Evan Soltas
Feb 20, 2014

Why Unions Can't Be Saved

I'm grateful to Michael Wasser of "Jobs With Justice," a labor-rights organization, for writing a reply to my Bloomberg post this week on the death of American labor unions.

Wasser's argument is straightforward: Unions aren't dead yet, and they are the only way to get public policies that advance labor and reduce inequality.

So there are two ideas here, the potential and the uniqueness of unions. Wasser says unions still have potential and that labor's gains from unionization are unique. I disagree on both. I think unions are far more likely to grow weaker over, say, the next ten years than they are to grow stronger. And I think that there are many other ways to advance labor -- ways that are, to my taste, preferable to re-unionization.

First, potential. In the Bloomberg piece, I linked to (but did not discuss) some research that shows pretty clearly that union decline has been driven by economic competition. Let me just pull one abstract from from Henry S. Farber* and Bruce Western:

...We then present an accounting framework that decomposes the sharp decline in the private-sector union membership rate into components due to 1) differential growth rates in employment between the union and nonunion sectors, and 2) changes in the union new organization rate (through NLRB-supervised representation elections). We find that most of the decline in the union membership rate is due to differential employment growth rates and that changes in union organizing activity had relatively little effect. Given that the differential employment growth rates are due largely to broader market and regulatory forces, we conclude that the prospects are dim for a reversal of the downward spiral of labor unions based on increased organizing activity.
So the heart of the matter, it seems to me, is whether union decline is basically irreversible. For what it's worth, the rest of the literature is also pretty clear that U.S. labor law had limited impact. If the decline is permanent, furthermore, Wasser's claim about uniqueness has no independent policy implications -- it's merely a statement of pessimism.

Yet I still find that pessimism implausible if one considers this graph (via Jared Bernstein) showing the broad increase in wages in the 1990s. Why? Unionization was also low then. How did wages rise so quickly, then, for the bottom half of the wage distribution? You can thank full employment.

The chart Wasser puts at the top of his post -- the strong negative relationship between unionization and inequality -- is the reason he thinks unions are needed. As for me, it's the reason I think unions are doomed. In his view, that relationship is causal: the decline in the union causes the rise in inequality. In my view, the relationship is driven by a third variable, the global economy, which both raised inequality and punished unions.

* Full disclosure: Farber is currently my professor in an econometrics course.