Unions and Economic Growth

Robert Barro writes “The national fiscal crisis and recession that began in 2008 had many ill effects, including the ongoing crises of pension and health-care obligations in many states. But at least one positive consequence is that the required return to fiscal discipline has caused reexamination of the growth in economic and political power of public-employee unions.”     Other economists such as Richard Freeman have nicer things to say about unions.  

In my own research   ,  Erin Mansur and I have documented that manufacturing industries that are highly labor intensive (their average labor to capital ratio is high such as Apparel and furniture manufacturing) tend to cluster on the Right to Work sides of state borders.  So, our findings build on Tom Holmes’ work.  He treated “manufacturing” as one industry. We disaggregate it into 21 subindustries (based on the 3 digit NAICS code) and thus can study how different types of manufacturing industries respond to union rules.

Comments

  1. koreyel says

    …manufacturing industries that are highly labor intensive tend to cluster on the Right to Work sides of state borders.

    Right to Work = Right to pay less than a living wage.
    Right to Work really hard = Malquiladoras on the other side of these state’s borders

    From Maquiladoras recovering:

    “The difference was about $1.50 to 40 cents (per hour) in 1996 and $3.50 to $3 now. Mexico is still more expensive, but not that much,” Pascual said in an interview. Juarez has been Mexico’s leader in maquiladoras for decades. Other companies increasing their presence here include: Swedish appliance maker Electrolux, which is closing two Iowa plants, laying off 850 workers and shifting nearly all its production to Juarez – where it already employs around 6,000 people.

    Please note how everything is connected to everything else:

    • Capitalism always seeks to maximize the wages of its corporate class and minimize the wages of its worker class. That is it bottom line ethics.
    • It is able to pay ever lower wages because of its ability to transport goods vast distances.
    • Trucking, shipping, air-lifting all release carbon that has long term costs.
    • This proves cost effective because Capitalism gets a free pass. It treats the earth’s atmosphere as an endless free lunch account…
    • Capitalism ignores these carbon costs. Indeed cycles tons of money into propaganda that these costs don’t even exist.

    Where is all this trending?

    I see Texas with its vast poverty, leadership in HS dropouts, its Right to Work attitudes, core religions pragmatism, and its experience with malquiladoras as being perfectly positioned to capture the planets future low wage jobs. China may someday outsource its manufacturing of cheap phones and shoddy goods to Texas and nearby states. In the other words, the South I believe, will rise again.

    What’s that phrase the kids like to use these days?
    Oh yeah I remember:

    It’s all good.

  2. Bruce Wilder says

    When a rapacious and thoroughly corrupt financial sector, fully supported by the mainstream of the economics profession (and the leadership of both political parties), crashed the world economy, while siphoning off individual “compensation” that sometimes ran into 7 and 8 and 9 figures, I immediately thought, we’ve got to find ways to pay teachers, firefighters and highway workers earning 5 figures, less; otherwise, how can we afford the dynamic masters-of-the-universe hedge fund managers? We’ve looted the private pension plans, and cratered the 401Ks and, of course, home equity is gone in the great shell game, wages are falling and unemployment is high, but it is just not enough! Public sector unions are standing in the way of debt peonage for ALL the little people, and that’s just not right!

  3. Barry says

    “Robert Barro writes “The national fiscal crisis and recession that began in 2008 had many ill effects, including the ongoing crises of pension and health-care obligations in many states. But at least one positive consequence is that the required return to fiscal discipline has caused reexamination of the growth in economic and political power of public-employee unions.” ”

    Barro is just another crime committed by Harvard (BTW, it took me 2 seconds at Wikipedia to find the guy; I was unable to look him up on Harvard’s website – maybe they should hire competant people).

  4. says

    This research definitely tells us something about the mentality of the modal manager, but nothing (or perhaps even less than nothing, given the recent capital-allocation quality of the “free” market) about what’s actually efficient or profitable. The original Goldin&Black (iirc) showed that unions and modern management typically had the highest establishment productivity in a given sector (where the divides were union/nonunion and traditional/modern management). But that’s a long time ago.