The Featherbedding Files. Entry 19.
Do unions increase productivity?
Feb 22nd 2007, 17:44 by The Economist | NEW YORK
IF YOU’VE ever spent time in a union shop, in America at least, it’s hard to believe they do. It is not that union workers are lazy, a favorite canard of the right; at least in my experience, union workers are higher quality than you would expect for the job they are doing.
However, unions often offer resistance to new work processes that might increase efficiency, and not just ones that would decrease labour demand.
A friend whose brother is an engineer for an auto parts supplier often keeps us entertained for hours with stories of the epic (and so far fruitless) battles to do things like install digital gauges, or measure things using the metric system. Unions also spend a lot of time trying to work in featherbedding provisions to their contracts—forcing companies to use more people than are needed for a given job. This makes perfect sense from the standpoint of the union; more people doing a job means more workers paying dues. But it should put a drag on average productivity. Think of all those GM workers being paid to sit in warehouses, waiting for a job to open up.
But when conservative corporate law blogger Steven Bainbridge avers that, at the very least, unions do not decrease productivity, one must take the argument seriously.
To be sure, unions often do very good work…
Does this bolster the argument you used to hear quite a lot in the late 1980’s (and still do from some sectors of the left) that Europe outperforms America because of high unionization levels? Well, no. First of all, Europe doesn’t outperform America, though perhaps that is changing. But also, the economic logic suggests that unions will only keep productivity high so long as they are a relatively small portion of the workforce. If everyone has a high-paying union job, there is no incentive for workers to strive to keep their plum spots…
This may explain why some unions are equally well known for their lack of productivity; the American teachers’ unions are generally believed (by everyone outside of the teachers’ unions) to be the primary obstacle to improving America’s appalling public schools.
Some thoughts on markets where unions will produce higher productivity:
There are opportunities for deploying capital to replace low-skilled labour
The union wage is higher than the average prevailing wage for the workers’ cognitive endowments and/or educational level
There are significant transaction costs to finding and retaining labour, such as the construction trades, where it is more efficient to call the union labor hall and tell them to send over 50 guys than hire them individually
The work easily lends itself to classification and regularization
Productivity is easily measured