Donate
 to this campaign

Freeman and Medoff

In 1984, Harvard economists Richard B. Freeman and James L. Medoff published a book called What Do Unions Do? It is an extensive (251-page) quantitative analysis of the wage and nonwage effects of trade unions. Their conclusion:

On balance, unionization appears to improve rather than to harm the social and economic system. (Page 19)

However, they do acknowledge the negative effect of unions:

Most, of not all, unions have monopoly power, which they can use to raise wages above competitive levels. Assuming that the competitive system works perfectly, these wages have harmful economic effects, reducing the national output and distorting the distribution of income. [The higher wage] causes firms to lower employment and output, thereby harming economic efficiency and altering the distribution of income. (Page 6)

As monopoly institutions, unions reduce society's output in three ways. First, union-won wage increases cause a misallocation of resources by inducing organized firms to hire fewer workers, to use more capital per worker, and to hire workers of higher quality than is socially optimal. Second, strikes called to force management to accept union demands reduce gross national product. Third, union contract provisions - such as limits on the loads that can be handled by workers, restriction on tasks performed, and featherbedding - lower the productivity of labor and capital. (Page 14)

The negative effects of unions are outweighed, the authors say, by several socially beneficial effects.

• [U]nions alter the entire package of compensation, substantially increasing the proportion of compensation allotted to fringe benefits, particularly to deferred benefits such as pensions and life, accident and health insurance, which are favored by older workers. (Page 20]
  
  My response: Fringe benefits certainly are good for union members, but I see no benefit to society. They are a form of wages, and if they are above competitive levels, they are harmful.
   

• [Because they] raise blue-collar earnings relative to the higher white-collar earnings [and] reduce inequality among workers in the same [and different] establishments . . . on balance, unions are a force for equality in the distribution of wages among individual workers. [Page 20]
  
  My response: In a free labor market, there is nothing wrong with having different wages for different jobs.
   

• [By providing a collective voice in dealing with management, problems with individual workers are more likely to be worked out and the workers are less likely to quit.] As a result, unionized work forces are more stable  . . . (Page 21)

My response: I do not disagree. However, a well-managed, non-union business can set up non-threatening procedures for dealing with personnel problems that would achieve the same result.

• Union workplaces operate under rules that are more . . .explicit than nonunion workplaces. Seniority is more important . . . management operates more "by the book", with less subjectivity . . .and in more professional, less paternalistic or authoritarian ways. (Page 21)

My response: I do not disagree. However, a well-managed, non-union business knows the value of contented employees and can make sure all are treated fairly.

• Some nonunion workers . . . obtain higher wages and better working conditions . . . because of the threat of unionism . . . Some workers, however, may suffer from greater joblessness as a result of higher union wages in their city or their industry. (Page 21)

My response: Workers may also suffer from greater joblessness due to the higher wages of those nonunion workers whose wages are higher because of the threat of unionism.

• [Usually,] unionized establishments are more productive than nonunionized establishments. [This] is due to . . . lower turnover . .  , improved managerial performance in response to the union challenge, and generally cooperative labor-management relations at the plant level. (Page 22)

My response: Maybe they are forced to be more productive to make up for their high labor costs. They have to stay competitive some way.

• Most union political successes have come in the area of general labor and social goals that benefit workers as a whole rather than unionists alone. (Page 22)

My response: Since workers outnumber employers, they should already have the upper hand in a democratic nation.

This is from the last chapter of the book, "Conclusions and Implications":

Unions pushed the union wage premium to extremely high levels from the mid-1970s to the early 1980s, gaining more and more for an increasingly small share of the workforce. We believe that union leaders gave insufficient weight to the job side of the job/wages tradeoff facing them, with dire long-term consequences for the well-being of their membership and the union movement in general . . . It is our hope that union workers and leaders will have learned from the experience that always extracting "more" is harmful in the long run, not only to society as a whole, but to labor itself . . . (Pages 249-250)

Milton Friedman

Milton Friedman was awarded the Nobel Prize in Economics in 1976 for his achievements in the fields of consumption analysis, monetary history and theory, and for his demonstration of the complexity of stabilization policy. According to The Economist, Friedman "was the most influential economist of the second half of the 20th century…possibly of all of it." Friedman died in 2006. (Source: Wikipedia) Here's what he said about unions in his book Capitalism and Freedom (page 124):

If unions raise wage rates in a particular occupation or industry, they necessarily make the amount of employment available in that occupation or industry less than it otherwise would be - just as any higher price cuts down the amount purchased. The effect is an increased number of persons seeking other jobs, which forces down wages in other occupations. Since unions have generally been strongest among groups that would have been high-paid anyway, their effect has been to make high-paid workers higher paid at the expense of lower-paid workers. Unions have therefore not only harmed the public at large and workers as a whole by distorting the use of labor; they have also made the incomes of the working class more unequal by reducing the opportunities available to the most disadvantaged workers.

And from Free to Choose (page 234):

A successful union reduces the number of jobs available of the kind it controls. As a result, some people who would like to get such jobs at the union wage cannot do so. They are forced to look elsewhere. A greater supply of workers for other jobs drives down the wages paid for those jobs. Universal unionization would not alter the situation. It would mean higher wages for the persons who get jobs, along with more unemployment for others. More likely, it would mean strong unions and weak unions, with members of strong unions getting higher wages, as they do now, at the expense of members of weak unions.

Drive the Unions out of Michigan
Unions in state government
Unions in public schools
Union facts
More thoughts on unions
What union sympathizers say