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Are labour unions a blessing or a curse?

U.S. Congress is pondering a historic shift in labour law


 

Are labour unions a blessing or a curse?

Depending upon who you choose to believe, labour unions are either a central cause of North America’s current economic troubles, or the only viable escape from them.

Robert Reich took up the pro-union banner last week. In a column in the Los Angeles Times, the professor of public policy at UC Berkeley and former labour secretary under Bill Clinton argued that unions formed the bedrock of America’s economic emergence, and that their decline over the past two decades has coincided with the collapse of the typical American’s standard of living. Harkening back to the good ol’ days of poodle skirts and drive-ins, Reich explained that “good pay meant more purchases and more purchases meant more jobs. At the centre of this virtuous circle were unions.”

On the other side of the canyon, screaming across at Reich, is Kevin Hassett, director of economic policy studies at the staunchly conservative American Enterprise Institute and a former policy adviser to John McCain. In his view, unions are nothing but trouble. Hassett argues that the rapid increase in unionization during the 1930s prolonged and deepened the Depression as strikes shut down factories and drove up labour costs. Like many arch-conservatives, he seems to believe that the thirties wouldn’t have been nearly so dirty if only the Pinkertons had busted a few more unionist kneecaps. Today, he sees only inflated wages and inefficiencies in union workplaces, deepening the crisis, sending more jobs abroad.

In fact, a dispassionate look at the data suggests that both the pro- and anti-union arguments are wrong. But that won’t cool the blistering rhetoric on this issue—it’s only likely to heat up in the months ahead.

Why the sudden interest in debating the merits of unionization? You may not have heard about it yet, but there is a bill winding its way through the U.S. Congress that amounts to the most consequential overhaul of workplace law in decades. It is called the Employee Free Choice Act, and it has the support of President Barack Obama. The proposed law would strengthen unions in myriad ways, most importantly by eliminating the need for secret ballot elections to certify a union. Organizers would need only to get a majority of employees to sign union cards and they could form a bargaining unit.

The bill’s supporters, like Reich, say it is essential to level the playing field with corporate managers who threaten and bully workers, making it nearly impossible to win secret ballot votes. The bill’s opponents point out that unions have been known to use their own forms of intimidation to get reluctant workers to sign union cards, and secret ballots are the only way to truly gauge the will of the workers. It’s an incredibly important piece of legislation, but neither side is content to merely argue its merits. They must both exploit the current economic panic to animate their positions.

And so you have Hassett declaring that an upsurge in unionization would lead to reckless strikes, rising prices and a further slowdown in economic activity, just like in the 1930s. Of course, there are rather large holes in this thesis.

It’s true that unionization surged from 13 per cent of the U.S. workforce in 1935 to 29 per cent in 1939, that strikes increased, and cartels raised prices. But it’s also true that union membership continued to climb through the 1940s, peaking at 35 per cent in the 1950s—the height of America’s postwar boom. If unions were such a disastrous force, why did the economy thrive for decades, even as union membership and power spread?

Then you have Reich, who states, correctly, that union workers earn more on average than non-union workers. What we need now, he says, is to get more money into the hands of the working class. Tax cuts, rebates and government spending are fine, but nothing will be as effective as a renewed surge in unionization. This simple logic is seductive, but it totally misrepresents the roots of this economic crisis and what it’ll take to fix it.

Look around and you’ll see the most heavily unionized industries (think automotive, construction and media) are the ones that are now in the most desperate financial trouble and where jobs are disappearing. Besides, union membership in the U.S. has been going up for the past two years—739,000 new members have joined a union since 2007. So, the labour movement was growing just as the economy was faltering—not exactly a ringing endorsement for Reich’s thesis.

Despite arguments to the contrary, this economic muddle wasn’t triggered because ordinary Americans don’t make enough money or because they lack adequate job protection. It wasn’t sparked by big businesses being saddled with high labour costs or debilitating strikes either. Our problems are rooted in the fact that ordinary Americans spent wildly beyond their means for more than a decade, and big business rode that debt-fuelled spending boom until it crashed. Now that the banks are stuck with billions in bad loans, even healthy businesses lack the funding they need to keep expanding.

Where do labour unions fit in that picture? They don’t. They are a footnote at most, and arguably irrelevant to our broader economic illness. But that won’t stop the combatants from trying to use this situation to advance their own agenda before Congress. The problem with the debate is that it’s not about economics, it’s about ideology. Both sides start with a preconceived belief about whether unions are good or bad, and then work backwards looking for data to support their point. The question before Congress is a political one, and so will be the answer.

Are unions a blessing or a curse for our troubled economy? Chances are you already have an opinion on that question, and you can pick and choose statistics and examples to back your position. But it’s a trick question. The real answer is neither.


 
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