« Our colleague Gordon Tullock | Main | China fact of the day »
Why are labor unions declining?
Why hasn't labour successfully colonised the non-manufacturing world, outside of the public sector?
Read the comments to her post, but I see a few major hypotheses:
1. It is now easier to fire people who try to organize unions. Remember Reagan and the air traffic controllers?
2. Marginal products are easier to measure and markets are more competitive than in times past. This lowers the scope for unions as a means of increasing the bargaining power of labor.
3. Physical capital --- especially in service sectors -- is less fixed than in previous times. If workers organize, the capital will move to another sector or nation. In contrast an auto plant is hard to move out of Michigan.
4. Government regulations, and superior market institutions for risk-sharing, render unions less necessary.
5. In the service sector the distinction between "management" and "labor" is more blurred than in traditional manufacturing firms. Yes you have lawyers and secretaries, but the class of manual laborers who spend their lives with a single firm is smaller than in times past.
It remains a puzzle to me why unions are so strong in Hollywood, suggestions are welcome, I have turned on the comments if you have any ideas on this.
Posted by Tyler Cowen on January 26, 2005 at 06:53 AM in Economics | Permalink
TrackBack
TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d8341c66b253ef00e5509788c58834
Listed below are links to weblogs that reference Why are labor unions declining?:
» Whither Unions from The 80/20 Club
Assuming the New Red Menace now occupying Washington, D.C., really does want to drive America back to the days before the New Deal, and make sure it never happens again, they’ll probably need to take the following steps in roughly the following order... [Read More]
Tracked on Jan 26, 2005 1:59:26 PM
» Tyler Cowen on Labor Unions from Market Power
I don't know about Hollywood, but he doesn't mention how ubiquitous labor unions are in Major League Sports (one of the commenters to the piece mentions this) [Read More]
Tracked on Jan 26, 2005 11:37:13 PM
» Tyler Cowen on Labor Unions from Market Power
I don't know about Hollywood, but he doesn't mention how ubiquitous labor unions are in Major League Sports (one of the commenters to the piece mentions this) [Read More]
Tracked on Jan 26, 2005 11:40:48 PM
» Blogs on Union Decline from Unions-Firms-Markets
The topic of deunionization has been featured on a number of blogs this week. It is interesting to see this topic discussed by scholars and other folks whose primary discipline and interests are not labor or industrial relations. Here are [Read More]
Tracked on Jan 27, 2005 4:24:35 AM
» Blogs on Union Decline from Unions-Firms-Markets
The topic of deunionization has been featured on a number of blogs this week. It is interesting to see this topic discussed by scholars and other folks whose primary discipline and interests are not labor or industrial relations. Here are [Read More]
Tracked on Jan 27, 2005 4:25:54 AM
» Blogs on Union Decline from Unions-Firms-Markets
The topic of deunionization has been featured on a number of blogs this week. It is interesting to see this topic discussed by scholars and other folks whose primary discipline and interests are not labor or industrial relations. Here are [Read More]
Tracked on Jan 27, 2005 6:28:52 AM
» Unionization's Decline: a Human Capital Story from EconLog
Jane Galt asks, Why hasn't labour successfully colonised the non-manufacturing world, outside of the public sector? I think that the... [Read More]
Tracked on Jan 27, 2005 6:44:35 PM
» Unionization's Decline, a Human Capital Story from EconLog
Jane Galt asks, Why hasn't labour successfully colonised the non-manufacturing world, outside of the public sector? I think that the... [Read More]
Tracked on Jan 27, 2005 10:20:19 PM
» Unionization's Decline, a Human Capital Story from EconLog
Jane Galt asks, Why hasn't labour successfully colonised the non-manufacturing world, outside of the public sector? I think that the... [Read More]
Tracked on Feb 25, 2005 5:54:55 AM
Comments
And unions are strong in grocery chains, where their delay tactics can be very costly in rotting food!
Posted by: eric at Jan 26, 2005 8:52:34 AM
The same situation as Hollywood must pertain to professional sports. Interesting indeed. I suspect it has to do with the early history of cartel-like behavior of the owners of studios and/or sports teams.
As for the previous comment about rotting food, it typifies a covert entitlement mentality among the Conservative class. "Bring me my food now servant." "Why sir, why don't you get up and get it yourself."
Unions were created to provide collective bargaining power to laborers who, as individuals, had little or none with their employers. Unions may have strayed far from that purpose. But that is why they started and that is what they still profess to be for today.
Posted by: martin at Jan 26, 2005 10:13:12 AM
Hollywood unions are a very different animal. They are more like a guild then a union. They also create a system where all employeers face the same costs structure. Autos unions are like this, but film makers are not faced with competiton from producers with lower costs. If Hollywood faced low costs foreign competition the system would change.
Hollywood and much of the tech industry work on a very similiar pattern where everything is organized around a project -film -- rather then a flow process. So I wonder if tech workers should not look at the Hollywood system as a way of organizing.
Posted by: spencer at Jan 26, 2005 10:14:28 AM
Could the decline of unions also partly be due to the fact that in some popular comparisons non-union firms are doing better than unionized ones? The airlines come to mind with non-union JetBlue and Southwest having "happy" and well compensated staffs, while the employees at the "majors" like United, US Air etc face pay cuts and lots of uncertainty about their jobs. Other examples? Non-union mini-steel mills vs. the old line union steel.
Posted by: Ian at Jan 26, 2005 10:14:37 AM
Reagan's firing of the ATCs was, in retrospect, a seminal moment: cmparable, perhaps, to Margaret Thatcher's crushing of Arthur Scargill's coal-mining union in Great Britain a few years later. Howevr, I doubt anyone would have characterized either of those moves as "easy."
When I was growing up, it was considered axiomatic that you had to negotiate with the unions--especially public-service unions, and *especially* public-service unions engaged in essential activities--which led to a gross asymmetry in leverage between the unions and their employers.
I remember John Lindsay, when he was mayor of New York, acceding to essentially all the demands of the police and fire unions, which led to the unions being the only organizations essentially immune from budgetary control--which, in turn, led in more or less a straight line to the New York near-bankruptcy in 1974-1975.
Posted by: David Hecht at Jan 26, 2005 10:37:17 AM
Aren't unions just an instance of Coase's theorem?
Posted by: Macneil at Jan 26, 2005 10:55:59 AM
Tyler:
I think you hit the nail on the head with #5. The labor-management dichotomy loses all meaning when labor believes it will BE management in a few years...
Posted by: Adam at Jan 26, 2005 11:24:10 AM
I think that Hollywood's unions are following the trend and becoming less powerful. About 4 or 5 years ago there was a writer's strike, and a shorter-lived actor's strike in sympathy. Not coincidentally, about 6 months later you saw the explosion of "reality TV" which requires neither (traditional) writers nor actors...
Posted by: Anne at Jan 26, 2005 11:37:38 AM
Even the entertainment business is becoming less unionized, as much of its work is now done outside Hollywood. Much of it in Canada.
The reason for the demise of unions in the private sector is simple, they do more harm to, than good for, workers. In the construction trades they rob the 'apprentices' blind.
Posted by: Patrick R. Sullivan at Jan 26, 2005 11:51:28 AM
One thing people tend to forget is that the decline in the percentage of the private-sector labor force represented by unions was just as fast between 1953 and 1978 (down from about 36% to a little over 22%) as it ahs been between 1978 and now (down to 8.2%). So whatever the cause of the decline is, it can't realistically be dated from the early 1980s.
My own take has several components, most of which Tyler mentions:
1. Increased global competitiveness in manufacturing. Think about the implications of a rising import share in steel, autos..., for the ability of unions to achieve benefits for their members (the demand for union representation has decreased).
2. Increased government regulation of the workplace, ranging from anti-discrimination laws to occupational safety laws to efforts (whether they've worked well) to protect pensions to tax sheltered savings plans. (Again, the demand for union representation has decreased.)
3. A shift in the industrial structure to services. This has *probably* decreased the average establishment size, and retail/service firms tend to be organized on a site-by-site basis. This has probably increased the costs of providing union services. (The supply curve of union services has shifted to the left.)
4. Increased employer resistance (which pre-dates the 1980s) has also raised the costs of providing union services.
What has surprised me has been the failure of the unions in the US and elsewhere to respond to globalization by globalizing, too--multi-national, or trans-national unions...
Posted by: Donald A. Coffin at Jan 26, 2005 11:53:31 AM
Hollywood unions are strong (in addition to a few reasons above) because the workers in HW gain *more* with unionization. Workers in HW are like independent contractors - they work for a number of companies on teams that change constantly. The union is a constant presence in their lives and a constant representative of all workers to the studios, providing the advantages of both aggregation and flexability. Another reason for their persistance may be the historic sympathy that HW has for workers rights.
Posted by: David Zetland at Jan 26, 2005 12:18:59 PM
I think that Hollywood unions are stronger than in other private-sector service industries, but growing weaker.
The main source of the unions' strength is probably the superstar effect. It's easier to maintain a cartel if one needs only monitor a few actors. Although there are tens of thousands of creative workers in Hollywood, there are only a few dozen A-list actors, directors, and writers. To the extent that the core products of the industry rely on star power, the labor cartel need only monitor a relatively small number of actors rather than innumerable alternatives. This is facilitated by a number of solidarity enhancing myths about the bad old days of the blacklist and the studio system.
It's quite clear that the unions are weakening. The studios are very good at using Article 20 PFDs and other arrangements to avoid using union labor. The unions gripe about "runaway production" (ie Canada) but haven't been able to do anything about it nor are they able to stop article 20 productions. But note that these evasions primarily harm craft unions and leave WGA, DGA, and SAG sitting pretty. This makes sense since the superstar effect only applies to above the line talent. Gaffers are more or less interchangeable but you can't just replace Tom Cruise with some waiter who has a headshot. In the past you might have been able to count on solidarity strikes, but these are less likely when the craft workers would have to fly to Vancouver to picket.
Posted by: Gabriel Rossman at Jan 26, 2005 12:59:37 PM
Actors are more sensitive to public opinion than other professionals. If there is widespread public disapproval of crossing picket lines, an actor's career will suffer if he does so. Individual manufacturing workers have little to lose from public disapproval.
Posted by: Xavier at Jan 26, 2005 1:29:51 PM
Not to seem thick but reason #1 seems like the number one reason -- in most industries there are now very few consequences for employers who fire employees who are attempting to organize.
Industries that rely more on public good will -- entertainment and software come to mind -- are somewhat socially constrained.
Intellectual-property-related industries are also constrained by the fact that disgruntled IP workers don't produce quality goods -- in classic project management terms a manager can control scope (quality and amount of content), resources (wages, salaries, and bonuses, plus materials), and time (CES and other trade shows / pre-announced release days / holiday buying season.) In IP-land reducing scope (leave out Hagrid, don't update the spam filter) or increasing time (don't release tax-prep software till May) are far more costly than increasing resources (bonuses, more soda, signing the gaffers' union contract.)
Airlines have a *slightly* similar problem in that people aren't crazy about flying with pilots and attendants who are known to be hacked off with management and (worse) might arbitrarily begin flying "by the book" (e.g. not taking accepted but regulation-violating shortcuts.)
Meat packers (the union du jour according to this mornings paper and many blog comments) are better situated. First of all nobody even *wants* to think about how their sausage is made. Secondly, traditionally low wages, toothless workplace safety enforcement, no prospect of overseas outsourcing (I really want to buy fresh ground beef packed in Burma? Neither does anyone else.), and ancient tradition provide little incentive for packers to use traditional methods such as capitalization to increase productivity. Instead they can just increase line speeds, lobby against reform, and continue to fire easily-replaced employees when they become injured. (Note: Contrast this to the software industry where permitting a premier programmer to develop carpal tunnel syndrome cost the employer millions of dollars in lost opportunity.)
---
I also suspect Tyler’s reason #4 has a lot to do with it. If (enforced) regulations already prohibit Imperial chicken from padlocking employee fire escapes those employees have less incentive to strike to get the padlocks removed. (Not the best example of the process in action – see http://www.emergency.com/nc-fire.htm -- but the principle remains.)
Assuming the new red menace really does want to drive America back to the days before the New Deal, and make sure it never happens again, they’ll probably need to take the following steps in roughly the following order.
1) Now, while labor conditions remain fairly poor for union organizing they need to repeal current labor protection laws and possibly add laws making organizing efforts criminal offenses by, for instance, interpreting organizing as a form of extortion. Extra credit for extending RICO statutes to cover labor organizers.
2) Build a body of legislation, regulation, and case law suggesting that any information gathered in the workplace is part of the company’s intellectual property and my not be disseminated under risk of penalty. Nondisclosure statements could be required of employees stipulating that labor practices, workplace conditions, and on-the-job injuries constitute competitive secrets and that they may only say they leave a job “for personal reasons.”
3) Extend medical privacy regulations to prohibit disclosure of longitudinal data that might lead to government or 3rd party analysis of workplace conditions.
4) Then, but only then, will the administration really begin to gut workplace-related regulations that might renew public interest in unionization, public health, and other New Deal-era “aberrations.”
David Innes
Posted by: David Innes at Jan 26, 2005 1:45:23 PM
As a past member of a printing Union, I can say that from my experience:
1) Unions are extremely easy to (and are) corrupt. Union management is an entrenched oligarchy, whose only goal is their own survival.
2) Unions cost workers a significant amount ($60 bucks out of every paycheck!), but offer very little. A 401k or investing your money yourself you will do much better then the union pension plan (which the unions raid, or use to enrich themselves.)
3) Access to education, news and information (hot jobs?) and a competitive job market means that workers can switch industries, companies and locations very easily. When compared to the 1930's.
Unions are an antiquated 19th century concept that has failed to adapt to the modern job market.
Posted by: Gregory Kennedy at Jan 26, 2005 3:11:04 PM
My one experience with unions was joining the musicians union as a teenager. It was local 10 in Chicago. The office is still the same and has the same LEAD LINED door that was installed by Jimmy Petrillo.
In the early 60's, lots of places would have some kind of 2-3-4 piece band on Friday or Saturday night, but the union had prices jacked very high. I could make as much on a 3-4 hour downtown gig (working wiht my dad) as other guys in school made in 1 to 2 days of work.
Of course, the union priced it's product out of existence, first with better juke boxes, and lately with DJ's.
Oh yea, I thought I'd have to demonstrate some real musical ability to get in, but all I had to do was play a scale in C and answer the question, "Do you have your initiation fee?"
Posted by: Frank Borger at Jan 26, 2005 4:31:42 PM
As I see it, unions offer a bargain of safety, security, and stability to the worker in exchange for money and freedom. The problem for unions today is that they are no longer cost effective. Unions no longer seem like the best way to protect oneself and one's family in a rapidly changing world where there is increased mobility for both jobs and workers. Most younger workers would rather have the money and the freedom to adapt as conditions change rather than be stuck in an industry that could be obsolete in a decade.
The situation with Hollywood has much to do with a limited market for the primary goods - TV and movies. However, this is changing as we get more and more channels, companies film outside of Hollywod, and it gets cheaper to produce video.
Other union industries are slowly losing out to automation and price competition. Hollywood is heading the same way, it's just a lot tougher to "simulate" an actor. But every year they get closer to doing it. In the meantime, lower priced (some even non-union!) actors will continue to destroy the pricing ability of the Hollywood unions. I give it a decade to be obvious what is happening and two decades for it to be mostly complete.
Posted by: Keith Perkins at Jan 26, 2005 6:24:33 PM
You have 5 reasons for union's decline. However, a point should be made that only one reason can cause a company to close and it's union workers to lose their jobs. Your number 1 reason, easier to fire workers, is the weakest one. Low cost foreign competition is a major factor. The other reasons are good points.
Posted by: Tom's Take at Jan 26, 2005 10:29:57 PM
The mobility of capital wouldn't seem to affect the position of unions in the service sector, since it's hard to "offshore" a nursing home or burger joint to Mexico.
Taft-Hartley's legal prohibitions of many of the successful labor tactics of the 1930s--boycott and sympathy strikes, especially--and federal acts prohibiting strikes in various transportation industries might have something to do with the difficulty of winning a labor dispute.
Posted by: Kevin Carson at Jan 26, 2005 10:35:53 PM
Reagan did not fire the air traffic controllers for unionizing. Their union was recognized, and had a contract. They decided they weren't satisfied with the terms of the contract and were seeking to renegotiate. The existing contract contained a no-strike clause, and rather than seek relief from that dubious detail in court they struck in violation of their contract. Reagan would have been wrong to negotiate a new contract while they were in breach of the current one.
Posted by: triticale at Jan 27, 2005 12:10:47 PM
Well, home construction, and the so-called "litigation problem" with defective homes proves point 4 wrong. States where anyone can pick up a hammer have much higher problems with defective homes than states where there are certification and regulations of just who can be building houses. States like TX and CA have high rates of lawsuits, and states like IL have low rates of "defective house" suits. Instead of addressing the real issue: untrained and/or incompetant workers, the public rallying cry is "tort reform." Similar issues of getting the worst 20-50 doctors per state out of the market. Which would do a far better job at reducing malpractice than any form of "tort reform."
OK. Theoretically, point 4 is correct, but as a country we have been going out of our way to eliminate regulations.
I would propose a point 6 for your list:
Advertising and Marketing. Marketing has made it seem that only unions can be corrupt (selective amnesia renders the words enron and worldcomm both invisible and inaudible). Every sample/anecdote of a corrupt union/union_official is well mentioned, but mentioning a corrupt mismanager is erased (except in dilbert cartoons). The term for that is "selection bias." Marketing does such an effective job at controlling thought, that the word "reform" when added to anything makes you stop thinking about what is actually going to happen.
The guild system of the middle ages mutated into the union movement. If you look at why guilds disappeared, you would identify why unions are withering away as well.
Hypothetical situation:
I build a house. The house is located in TX. I (or the folks I hired) did a bad job making the roof. The roof leaks. Carpeting and interior walls are damaged (ever see what happens to sheetrock when it gets wet?). What are my legal liabilities to fix the problems I caused? After "tort reform" all I am liable for is fixing the roof. Not replacing the carpeting. Not fixing the walls. Nothing but the roof. As a result, I have very little incentive to hire decent workers, or to make sure they do a proper job.
Posted by: Peter at Jan 27, 2005 12:18:15 PM
What about age/generational issues?
I work with a union. Besides gripe about trivial issues (we solved most of our safety and other concerns years ago), the main thing the union does is protect seniority. Younger workers have no incentive to support that behavior, since it makes them the first to go when we have a layoff. Younger workers also don't have the same belief as the older ones about working for the same company from the time they enter the workforce until they retire.
I guess that means they are discounting the future benefits of unionization at a different rate than their parents. In Hollywood, where they hear the pro-union propaganda 24/7, they don't use the same discount. Ditto the aviation and automobile industries and public sectors (teachers, mail carriers, etc.).
Posted by: Eric H at Jan 27, 2005 5:29:46 PM
Unions succeed in Hollywood for two reasons.
1. It's full of lefties who like the idea of union membership.
2. It's all mobbed up.
Posted by: PJ Doland at Jan 30, 2005 7:18:28 PM
I think labor unions are declining due to the fact that they create an "us and them" mentalitity that is counter productive to all partys involved. I think labor unions support all that is wrong with American manufacturing, and they are killing us in a global market.
Posted by: Kris at Feb 9, 2005 8:23:35 PM
u kno ive heard a lot on labor unions and i think urs sucks and its all bull crap
-Obie Trice
Posted by: Chyeah at Feb 11, 2005 2:59:42 PM
