Labor Unions Good for Economies and Equity, Says World Bank

[kolpo]

hello? hellooooo?

[DinoDoc]

Best thread ever!

[DinoDoc]

Best thread ever!

[kolpo]

How is this possible, it posted my tread but not my post

Oke here is post:

http://story.news.yahoo.com/news?tmpl=story2&u=/oneworld/20030213/wl_oneworld/1032_1045143315&e=2

[St Leo]

In a report based on more than a thousand studies of the effects of labor unions and collective bargaining on the performance of national economies, the Bank found that workers who belong to trade unions earn higher wages, work fewer hours, receive more training, and have longer job tenure on average, than their non-unionized counterparts.

Duh. Unions are the reason that modern western nations did not have Commie revolutions. Unions should be nurtured and encouraged.

[Zkribbler]

<----- V.P., Local 910

[Main_Brain]

Unions are good for Work Safety but bad for Employment.
Ban Unions!

[kolpo]

From the article:

"High rates of unionization also lead to lower inequality of earnings, especially for women and minority groups, and can improve economic performance in the form of lower unemployment and inflation, higher productivity, and speedier adjustments to economic shocks, according to the report, 'Unions and Collective Bargaining: Economic Effects in a Global Environment.' "

[DuncanK]

The World Bank is a little slow to come around. Kind of like some of the people here at poly. But they will come around eventually.

[Solly]

Just a pity they massively contribute to unemployment.

See Germany.

[DuncanK]

There's never evidence for that and I don't think its true. When workers get pay raises they spend more money which creates further job growth. Appearantly even the World Bank sees that now.

[Adam Smith]

OK, I'll bite.

Lets go to the source, and see what the
World Bank has to say about this.

Workers who belong to trade unions earn higher wages,

No surprise.

work fewer hours

No surprise.

receive more training

ditto

and have longer job tenure on average, than their non-unionized counterparts

ditto.

On the other hand, temporary layoffs can be more frequent in unionized firms.

Somebody forgot to quote this part.

At the macroeconomic level, high unionization rates lead to lower inequality of earnings

The results vary across country. See below.

and can improve economic performance (in the form of lower unemployment and inflation

The results vary across country. See below

higher productivity

This is to be expected, given higher wages

and speedier adjustment to shocks

See the temporary layoffs comment above.

Now for the unemployment effects. The results here are driven by different types of labor markets, a point which is not made clear in the original link in this thread. Labor markets in various countries can be divided into three groups: developing, newly industrialized (NIC’s), and industrialized.

In developing countries, workers tend not to be very mobile, tend not to have information about working conditions, and often do not have access to institutions which can enforce explict or implicit employment contracts. In this case, an employer can act as a local monopsonist, effectively the only buyer of local labor. A monopolistic labor supplier (ie union) facing a monopsonistic employer will both increase wages and increase employment. You can find this in any decent micoreconomics text.

In NIC’s you have a mixture of less developed and developed labor markets. Hence you get a mixture of effects.

In developing and middle-income countries, the markup can be higher or lower. For example, it appears high in Ghana, Malaysia, Mexico, and South Africa but relatively low in the Republic of Korea (in 1988, before the expansion of unionism).

Note also the observation that

Countries with highly-coordinated collective bargaining tend to be associated with lower and less persistent unemployment, lower earnings inequality, and fewer and shorter strikes than uncoordinated ones. In particular, coordination among employers (my emphasis) tends to produce low unemployment.

While I cannot find a copy of the whole study, this appears to indicate that coordinated labor relations as practiced in East Asian NIC’s appears to smooth out labor market problems while still developing.

In industrialized countries you have the standard effects of increased wages and increased unemployment. As the report notes,

union members, and other workers covered by collective agreements in industrial as well as in developing countries, get significantly higher average wages than workers who are not affiliated with a trade union. The wage markup can be larger in the United States (15 percent) than in most other industrial countries (5 to 10 percent).

fragmented unionism and many different union confederations are often associated with higher inflation and unemployment.

though it is not clear from the press release whether the authors controlled for level of industrialization in making this finding.

On the inflation front, unions can be considered labor monopolists. In setting wages, the union needs to balance gains or losses to existing members vs. gains in employment for new members. A competitive labor market only takes into account the latter effect in determining wages. A monopoly union would therefore change its wages only half as much either up or down as a competitive market would under similar conditions. So the inflation result is not surprising, but only half the story.

Lastly, studies on the effect of unionization or relative wages are notoriously difficult to do. For example, unionization can cause a reduction in employment in one sector, and a reduction in wages as people flow to other, non-unionized sectors. A good study must take account of both effects. Of the “over a thousand” studies cited, I would be willing to bet that less than a hundred are done well.

Class dismissed.

[Adam Smith]

Originally posted by DuncanK
There's never evidence for that and I don't think its true. When workers get pay raises they spend more money which creates further job growth. Appearantly even the World Bank sees that now.

Please see H. G. Lewis "Relative Employment Effects of Unionism", 1963, for the original study, and any good Labor Economics text for a review of the dozens of studies which followed the original.

[Solly]

The effect of uneconomical union activity on efficiency and investment also should be considered.

[DuncanK]

I always hated when my economics professors rambled on throughout the whole class period about something that didn't make sense at all and then dismissed the class without allowing you to ask questions.