The so-called Employee Free Choice Act (George Orwell call your office) would end secret ballots in union voting making it easier for unions to organize. A bunch of economists signed an ad in today's Washington Post in favor of the Act. I hope to write more on this, but for now, I'll focus on the opening paragraph of the ad:
This alleged disconnect between wages and productivity and the stagnation of wages is sufficient proof to some that labor markets are broken and an increase in unionization is necessary to protect workers from exploitation.
Here is one noted economist's response to a similar claim made by Michael Lind a while back citing the same disconnect. Can you guess who it is? No googling. (HT: David Bieler):
One of America's new intellectual stars is a young writer named Michael
Lind, whose contrarian essays on politics have given him a reputation as
a brilliant enfant terrible. In 1994 Lind published an article in Harper's
about international trade, which contained the following remarkable
passage:
"Many advocates of free trade claim that higher productivity growth
in the United States will offset pressure on wages caused by the global
sweatshop economy, but the appealing theory falls victim to an unpleasant
fact. Productivity has been going up, without resulting wage gains for
American workers. Between 1977 and 1992, the average productivity of American
workers increased by more than 30 percent, while the average real wage
fell by 13 percent. The logic is inescapable. No matter how much productivity
increases, wages will fall if there is an abundance of workers competing
for a scarcity of jobs — an abundance of the sort created by the globalization
of the labor pool for US-based corporations." (Lind 1994: )
What is so remarkable about this passage? It is certainly a very abrupt,
confident rejection of the case for free trade; it is also noticeable that
the passage could almost have come out of a campaign speech by Patrick
Buchanan. But the really striking thing, if you are an economist with any
familiarity with this area, is that when Lind writes about how the beautiful
theory of free trade is refuted by an unpleasant fact, the fact he cites
is completely untrue.
More specifically: the 30 percent productivity increase he cites was
achieved only in the manufacturing sector; in the business sector as a
whole the increase was only 13 percent. The 13 percent decline in real
wages was true only for production workers, and ignores the increase in
their benefits: total compensation of the average worker actually rose
2 percent. And even that remaining gap turns out to be a statistical quirk:
it is entirely due to a difference in the price indexes used to deflate
business output and consumption (probably reflecting overstatement of both
productivity growth and consumer price inflation). When the same price
index is used, the increases in productivity and compensation have been
almost exactly equal. But then how could it be otherwise? Any difference
in the rates of growth of productivity and compensation would necessarily
show up as a fall in labor's share of national income — and as everyone
who is even slightly familiar with the numbers knows, the share of compensation
in U.S. national income has been quite stable in recent decades, and actually
rose slightly over the period Lind describes.
The answer is here.
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{ 11 comments }
Look what labor unions did for GM!
and Ford!
and Chrysler!
Labor Unions would not be so bad if it was just wage negotiation. It is still a job killer, and hurts the most unskilled workers the most. That is hardly a HOPENCHANGE policy.
The worst part are the stupid work rules. GM had to run assembly lines and then discount the heck out of vehicles because the cost of shutting down the lines was higher than the loss made by running the lines and selling vehicles at a loss.
Why?
Because when you shut down the line you still have to pay 95% of the labor market.
Even with artificially high hourly wages, you can still have labor flexibility in cyclical demand cycles.
Add in the work rules, and you get the double whammy.
We know this will promote a jobless recovery and really hit the unskilled Democrat base the hardest. It will almost ensure Obama loses. Who the heck is going to hire up in a soft recovery if all those workers are going to unionize.
Right now, employers are probably starting to screen based on whether they think the employee is pro-union or not.
If I am a plant manager who fears unionization, I am going to go recruit workers in the most conservative part of town if you get my drift. I am putting job postings up in the hardcore churches.
That is what I would do. If you hire back staff that skews conservative, they are more likely to vote down the union.
I honestly am losing respect for left-wing economists like Arrow and Blinder and Solow. They say one thing in a textbook and something entirely different in an op-ed. Blinder's own textbooks clearly explain how minimum wage hurts workers, yet he supports it. It clearly explains how unionization hurts non-unionized workers, yet he supports it.
Can somebody explain to me this disconnect between economics and left-wing economists' actual viewpoints? I seriously would like to know what motivates this.
More to the point, economists who continuously use statistics that are known to be false should be called what they are: charlatans. You cannot credibly make the case for this stagnating income myth, nor can you credibly make the case that unions (of the American, NLRB variety) help workers or the economy as a whole.
Somebody, please, explain to me how an economist could hold such views.
Jacob Oost on Feb 26, 2009 @ 4:03:29 AM
"Somebody, please, explain to me how an economist could hold such views."
Because they're human beings; flawed like all of us.
Obviously, they drink the water from the liberal fountain of lies too.
I understand they're flawed humans, but CONSTANTLY flawed humans? How can they be so two-faced? Is it a personality thing?
Who in the world could possibly defend the EFCA and its abandonment of the secret ballot?
Even George McGovern thinks the EFCA is a bad idea.
By pushing this, the Dems are only giving ammo to the folks who believe we're on the road to Chavez-istic fascism and pseudo democracy.
Jacob-
I could not agree more. It is not just dishonest, it is malpractice. It is negligence.
I respect the polite discourse that someone like Russ has with someone like Brad Delong or Mark Thoma, but sometimes they say such indefensible things that you have to wonder how competent they really are.
Example: I went ballistc on Mark Thoma's blog when he had the nerve to say that the notion that Fannie and Freddie had anything to do with the housing mess has been thoroughly debunked.
Debunked, proven false. With absolute certainty.
That is either a lie, or incredible ignorance, or sheer delusion.
Arnold Kling has vastly more street cred on this issue, and to say that his views have been debunked, when numerous Economists have seconded his view…it is disrespectful.
You can say there is some disagreement on the topic, but to say that a widely held view is debunked just because you disagree with it is sheer arrogance.
I won't go into Thoma's rationale for his view, other than to say it was amateurish, lacked an understanding of mortgage underwriting, and totally ignored the idea that there is a time lag between when a mortgage is written and the time it defaults.
He think FNMA is not culpable because they stopped writing subprimes after 2006. He fails to understand that an exploding ARM in 2008 was likely written in 2003 or 2005. FNMA just switched to Alt-A which are no-doc loans that will explode in 2011.
It was amateur hour and I went ballistic.
Wow! Wasn't expecting Krugman to be the author of that one…very interesting!
Minoring in economics at a technology school, I was able to take a very good course in global economics in the information age, taught by a former VP of a global technology firm. I am just curious about how certain ecomonists have adjusted there interpretation of the market, when it clearly fuctions differently. It seems that Austrian economics is more easily adaptable to new business rules than Keynesian.
In a time period where information technology and automation grew tremendously, companies were able to harness these tools to increase efiiciency and productivity. Perhaps a machine is purchased that makes a workers job much easier and increases their output 2 or 3-fold. Their productivity increases, but they actually may not be doing more. In some cases workers are trained to run and maintain a machine(adding greater value to themselves). In others cases, poor management may have had ineptly determined the value of their labor. If a technology allows a poorly running company to meets its targeted output, maybe by speeding up an assembly line and elimating down time between parts arriving at a given area, who should get the credit for the increase in productivity. I may be turning out 10x as many parts as before, but this could be the actual number from which my labor figures were derived.
I have been looking to post something of this nature for a while, and this seems to be the most relevant topic. I apologize if this takes away from the discussion at hand.
Geoff
Et tu, Jagdish Bhagwati?
Would I be unfairly presumptuous to say that our favorite two-faced economist would never make anywhere near this amount of honest effort shown above in current partisan reincarnation for fear of damaging his popular partisan appeal and fan base?
I think not.
Jiminy jillickers Radioactive Man,
I actually didn't realize that was Krugman, after reading the entire linked article – until I looked at the URL, and I still had to Google it to verify that there wasn't another Krugman in economics at MIT.
This goes to underscore again how someone can be such a great academic and an equally great idiot in their public writings.