When most people refer to labor economics as a subset of neoclassical economics, they are actually referring to econometrics applied (usually, but not always) to the labor market. I didn’t realize this when I signed up for Advanced Labor Economics my senior year in college. I enjoyed the class immensely, because it was well-taught and endowed me with some key econometric skills. However, I often wondered why labor economists took such a narrow approach to their trade. Via Mark Thoma, I see that the Steven Greenhouse of the New York Times has a post about a new paper by Richard Freeman, a labor economist at Harvard. Freeman argues that our labor law needs to be fixed (quoting from the post):
He said unionization elections in the private-sector “have turned into massive employer campaigns against unions.”…
He argued that the penalties in the National Labor Relations Act were weak and “have failed to deter firms from illegal actions to prevent unionization.” He wrote that in the early 1950s firms fired about 0.5 workers for every 100 workers who voted in N.L.R.B. elections, but in the 1980s and early 1990s, firms “fired 4.5 workers for every 100 union voters,” with that percentage dropping slightly in recent years…
One big reason for this, he wrote, is that private-sector employers “have sizable monetary incentives to oppose unionism,” and the penalties that N.L.R.B. “has at its disposal are too limited to offset these incentives.”
In addition to calling for harsher and more targetted penalties (aimed at managers and not just companies), Freeman makes a suggestion that would give workers a voice even without a union:
Lastly, Professor Freeman recommends an idea that union leaders hate — allowing employers to set up employee committees that address not just productivity, but also issues that deal with workers’ well-being, like hours or pace of work. “Throughout the advanced world works councils perform this function, usually with members elected by employees, independent of collective bargaining,” he wrote.
Strong labor laws level the playing field of the labor market. Most labor economists who do study unions choose to apply methods like regression discontinuity to determine if unions raise wages. However, they may not be asking the right questions. Addressing labor laws per se requires an acknowledgment of worker-employer power dynamics, a move most neoclassical economists deem normative (and also hard to measure).
The paper was submitted as part of a symposium at GWU Law on the NLRA. There are a lot more interesting papers at the link above.
” . . . in the 1980s and early 1990s, firms “fired 4.5 workers for every 100 union voters . . .” The implication is that union voters were more likely to be fired than non-union employees. Is that true? What is the firing ratio for non-union employees? What is the source of the data? Why were people fired?
“Strong labor laws level the playing field of the labor market. Is there any data to support this? Specifically, how does “level the playing field” manifest itself?
And, what is “the labor market”? Are there differences among various segments? My intuition is that unions in the public sector (i.e., teachers, police, various federal workers), have far more than “leveled the playing field.” What about sports? The arts? Finance? Blue collar vs. white collar? Small business?
Yes, one factory worker has less power than does a large corporation, but does this scenario extrapolate to all segments of the business world?
Rodger Malcolm Mitchell
No, you’re right, this situation does not extrapolate to all sectors. The reality is, though, that many people are employed by large corporations and do not have union representation or a fair process to get it. Nurses might be the best example, as efforts have been made to deem them supervisors to cut their eligibility. I don’t think what Freeman talks about is the problem, but it is a problem.
Nick, perhaps the best example is Walmart. Nurses actually might be a poor example, as for many years there has been (still?) a nursing shortage, and nurses move easily from hospital to hospital.
There is a delicate balance. When management has too much power, workers can suffer. But when unions have more power than management, the company and its customers can suffer.
Union organizing laws are a form of government “regulation” of business, sometimes good, sometimes not. I’ve not heard of a “fair” law, simply because fair is not possible.
Rodger Malcolm Mitchell
Duh- Walmart. Dopey me. Nurses actually shouldn’t be very high on the list at all- farmworkers who are hired by Cargill et al., and some others I can’t think of on my fried brain.
Regarding your other points, there is a balance one must strike. I think US labor law breeds the combativeness of which you speak. I like what many European countries do, where labor, management, and the government get together to define general labor agreements. This also opens the door for work-sharing, which especially in downturns can benefit employers, workers, and the economy as a whole.
O.K., but just don’t use France as your European example.
Rodger Malcolm Mitchell
Germany and Sweden were the two that came to mind…I believe others have these arrangements as well, though.