Do Unions Contribute to More Unemployment?

This is a lively Facebook debate on the relationship between unions and unemployment. The comments are in response to an article reporting on the death of an adjunct college professor, who died from heart attack, while being paid $25,000 without health insurance from her college. The question in the debate was whether a union would have helped that woman, and many other members of the growing teaching proletariat (Link http://www.post-gazette.com/stories/opinion/perspectives/death-of-an-adjunct-703773/).

Phil Magness: Sad story, although it ends in a fairly egregious non-sequitur in assuming that the unionization of adjuncts would have alleviated her condition. Unionization of this sort tends to function as an entry barrier to the teaching market & does so not by raising wages/conditions, but by impeding mobility within a labor market much as the tenure system at the root of this does. IOW, both make it virtually impossible to fire crappy professors which has the side effect of also making it difficult to hire or reward good ones by consuming the available resources to do so in the form of salaries for academic dead weight – be it the tenured prof. who makes $130K a year but only teaches one completely useless course around her obscure pet interest in the “Sexuality of Caribbean poets in the Cold War era,” or the union-invested adjunct who consistently gets a teaching eval of 2.3/5 for blowing off his classes but nonetheless teaches all 3 sections of Algebra 101 because firing him for somebody better would incur the wrath of a union protest.

My point: Unions are not inherently problematic on account of being voluntary organizations. But in practice they do tend to impede labor mobility because they permit hiring/firing decisions to be made around political criteria, which normally reduces them to specialized homogeneous interests wielding clout through the imposition of costs upon the diffuse, dispersed, and comparatively powerless. This usually means that a completely open and free labor market, though far from perfect and problem free in its own right, is almost invariably the better option compared to a unionized or cartelized (tenure) alternative.

Cory Haberkorn: Unions would not help adjunct professors in the least. Most likely, they’d make them worse off. Teachers unions in the K-12 sector already keep out qualified labor by not letting people negotiate wages.

What might’ve helped this poor woman would be a free-market for healthcare, not an inflexible labor market.

L. Larry Liu: Cory, your “free” labor market has not provided the kind of freedom to the 89% of the US workforce that is not part of a labor union.

Cory Haberkorn: How do unions engender freedom? The union dues you pay? The fact that you aren’t allowed to bargain with your employer for a wage and benefits? The fact that non-right to work states have lower cost-of-living adjusted disposable income relative to right to work states? The forced protesting you must do as part of a union? The beating up of scabs and the destruction of scab property? The fat cat union bosses who do nothing but live off of the sweat of union member brows through their dues? The increased unemployment with unions? The collectivist mentality that accompanies unions?

Unions are not freedom. Maybe at one point they were – and in monopsonistic labor markets I’d be okay with joining a union, but most labor markets are competitive now so unions only impede workers.

L. Larry Liu: Unions provide an important form of organization to protect the interests of the workers. They may be subject to larger social forces they don’t control, such as outsourcing or automation, but it makes them nonetheless important. For most sectors of the economy, a union is beneficial to wageshttp://www.bls.gov/opub/ted/2013/ted_20130513.htm

So your rant speech won’t work for the many fast food workers, who are not in a union and want a union and protest for forming a union, because they face starvation wages, while their company is making record profits: http://finance.yahoo.com/…

Phil Magness: Higher wages mean little to those outside of it if the job market is cartelized to inhibit the free entry of employees by way of the union system. Sure, it’s great for the union workers, including the non-performing ones who cannot be fired because the union inhibits it. But it sucks for the unemployed who can’t even find a job because of union-imposed labor market rigidity. And this is PARTICULARLY true of academia, where there is currently a huge glut of tenured baby boomers who teach 1 class a year as well as increasingly unionized facilities and peripheral administrative staff that can’t be fired or have any of its budget or benefits cut, despite more pressing needs for the money in core functions like teaching. The people who suffer the most: the unemployed and under-employed faculty who would gladly teach more classes and at a cheaper rate than a tenured faculty if only there was a budget with which to hire them.

Cory Haberkorn: Starvation wages? What about their net income? You know, factor in things like EBT/SNAP (which I unlibertarianly support)?

“High wages” means nothing. Market clearing wage means something. Wages set above the market clearing wage create unemployment. This is what unions do through collective bargaining.

Furthermore, the empirical data shows that right to work states has higher cost-of-living adjusted disposable income than non right to work states.

What unions do is create excess labor supply. They push up wages so far that people can’t get a job.

I’ll give you an example. I worked with a woman at Giant (non-union, we had healthcare at 20/hrs a week, everyone was above minimum wage) who had a Master’s in education. She was specialized to teach elementary school kids. But the PA teachers union requires that Master’s Degree holding teachers get paid a certain wage.

She couldn’t find a job anywhere in PA, specifically because she couldn’t negotiate a lower wage. She had little experience teaching (she got a Master’s before becoming a teacher) so couldn’t get her way in.

This is what your union does. It keeps people out of jobs. It impoverishes workers who want to get jobs. You are implicitly saying that you care more about the lucky few union members who get jobs more than the workers who don’t. You don’t care about workers, you don’t care about the middle class, you don’t care about wages. You care about being anti-business and you care about your leftist political organizations.

I don’t care if you are anti-business and pro-union. But admit that, don’t try to sell your union love by saying they’re good for workers, when they really aren’t. It’s a flat out lie.

L. Larry Liu: Phil, with regard to the tenured faculty, it should be noted that according to a report by the American Association of University Professors, 76% of college teachers are not tenured (http://www.aaup.org/file/2012-13Economic-Status-Report.pdf p.8 ). They are either part-timers, adjuncts, or full-timers with annual contracts. Tenures are concentrated among older faculty, but among the younger professors there is no more job security, especially those without tenure.

Phil and Cory, you both seem to assume that there is such thing as a market-clearing wage, and that if you go above that there will be more unemployment. If you make a comparison between the employment to population ratio and the rate of labor unionization in say Netherlands and the US, you will find very little overlap. If your theory were true, then more unionization should lead to greater unemployment, but Netherlands has both a higher labor participation rate (62% vs. 58%), and a higher rate of unionization (18.2% vs. 11.3%) than the US. Sweden has 67.5% of the workforce in a union, and 59% in employment. The latter value is comparable to the US, but the former is significantly higher in Sweden. (Data assembled from http://stats.oecd.org/Index.aspx?QueryId=20167and http://data.worldbank.org/indicator/SL.EMP.TOTL.SP.ZS). So your theory remains unsupported.

Cory’s story of the unlucky teacher tells me less about the intransigent teacher’s union, which is apparently blocking the hiring of new teachers, and more about the shit state of the labor market for teachers, which resulted from significant funding cuts from the state government for the school districts across the country. It is not surprising that if you hold wage and personnel costs constant in schools, while at the same time drastically removing funding for them that the schools will quickly be pushed into deficit, and the “overbloated” teacher’s union, which previously was no problem, now becomes a problem. Here the culprit has to be the state government, which has consistently preferred corporate tax breaks over solid public education. The corporate tax breaks would not be so bad if they at least would be job creating. But my review of profit and employment statistics show me that employment had been shrinking while corporate and financial profits are up (http://www.theatlantic.com/…/279671/).

More generally, the problem of unemployment has little to do with greedy unions, but with the fact that employers just don’t want to hire that much labor at this point. That has to do with globalization and the financialization of the economy, which I will entertain perhaps in a different discussion thread. Reducing union membership does not help, because there are fewer labor union members now in the US, and yet the employment-to-population ratio is still very low. If your theory were right, then the unemployment rate should be dropping very quickly, because union membership is declining so rapidly.

An important piece of your argument seems to be that unions and a reasonable life for workers (i.e. being employed rather than unemployed) are completely antithetical to each other. You can have one or the other, but not both. Again, reviewing the income of the US middle class and the union membership rates shows me a very tight correlation between these two values. The middle 60% of the US population earned 53.2% of the income in 1968, and 45.7% in 2012, while unionization rates fell from 28.3% to 11.3% in the same time period (http://www.huffingtonpost.com/…). So, even assuming you were correct with your assumption about the number of jobs and union wages: the decline of the unions and the decline of wages and the middle class of the US quite simply show that the consequences for the national living standards of many Americans have been devastating. Good luck selling the need for Americans to be poor to the American people. One New York Times article reports about the fact that the median family is no better off or even worse off than the median family 25 years ago (http://www.nytimes.com/…).

Two more points: the theory that high wages are creating more unemployment is not sustainable within the context of the capitalist economy. If your framework is purely supply-side economics, then the logic will make sense. If the wage bill is lower, then the company can produce more goods at lower prices, and sell the goods at a low enough price that he will sell large quantities at a profit. Sounds very great, except that this account assumes that consumption remains constant. Many economic calculations really hinge on this ceteris paribus assumption, which is a nice feature in economics papers, but a very bad assumption in the real world. The assumption that consumption remains constant is nonsense. Consumption depends on the wages that are paid to the vast majority of the working population. And here the fallacy of composition (named by John Maynard Keynes) is at play (http://en.wikipedia.org/wiki/Fallacy_of_composition). What is true for the part is not true for the whole. If one company cuts wages to workers, then consumption impacts in the overall economy are small, and the firm will make extra profits. If many workers are paid bad wages, then there are no benefits attached to lower wages, because the lower wage bill has reduced the purchasing power of the mass of consumers. Less consumption means less profit, and less profit means less employment and hiring. Cory and Phil, you both seem to assume that pursuing lower wages is a good social result, but it is a self-defeating result.

And to finally defeat your argument about higher wages contributing to more unemployment, I want to suggest a different metric. The key question that determines employment is, of course, consumption, as I had suggested in the previous paragraph. The key determinant of wages on the other hand should be (but unfortunately is not) labor productivity. Given the enormous rise in national labor productivity, wages should significantly increase. A report by the Center of Economic and Policy Research finds that the minimum wage would be $21.72 an hour if it had been linked to the growth of productivity, i.e. what the worker had been producing in total commodities, and not what the employer would have to hand out while operating at a loss (http://www.cepr.net/…/publications/min-wage1-2012-03.pdf). Unions enable workers to bargain for those higher wages. They are not the obstacles to the progress of the working class. Anybody, who has thoroughly reviewed US history would see that the actions of unions have created the workplace safety regulations, the minimum wage, the social security legislation, the 40-hour workweek and the right to collective bargaining. They have not been an obstacle, but a boon to the working class. And educated workers will understand that they should not bid against each other for lower wages and living standards, as you two promote, but stand in solidarity with each other to bargain for higher wages and better working conditions for all workers.

Phil Magness: Larry – In my prior comments I argued that (1) there is no evidence that unionization would have alleviated this professor’s conditions, (2) there is little reason to believe that the unionization would alleviate any of the current ills of the academic employment market, which are actually attributable to the inefficiency of the tenure system and the growing diversion of department budgets into university administrative overhead, and that (3) unionization in general tends to impose barriers upon the entry into particular labor markets and thereby impede labor force mobility in ways that are generally harmful to those persons OUTSIDE the barrier. How you jumped from any of that to attributing a general theory of the connection between unionization and unemployment to me is quite the mystery as I previously made no such assertion. Since you do bring it up though, it is entirely fair of me to ask of you to demonstrate (1) how unionization would have specifically operated in this woman’s favor and in the favor of the untold thousands of other adjuncts like her, (2) how unionization would alter, alleviate, or otherwise change for the better the existing ills of the budget-consuming tenure system and the budget-diverting growth of administrative overhead in US higher education as opposed to adding even more rigidity and budgetary strain upon it, and (3) how unionization serves the interests of those persons it excludes from the labor market by design through establishing an entry barrier for new hires and an exit barrier to retain and preserve underperforming old hires. Any such demonstration should also take into account that higher ed in the United States ostensibly presents itself as something of a “public” commodity (whether that is true or not being an entirely different question), and as such would not be subject – at least on its own accord and self-depiction – to the considerations as “profit” and “consumption” which you seem to have conflated into your argument above. And actually the same might be said of *any* union that operates in the public sector, its direction allegedly being reached not by “profitability” but rather political bargaining. So answer me those things, instead of vomiting up a disjointed jumble of links to OECD reports, political op/eds, and wikipedia articles along with sloppy attributions of positions and claims that I did not in fact make to begin with, and perhaps we can have a substantive discussion about this issue. Otherwise, please forgive me as I conclude that the essay you have posted above is simply not worth my time to pick through.

L. Larry Liu:  Phil, let me respond to the first list of comments. (1) A union would have alleviated the professor’s condition because the health care plan would likely be provided by the employer. I actually spoke with a tenured community college professor of mine, who had undergone major cancer surgery a few years ago. He appears to be very healthy, when I talked to him the last time. He had an excellent health care plan through his employer, and paid virtually no co-payments for his medical bills. I am sure he would be more desperate by now if his union was weak, and he had to foot the entirety of the medical costs, which are outrageous in this country (which is the major reason that makes the United States a less civilized country- and civilization is now measured by the quality of the health care system in other comparable Western industrial countries.

(2) The second point I can not completely quarrel with. I do think that significant revenues are diverted toward top faculty, and I do not think that a professor has to be paid more than a $100,000 a year to carry out great research. There are only two constraints in the market: first, as long as other colleges pay top salaries, they will attract more top professors, which would undermine a single college’s attempt to restrain academic salaries. Second, colleges sometimes have to compete for capable scholars with the private sector, especially in applied fields like in engineering, business, medicine or law. How to get rid of these two constraints is difficult, but I would be willing to concede on your second point. The administrative overhead is heavy, and the fact that college presidents and top administrators try to pay themselves salaries approaching those of Fortune 500 executives is a very problematic trend. It comes at the cost of students, who will be shackled to student loans for the rest of their lives, and subverts the objective of providing a good education to the mass of people.

(3) Unions in the way they are organized are very parochially oriented, and mostly care about their own due-paying members only. This is a critique from the left and the right, though you approach this question from the right, and I from the left. Let me explain. People on the right attack unions, and they jump to the conclusion that any union is therefore bad, and you have to remove the union to eliminate labor market rigidities.People on the left argue that unions are not redundant, but are following the wrong approach. Rather than being parochial and local, they should be comprehensive and national (ideally even international- due to the forces of globalization and the international division of labor). Unions should not disappear, but become stronger and more organized. One look at US history might be very useful: during the 1930s the Congress of Industrial Organizations carried out mass strikes, and was most effective when they enlisted support from 25% of the workforce that remained unemployed. The unemployed workers were willing to participate in the picket lines, because they were fed and clothed by the union, and so a convincing case could be made that leveraging the unemployed allowed the unions to gain significant political strength and force their employers and the government to grant them far-reaching concessions that form the modern US middle class. It is unfortunate that the current labor market can not exactly replicate the past condition, especially in the absence of a labor shortage. But I doubt that workers can afford to be so fatalistic about their fortune.

I will now address your second set of question. (1) Unionization would have helped the woman as I explained in the first paragraph. Union membership would have allowed her to receive better health care, so she would not have faced financial difficulties when treating the disease. It is clear that with her age nothing might have saved her, but there is a crucial difference between being broke and being sick vs. just being sick. (The latter position is granted to most people in Europe, at least in the wealthier parts that have not completely self-destructed with austerity policies.)

(2) Again, I laid out previously that there are some problems associated with star professors and CEO-like administrator compensation. But I should add that the strain is in large part caused by significant funding reductions from state governments. One report by the Center on Budget and Policy Priorities points out that states are spending 28% less per student on higher education in 2013 compared to 2008 (http://www.cbpp.org/cms/?fa=view&id=3927). So what we have is class warfare, where state legislators prefer to fund prisons and give useless tax incentives for highly profitable corporations rather than supporting a functioning higher education system. What I had mentioned in the previous comment is that 76% of faculty operate outside of the tenure system, and that while college tuition increased by 7.9% between 1979 and 2007, faculty salary raises were only 4.5% (which is above the 4.1% inflation rate, but consider also that productivity for the whole economy has grown too, so moderate real wage increases are not economically problematic (http://mjperry.blogspot.com/…). We have to look at administrators for cost savings, and maybe the few star professors at top schools.

(3) I addressed this issue in the third paragraph. The barrier for entry are not ideal, but the best way to circumvent this is to push up labor demand (increasing hiring and openings), which is a part of the formula that you ruefully neglect. Why is it always labor supply that has to be adjusted? Why do the workers have to take the shit part of the stick? Education is considered by some as a public commodity, and the fact that the state intervenes with loan guarantees makes it more important than other privately consumed commodities. But the distinction is becoming an increasingly fine line, because professors and administrators are pushed into attracting more money from various grants and other sources, and colleges generally are raising tuition, which makes it more a private rather than a public commodity. With regard to political bargaining, it is certainly true that the public sector is more favored than the private sector, and they tend to be better organized than in the private sector, and they can pass cost raises in the form of tax increases. I understand all that. But if you carefully read the newspapers, you should realize that that distinction is becoming decreasingly relevant. Governors of Ohio, Pennsylvania, Michigan, Wisconsin and many other states are pushing bills to destroy collective bargaining rights for public employees, and declare right-to-work (for less) laws. Detroit’s bankruptcy will literally wipe out the pensions of public sector retirees, who have paid into the fund all their lives, and other municipalities suffering from financial strains are also on the chopping block.

Phil Magness: Larry – “A union would have alleviated the professor’s condition because the health care plan would likely be provided by the employer” – That’s quite a leap in your assumptions. As adjuncts are typically treated as part-time workers (each course taught is ~3 hrs/week equivalent work time – office hours & grading don’t count btw – meaning a max course load of 4 per semester is ~12 hrs/week equivalency), health benefits are generally not a part of their compensation whether they are unionized or otherwise. Now it’s possible that a union might have negotiated some sort of buy-in to a basic coverage university health plan for adjuncts, but that is realistically the most you could’ve hoped for and – more specific to this case – there’s little evidence that such a scenario would have worked to the benefit of this particular adjunct, union or not. There’s also a very real possibility that the unionization of adjuncts at her college would have led to a hiring freeze of full time contract faculty by budget-conscious administrators (as recently happened in at least one state university system I directly know of, affecting a non-adjunct colleague of mine who was offered a demotion to part-time because of the unionization process’ anticipated budget strain). It sucks to be sure, but hey – welcome to the world of insurance price fixing and Obamacare!

On point 2 – “star professors” are not the problem in higher ed budgeting because “star professors,” or at least the ones that truly are stars and not simply legends in their own minds, are usually appointed to an independently endowed chair that is not part of the same budgeting equation. The problem comes from tenured faculty who have accrued seniority from the length of their employment & presently sit on a $100K+ salary despite teaching only one class a year – usually an obscure & specialized higher-level section on their pet interest areas, but which next to zero students actually want or take. Those profs do nothing but eat up salary, meaning a department cannot afford to hire a new full time faculty to replace this diminished teaching load of their senior tenures, so instead the farm out the teaching obligations to part-time adjuncts at $3K per class taught with no benefits at all. And I’m sure if you were to ask those adjuncts if they’re rather have a full time teaching position 75% of them would leap at the opportunity (the rest are normally people with other full-time jobs who teach on the side for extra income or simply because they enjoy it). But they can’t – why? Because there isn’t enough money to create those jobs, since it’s all being eaten up by (1) non-performing senior tenured faculty and (2) administrative overhead along the lines of an “Assistant Vice President of Student Emotional Health, Recreational Facilities, and Diversity” making $300K a year. IOW, your campus administration puts on a Green Energy Fair as part of some peripheral and completely needless office of the “Vice President of Sustainability,” remember that the $300K salary being received by its administrator = not one but SIX full time junior faculty salaries at a very reasonable market rate of $50K a year that most adjuncts again would leap upon if given the opportunity. And next time you see a senior full professor who makes $200K a year to teach a single class in “Interpretive Wiccan Poetry” attended by all of 8 students, remember that the same salary could hire 4 more adjuncts into full time positions at a salary most of them would gladly accept.

Also it’s not budget cuts to blame for the current problem in higher ed budgeting. It’s an exponential growth in administrative crap & lazy tenure retention over the past two decades. The number of higher ed administrative positions grew by 44.6% between 1989 and 2009. Full time faculty positions, by contrast, grew only 23.4% (which isn’t even enough to keep pace with the growth in students). A good summary of the issue including multiple data links is here:http://www.volokh.com/…/

L. Larry Liu: Some adjuncts do get pretty reasonable health care plans thanks to their unions. My main point, however, was that adjuncts benefit from unions more than they suffer. Star professors receive endowed professorships, but I would still wonder whether they would produce good scholarship if their generous salary would be devoted to student scholarships and other less privileged professors. The tenured professors without much demand are in the minority, and few of those tenures are given out anymore, so I am not very concerned about that. Administrators are the main obstacles to affordable education, and I will agree that they make too much money and there are too many of them. I do not mean to target cashiers or financial aid officers or secretaries. Paying for that extra bureaucracy at modest salaries is necessary for a modern college bureaucracy. The major problem are the administrators at top salaries. But your exclusive focus on the budget spending side of colleges does underestimate the impact of college funding cuts. Even maintaining college funding at a constant level would have significant cost-moderating impacts for college students.

Advertisements
This entry was posted in Uncategorized. Bookmark the permalink.

One Response to Do Unions Contribute to More Unemployment?

  1. Pingback: Do Unions Contribute to More Unemployment? | The Spectrum

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s