Evan Soltas
Feb 27, 2014

If Not Unions, What?

The piece I wrote about unions still seems to be in discussion. It's received responses from Brad DeLong and Kevin Drum in agreement, and Michael Hiltzik and Michael Wasser in disagreement. The discussion seems to have crystallized into two questions: Are unions finished? Are unions necessary?

That's how I framed my response to Michael Wasser, and I don't think any of their new critical responses actually address those questions. This is problematic. As I wrote before, if all you argue is that unions are irreplaceable, and you don't address the primary issue that there's a hole where your union should be, you aren't really arguing anything. You're just saying that the U.S. is screwed.

Let's go to Hiltzik's piece, which I think suffers from this analytical flaw. Hiltzik writes:

Wasser is certainly correct in arguing that Soltas' argument that the U.S. is better off without unions and "unions can't be saved" reflects the limitations of textbook-learning. A few specific issues:

To think that federal labor law has had "little to do" with union decline, as Soltas puts it, is hopelessly naive. He's misled by the fact that union membership has fallen even though we have laws guaranteeing the right to collective bargaining, and by the failure to recognize how inadequately those laws are enforced.

"Soltas doesn’t even consider the ramifications of broken labor law," Wasser observes, and he's right. "Without any real penalties to fear, employers have an economic incentive to violate federal labor law. Research shows that indeed they regularly do, using a variety of often unlawful tactics to coerce and intimidate workers during union organizing campaigns."

When the employers don't do so, political representatives of the capital-holding class will, as was seen in Chattanooga, where politicians used the threat of the withdrawal of government subsidies, and the impact that would have on the workforce, as a weapon against the union.

Over the years, employers have developed an exquisite arsenal against union organizing. For a succinct description of how the war is waged, Soltas needs to examine "Confessions of a Union Buster," the heartfelt memoir Martin Jay Levitt published in 1993.

First, you've got to appreciate the potshot at the fact that I know my economic theory, as if calling something "textbook-learning" is an actual response to a thorough argument on my part. It's the same thing with his charge that it's "hopelessly naive" to think that economics explains the decline of unions. And your evidence for that is...?

Let's review the evidence I gave for the decline of unions. First, you've got an uninterrupted decline in the unionization rate since the 1950s:

Looking at the chart, it's pretty clear that unionization began to fall as U.S. labor encountered increasing global competition. Why? The U.S. in the 1960s and 1970s wasn't exactly a hotbed of anti-union sentiment.

But let's say that you aren't convinced by the historic slide of unions into nothingness. Then you should reckon with the consensus of research that the decline of unions can be explained by global economic competition. This is something Hiltzik simply refuses to do. An actual rebuttal would have responded to the evidence I put forward, not just repeat the view that employer opposition matters.

That's the same way that Wasser's response proceeds:

Given that workers are still trying to organizing unions, one must ask why they don’t succeed. The answer, as Kate Bronfenbrenner describes convincingly in detail, is intense employer resistance. Much of this resistance violates federal labor law. Employers also commonly use procedural delays to lengthen the union election process...This is not a natural outcome. It is the result of a deliberate decision to not address the deficiencies in our labor law.
So it's great that they can cite research that shows the use of the illegal anti-union tactics, and so on. The more damning problem with their line of argument is that they simply has no evidence that, in the aggregate, the factors they cite actually matter. The stuff that we normally call evidence is one-sided. Again, from Farber and Western:
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.
And two from Hirsch:
The paper’s principal thesis is that union decline has been tied fundamentally to competitive forces and economic dynamism...Of course there are other explanations for declining private sector unionization – strong management opposition, a less favorable labor law environment, high levels of unfair labor practices, changes in worker sentiment, and weakened demand by nonunion workers for union services due to the increased protection offered by employment laws (antidiscrimination laws, pension insurance, etc.). But these explanations are less fundamental and of second-order importance compared to competition and dynamism.
In competitive and dynamic economic environments, a union tax on company earnings and slow response to economic shocks combine to produce poor performance by union companies.
And from Slaughter:
The main finding is a statistically and economically significant correlation between falling union coverage and greater numbers of inward FDI [foreign direct investment] transactions...Because U.S. affiliates of foreign multinationals have higher unionization rates than U.S.-based firms do, this correlation does not reflect just a compositional shift toward these affiliates. Instead, it may reflect pressure of international capital mobility on U.S.-based companies, consistent with research on how rising capital mobility raises labor-demand elasticities and alters bargaining power.
The truth is I couldn't find one bit of research arguing what Hiltzik or Wasser say: that union decline is primarily the result of public policies that undermine labor or increased employer hostility.

What Hiltzik and Wasser are more interested in doing, as Hiltzik's title question "Are unions necessary?" suggests, is saying that you need unions to get liberal policies. I have no doubt that unions would make it easier for those on the political left to get the policies they want. And I think Kevin Drum's assessment, which describes the political vacuum left by the decline of unions, is totally on point.

But I don't see what unique weight this carries in the argument. If we can't save unions, then it doesn't count for anything that unions help win whatever policies you desire. The thesis of my original piece was that since the decline of unions, the U.S. political system has done a poor job of sharing prosperity with workers -- and that since unions aren't a real option going forward, we have to look for other ways to build employee bargaining power.

It's entirely non-responsive to my position to say, as Timothy Noah does, "To think you can tackle inequality without empowering workers is fantasy." Or, as Jeff Spross does: "[Evan] wants to replace unions w/ policies only passable w/ the political muscle unions historically provided." Or, as Hiltzik does:

Where does he think the impetus for these advances will come from, if not the labor movement? He may not have noticed, but Congress today is in the grip of the employer class.
 Or, as Wasser does:
I still don’t see how we get to policies like full employment, which Soltas believes will address inequality better than unions. Who, if not unions, has the resources, both in terms of money and supporters, to support this policy agenda and take on any opposition to it? And assuming these policies become law, who ensures that future administrations and congresses do not repeal them or render them ineffective? Unions aren’t just a check-and-balance on employers in the workplace. They also serve as a check-and-balance on corporate power in politics.
Why is it non-responsive? Because if it's a "fantasy" to think we can do good for workers without unions, then you better have some compelling evidence that unions can be brought back to life. The left can't get by just pretending that employers and politicians are to blame for killing off unions. It needs to actually reckon with the reality that unions have a substantial disadvantage in a globally competitive economy -- where a large union wage premium, for example, is simply unaffordable.

Yet I think my role in this debate is to say that the left's emphasis on the union isn't merely a flawed argument in this way, it's also wrong. We have no other choice but to look for another way to restore labor's share, but I also think another way exists.

I don't think, for instance, it takes unions to push the political system towards full employment. Clinton did it in the 1990s. A team of economists -- you may have heard of them, they're called the Federal Reserve -- is doing it now. I don't think it takes unions to push the political system to deal with inequality. The second largest U.S. antipoverty program (the earned income tax credit, after Social Security) was born in a de-unionized America, and mainly with the backing of Republican presidents. These are not difficult or new policy ideas.

We can rebuild the power of labor without labor unions. We just have to try.


One further comment on Hiltzik's piece. He really doesn't get the economic analysis in Freeman and Medoff about unions, which he waves off as "two academic economists" (but is in fact the single most important thing anybody has written about unions in the last 30 years) and then says, all of a sentence later, that I "cite no authority for these statements."

"The only vantage point from which union power can be seen as inefficient and bad for the economy is that of rent-seeking management," he says. So let me explain the basic economics of why the way unions help workers is less than ideal.

Unions build power by restricting the supply of labor -- quite literally, they say that, for any given wage rate, they'll supply less labor than would have otherwise been provided. (See the chart on the right.) That's not the way I'd like to do it, because it means we employ fewer and produce less, even if it drives up wages. I'd like to maintain strong demand for labor. This goes two-for-two on outcomes: Labor gets higher wages and higher employment. (See the chart on the left.)

If someone cares, I could actually write out a macroeconomic model for this, but it's going to get to the same result as above.