I love Adam Ozimek’s post “How to Improve Working Conditions” It encapsulates very well what I think Adam and I both learned from the work of Harvard Professor Richard Freeman—especially his influential book What Do Unions Do? Richard Freeman says that unions have two effects:
- Unions raise wages and benefits above what the workers in the union would otherwise get, which is much like a tax on a firm hiring workers and causes similar distortions. (The main difference from a tax is that the workers get the money from the “employment tax” instead of the government.)
- Unions communicate to firms the details of what workers want (and gather information from the workers in the union to be able to do this), often identifying ways to make workers better off that are worth more to the workers than they cost the firm, so that they increase the total size of the pie to be divided between workers and the firm.
Number 2 is the “worker voice” that Adam praises.
The simple bottom line on unions is this:
Raising wages or benefits and so making it harder for people to get jobs, bad. Making life better for workers in common-sense ways, good.
We can have the good, worker voice, without the bad, a worker-imposed employment tax that reduces employment and output, by adopting Adam’s proposal of encouraging worker associations as opposed to traditional unions. Workers need an organization that can speak for them. But they don’t need traditional unions that hurt the economy by grabbing for a bigger share in the short run.