Gary Becker and Richard Posner on Labor Unions

By October 3, 2007Labor Unions

From the University of Chicago, economist Gary Becker and legal scholar Richard Posner on the decline of labor unions in America, reacting to the UAW-GM settlement. Becker makes a point new to us:

Not that long ago, there was strong support for unions in American academia and among American intellectuals, as well as among blue-collar workers. Scholars who emphasized the negative side of unions, such as Chicago economists Henry Simons, H. Gregg Lewis, and Milton Friedman, were looked upon as crackpot reactionaries. Academics and intellectuals are still generally pro-union, but with little enthusiasm. They have seen that strong unions promote the earnings, and health and retirement benefits of their members who tend to be well paid-production workers at GM start at close to $30 per hour- without doing anything for workers who earn much less. As a result, no current union leader has the prestige, name recognition, or media attention that Walter Reuther, John L. Lewis, and Jimmy Hoffa did several decades ago.

Posner comment:

What has wrecked the unions, outside of the public employment sector, is the rise of competition in the product markets that used to provide the most favorable conditions for unionization. When thousands of workers are doing essentially the same work in the same plant in an oligopolistic industry, the cost of organizing is minimized. The existence of a large homogeneous work force reduces the cost of communicating the union’s message and reduces conflicts of interest among workers that would make it difficult to agree to a common package of wages, benefits, and improved working conditions. With few producers, the cost of organizing the entire industry’s work force is reduced and the benefits to the workers and to the union (in union dues and agency fees) increased. These conditions are most likely to be found in traditional assembly-line manufacturing, which as Becker notes has declined, in significant part because of the pressure of foreign competition. (That is why unions oppose free trade.) The more competitive an industry, the more difficult it is for unions to extract significant concessions from an employer: higher labor costs will simply deflect an employer’s customers to his competitors. Unionization accelerates its own decline.

You definitely reduce the marginal costs of organizing with the Employee Free Choice Act.

Lots more smart analysis of the state of organized labor in both posts. A tip of the hat for the link goes to Instapundit.

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