

 

[ksen]

Unions raise the wages of their members versus non-members. I don't think that anyone is disputing that.

So the question of if overall unionization increases wages in aggregate is pretty much settled, ignoring the fallacious lump of labor arguments that is. It does.

10% of the population receiving 20% higher wages results in 2% higher wages in aggregate from simple mathematics.

But there are also spill over effects. Increased unionization will result in higher wages being paid to non-union workers. In part from the increased competition but also non-union employers will increase wages to try to keep the unions out of their shop, to avoid having the union voted in to their shop.

This spill over effect increases as the percentage of workers covered by unions increases.

There is also what we have been seeing recently a negative spill over effect where decreasing unionization results in the premium that union worker earn.

This negative spill over effect increases as the number of workers covered by the unions decreases.

You're assuming there is no downside--lower wages paid to non-union workers because the money has to go to the unions. This assumption is invalid.

Then we can assume that you also think there is a similar downside to higher executive compensation and higher profits? If not, why?

 

[Togo]

You're assuming there is no downside--lower wages paid to non-union workers because the money has to go to the unions. This assumption is invalid.

It's worth pointing out that the good professors seem happy with the idea that unions raise wages within a particular company - so the effect you're arguing for is that higher wages in company A lead to lower wages in company B. Since it's not the same money, I'm not sure why you reckon this is a thing. It seems more likely, by raising standards and competition for workers, that the opposite would occur.

 

[Jimmy Higgins]

My personal anecdotal evidence indicates that union drillers get paid a lot more than non-union drillers.

 

[SimpleDon]

....

As the video mentions, unions do in fact raise wages for the few lucky ones who are able to obtain membership in one, but at the expense of everyone else, resulting in a net loss overall (higher prices, lower wages, less efficient companies, lower levels of employment). This is evidenced by analysis of countries with high union membership vs those with lower union membership - there is no increase in prosperity to the working class in the high union membership countries.

I love to see the way anti-union arguments bounce between sympathy for those who are "forced" to join a union and admiration for those who are "lucky"to join a union.

I was having coffee with a group of old friends and one of them, who happens to be a certified financial planner(not really sure what that means) made a nasty crack about unions. I said that was a strange attitude for a union member to take. He was a little offended that I would call him a union member, but I explained.

A union is group that keeps wages high for its member by restricting who can enter a particular job category, right?

He agreed, with a very irritating grin.

"You have a license from a state financial planner board, right? (that's the certified part). No one can become a certified financial planner without their approval, which limits who can be a financial planner, means you can charge higher prices. That makes it a union."

At the time, I was an auto mechanic. On any day of the week, I repaired anti-lock brakes systems, diagnosed malfunctioning airbags(known as supplemental passive restraints) and all the other electronic systems in a modern automobile. The was not, and still is not a state board to limit who could work on cars. I had many years of training and experience, but I only needed two things in order to be a mechanic. The first was a desire to work on cars. The second someone willing to pay me to do it. The rest was superfluous.

I don't know of a state in the Union where a person can charge money to represent a person in court, if he has not passed an exam administered by other attorneys. It doesn't matter how much time one spends in law school. In fact, you don't to go to law school. The Bar Exam is what allows one into the group.

There are similar state sanctioned boards for barbers, hairdressers, and even people who clip fingernails.

If we are going to bring unions into question and ask if they are really good for society in general, lets talk about all of them, not just the blue collar unions.

I don't believe that it is desirable or even necessary to unionize the entire work force. There is a lot of overheads with unions just like there is with corporations. The administration of both is finally a drag on the productivity of the economy. It is probably enough to have say 20 to 25% of the workers organized.

Professional registration is not in my mind the same as a union. While it does limits the people who can prescribe medicine for example, its main reason is not to restrict the number of people who can prescribe drugs in order to increase the income of those who can, its main purpose is to restrict that to people who have the training and the knowledge to do it properly.

I was a registered professional engineer. In most of the country you can't build an engineered facility unless every drawing and calculation are stamped with the seal of professional engineer who did the work or who supervised the work. Unlike corporate officers, that professional engineer is personally responsible for that work. There is no "the corporation did it and no person is responsible."

Professional registration is an alternative to the operation of the market, supply and demand or profit maximizing. It is used in the cases where making a profit doesn't produce the results that we need. I was not only responsible for making a profit, I had an overriding responsibility to build a safe, effective, low polluting facility. Safe and effective for the client and the people who build and who will operate and maintain it. I am also responsible to the public to build a facility that minimizes pollution and power consumption. All of these are externalities to the profit making venture of building the facility. Factors which must be accounted for but that wouldn't be without the regulations and the professionalism to apply them.

I worked in Germany for about four years on the company's executive board in a sub C suite job. There the corporate officers including me were personally responsible for our decisions. We could be fined or even jailed for bad decisions. And we weren't just responsible to the stockholders like in the US, we were responsible for the well being of the employees and the public in equal measures.

 

[SimpleDon]

Unions raise the wages of their members versus non-members. I don't think that anyone is disputing that.

So the question of if overall unionization increases wages in aggregate is pretty much settled, ignoring the fallacious lump of labor arguments that is. It does.

10% of the population receiving 20% higher wages results in 2% higher wages in aggregate from simple mathematics.

But there are also spill over effects. Increased unionization will result in higher wages being paid to non-union workers. In part from the increased competition but also non-union employers will increase wages to try to keep the unions out of their shop, to avoid having the union voted in to their shop.

This spill over effect increases as the percentage of workers covered by unions increases.

There is also what we have been seeing recently a negative spill over effect where decreasing unionization results in the premium that union worker earn.

This negative spill over effect increases as the number of workers covered by the unions decreases.

You're assuming there is no downside--lower wages paid to non-union workers because the money has to go to the unions. This assumption is invalid.

Of course, there is a downside to unionization. See my post to BronzeAge. It is the same as there is for corporations, the overhead costs of administration. But it doesn't invalidate the reason for the unions any more than the corporate administrative overhead invalidates the concept of corporations.

 

[whichphilosophy]

The answer is no, says professor Alex Tabarrok - we see no empirical evidence that unions raise wages of workers as a whole, evidence between heavily unionized countries and countries with low rates of unionization is discussed. They can, however, raise wages for some workers, primarily by restricting supply:

[youtube]https://www.youtube.com/watch?v=S3EUrI63SnA[/youtube]

Do any of the pro-union supporters who believe they raise wages have evidence they can post to suggest otherwise, that they raise wages for workers across the economy as a whole?

If the worker is valued for his work and not considered a cost overhead, then higher wages means he/she spends more in the economy, thus creating new jobs. This means the worker on a lower wage does not spend but will have to pay a little extra social security to support the unemployed

 

[Bronzeage]

I love to see the way anti-union arguments bounce between sympathy for those who are "forced" to join a union and admiration for those who are "lucky"to join a union.

I was having coffee with a group of old friends and one of them, who happens to be a certified financial planner(not really sure what that means) made a nasty crack about unions. I said that was a strange attitude for a union member to take. He was a little offended that I would call him a union member, but I explained.

A union is group that keeps wages high for its member by restricting who can enter a particular job category, right?

He agreed, with a very irritating grin.

"You have a license from a state financial planner board, right? (that's the certified part). No one can become a certified financial planner without their approval, which limits who can be a financial planner, means you can charge higher prices. That makes it a union."

At the time, I was an auto mechanic. On any day of the week, I repaired anti-lock brakes systems, diagnosed malfunctioning airbags(known as supplemental passive restraints) and all the other electronic systems in a modern automobile. The was not, and still is not a state board to limit who could work on cars. I had many years of training and experience, but I only needed two things in order to be a mechanic. The first was a desire to work on cars. The second someone willing to pay me to do it. The rest was superfluous.

I don't know of a state in the Union where a person can charge money to represent a person in court, if he has not passed an exam administered by other attorneys. It doesn't matter how much time one spends in law school. In fact, you don't to go to law school. The Bar Exam is what allows one into the group.

There are similar state sanctioned boards for barbers, hairdressers, and even people who clip fingernails.

If we are going to bring unions into question and ask if they are really good for society in general, lets talk about all of them, not just the blue collar unions.

I don't believe that it is desirable or even necessary to unionize the entire work force. There is a lot of overheads with unions just like there is with corporations. The administration of both is finally a drag on the productivity of the economy. It is probably enough to have say 20 to 25% of the workers organized.

Professional registration is not in my mind the same as a union. While it does limits the people who can prescribe medicine for example, its main reason is not to restrict the number of people who can prescribe drugs in order to increase the income of those who can, its main purpose is to restrict that to people who have the training and the knowledge to do it properly.

I was a registered professional engineer. In most of the country you can't build an engineered facility unless every drawing and calculation are stamped with the seal of professional engineer who did the work or who supervised the work. Unlike corporate officers, that professional engineer is personally responsible for that work. There is no "the corporation did it and no person is responsible."

Professional registration is an alternative to the operation of the market, supply and demand or profit maximizing. It is used in the cases where making a profit doesn't produce the results that we need. I was not only responsible for making a profit, I had an overriding responsibility to build a safe, effective, low polluting facility. Safe and effective for the client and the people who build and who will operate and maintain it. I am also responsible to the public to build a facility that minimizes pollution and power consumption. All of these are externalities to the profit making venture of building the facility. Factors which must be accounted for but that wouldn't be without the regulations and the professionalism to apply them.

I worked in Germany for about four years on the company's executive board in a sub C suite job. There the corporate officers including me were personally responsible for our decisions. We could be fined or even jailed for bad decisions. And we weren't just responsible to the stockholders like in the US, we were responsible for the well being of the employees and the public in equal measures.

One could also make a list of the functions Unions provide, such as healthcare plans and pension plans. Craft unions(welders, pipefitters, etc) warrant that their members are competent to perform their work, much like the Bar Association.

State sanctioned licensing bodies, which issue the certification which allows a person to work in a specific occupation, are government sponsored unions, and their main purpose is to limit who can and who cannot enter the field. Without the force of state statutes, no professional organization could function to limit entry of new workers and for all practical purposes, would either cease to exist, or become a public relations gimmick.