Thankful for what we can get.

these scraps from the big table sure are tasty

Share and Enjoy:
  • Digg
  • StumbleUpon
  • del.icio.us
  • Facebook
  • Twitter
  • Google Bookmarks
This entry was posted in value, work. Bookmark the permalink.

4 Responses to Thankful for what we can get.

  1. Norman Maynard says:

    Love your work, and I agree that this is a fairly intuitive relationship. However, when we look at current developed countries, the line actually slopes up. There are lots of possible explanations for this (difficulty in firing convincing firms not to hire in the first place, higher union wages causing firms to be more selective, etc), but unemployment rates in good times are much higher in union-friendly France than in the US.

    Doesn’t mean we shouldn’t favor unions, but it does mean we shouldn’t favor unions for their effect on the unemployment rate.

  2. Jeff Walden says:

    Not to get into too much of an argument, but isn’t this an awfully simplistic view?

    Unions can also protect their members from being fired. Fewer people fired means less unemployment. Or does it?

    Strong unions presumably can demand higher wages. Higher wages means fewer employees can be hired. That means more unemployment. Or does it?

    Unions reduce wage disputes to a one-to-one decision, rather than one-to-many. That means the companies run more efficiently, so they can hire more, so less unemployment. Or does it?

    Sometimes you really do want one-on-one decisions, for example when an employee really should be fired. The union, in order to protect in those cases where the employee is unjustly fired, has to be able to interject into those cases, too. So the union makes companies run less efficiently, at the margin keeping some workers in the wrong jobs, making it harder for those who really deserve those positions (and who wouldn’t settle for the fallback that the union member might otherwise get) to get them. That means more unemployment. Or does it?

    Unions probably contribute some to employment. They also probably contribute some to unemployment. But exactly how the portions balance out overall — particularly when we consider that not all unions are alike, and that not all industries they’re active in are alike — is not nearly so clear. This graph pretends it’s a simple, black-and-white proposition that unions decrease unemployment. But it’s just not.

  3. ZT says:

    “Unions can also protect their members from being fired. Fewer people fired means less unemployment. Or does it?”

    The thing is, employers know this. There’s always some uncertainty when you hire someone; if you know it’s harder to fire bad workers, you’ll be more conservative in your hiring decisions in the first place. It’s an added cost, just like increased wages are an added cost.

    “Unions reduce wage disputes to a one-to-one decision, rather than one-to-many. That means the companies run more efficiently, so they can hire more, so less unemployment. Or does it?”

    Unions make wage bargaining an all-or-nothing issue that can temporarily (or permanently) shut down a firm. They cluster all the risk– no firm has gone bankrupt by failing to negotiate with just one employee, and it’s easy for a firm to just offer a market wage in many instances without long negotiation. Even if lots of individual negotiations did take more time than collective bargaining, I don’t think that effect would be nearly large enough to counter the risks involved in a strike. Also, collective bargaining often imposes clunky rules on how a firm can function (only “x” person can do “y” job, you can only hire someone for so much overtime, etc) which impose significant inefficiencies.

    So, props for pointing out the obvious complexities here, but I think you’re being way too generous. There are very, very few real economists who will say that unions -> more employment. Whether they lead to a lot of unemployment or a little unemployment is a matter of real dispute.

  4. Jeff Walden says:

    It’s a fair cop. :-) But I think of this as just a fun web comic without political overtones. Arguing for a particular political position, probably would exacerbate that. So I decided to just argue that the proposition wasn’t obviously true, in a semi-balanced manner (in terms of arguments from both sides — I suspect there are stronger intuitive arguments for the proposal here, but I don’t understand them enough to argue them), rather than to argue it was definitely false. If that helps avoid controversial (at the very least) political observations here, I’m basically happy. If this were posted in any sort of semi-political forum, I’d make a better, stronger argument for a position.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>