WASHINGTON, Feb. 28 (UPI) -- Do unions serve the purpose of not only raising wages for their members, but also raising overall productivity and growth, not only in the U.S. but also around the world?
On the question of economic growth, this article shall not worry overly much on how unions affect particular corporate bottom lines so much as add to overall growth through increasing wage levels for workers, and thus add to larger economic growth through that mechanism.
It has been argued in other UPI columns, particularly our more conservative "Bear's Lair," that by cutting into corporate profitability, unions serve to harm overall economic growth -- to which this column ultimately says a loud NO!
Perhaps looking at the various World Bank studies and academic papers on the subject is an exercise in subjectivity and ideological filtering anyway, but so be it. The final conclusions this column -- which fancies itself objective -- is that after much study on the issue of unions and their larger effects, is to say that unions not only benefit their member workers but also overall growth.
Not letting unions off the hook, much of the above depends on modern union organizations around the world putting forward a positive agenda.
For professor Barry T. Hirsch of Trinity College, San Antonio while the productivity effects of unions vary widely, the wage increases inevitability do end up cutting into the bottom line
"Although unionization no doubt leads to productivity increases in many workplaces, on average these effects appear to be close to zero, and certainly insufficient to offset wage increases," Hirsch writes in his Nov. 2000 paper "Private Sector Union Density and the Wage Premium: Past, Present, and Future."
Hirsch adds, "In short, wage and compensation premiums are the principal avenue through which unions affect firm profitability, which in turn influences management behavior toward their unions and toward new union organizing."
In earlier research, Hirsch has found that market value and earnings are between 10 percent to 15 percent lower in an average union company compared to a non-union company.
This, however, is not to be unexpected, and while it may seem at least a bit of a rook to shareholders, it must be kept in mind that this is a direct transfer in value from the company to its workers. In other words, it again comes down to the ideology of who you think should get value for work, the company (and shareholders) or the workers.
I assert that as consumer spending is two-thirds of gross domestic product that workers getting more money is not a bad thing for overall national growth.
If workers get better wages, it stands to reason, that they will spend these wages.
A recent Organization for Economic Cooperation and Development study which attempted to analyze the effects of labor standards, identified countries that have undertaken major labor market reforms in area of the right to collective bargaining, and then to compare the performance of the economy before and after the reform.
Using this approach, the OECD report identified 17 countries that undertook significant labor market reforms over the past 20 years and compared the average growth rate of GDP, manufacturing output, and exports in the five-year period before and the five-year period after the reforms.
The cross country variation of results was significant, for example, growth rates in Panama increased by as much as 8 to 10 percentage points after the reform, whereas export growth in Peru collapsed. On average, GDP grew at 3.8 percent per year before the improvement in labor standards and at 4.3 percent afterwards. Growth in manufacturing output remained practically the same. In contrast, export growth declined by 2.3 percentage points on average, from 6.6 percent to 4.3 percent.
On the issue of wage levels, according to a recent World Bank report, workers who belong to trade unions earn higher wages, work fewer hours, receive more training, and have longer job tenure on average, than their non-unionized counterparts
On the other hand, the report found that temporary layoffs can be more frequent in unionized firms. But, at the macroeconomic level, high unionization rates lead to lower inequality of earnings and can improve economic performance, in the form of lower unemployment and inflation, higher productivity and speedier adjustment to shocks.
The new report -- "Unions and Collective Bargaining: Economic Effects in a Global Environment" -- says that union members, and "other workers covered by collective agreements in industrial as well as in developing countries, get significantly higher average wages than workers who are not affiliated with a trade union."
The study reported that this union wage markup is often as large as 15 percent in the United States, compared with most other industrial countries, where it is 5 percent to 10 percent. In developing and middle-income countries, the markup can be higher or lower. For example, it appears high in Ghana, Malaysia, Mexico, and South Africa but relatively low in the Republic of Korea (in 1988, before the expansion of unionism)."
Other notable findings include that union membership reduces wage differences between skilled and unskilled workers and also between men and women. In some countries such as Germany, Japan, Mexico, South Africa, and the United Kingdom, unionized women workers have a greater pay advantage over their non-unionized counterparts than unionized men.
The report also notes that "countries with highly-coordinated collective bargaining tend to be associated with lower and less persistent unemployment, lower earnings inequality, and fewer and shorter strikes than uncoordinated ones."
It adds: "In particular, coordination among employers tends to produce low unemployment. In contrast, fragmented unionism and many different union confederations are often associated with higher inflation and unemployment."
