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Real Union Enemy Isn’t Boeing, It’s Competition: Ramesh Ponnuru

June 28, 2011

June 28 (Bloomberg) -- The liberal writer John B. Judis, who means to offer a compliment, says it “may be the most radical thing the Obama administration has done.” He is referring to the National Labor Relations Board’s complaint against Boeing Co.

The company wants to produce airlines in a nonunionized plant in South Carolina rather than a unionized one in Washington state, in part because of repeated strikes at its facilities in the Puget Sound area. The NLRB says the move is illegal union-busting.

Republicans and business groups are apoplectic. They call the complaint a payoff to the unions, question its legal basis and portray it as an assault on the country’s 22 right-to-work states, which prohibit making union membership a condition of employment. Sixteen Republican governors have asked that the complaint be dismissed. But rather than backing down, the NLRB has further angered its critics by proposing to speed up employee votes on whether to unionize. Employers say they need time to make the case against unions, but the board calls a longer voting process “an unnecessary barrier” to unionizing.

Underlying this dispute -- and an earlier one over Democratic proposals to let unionizing elections take place without a secret ballot -- is a fundamental difference in perspective about the decline of unions. Liberals fear it will lead to the immiseration of the middle class. Conservatives tend to see it as inevitable and beneficial, because unions undermine the competitiveness that modern economies require.

A Gradual Decline

Between World War II and the 1960s, about a third of U.S. workers belonged to unions. Since then, the percentage has fallen to 12 percent. In the private sector, only 7 percent of employees are unionized.

Liberals see this decline as the result of deplorable policy choices. In their view, since the 1970s corporations have used their political power to block unionization, and then gained more power as unions weakened. The signal moment in this narrative is President Ronald Reagan’s firing of striking air- traffic controllers in 1981. Government was no longer on the side of unions, as it largely had been since the New Deal. The consequences, to hear liberals tell it, have been an unequal society with a smaller and poorer middle class, and with workers getting a shrinking share of national income. It follows that we need to make labor law more sympathetic to unions to reverse these baleful trends.

Competitive Disadvantage

This storyline gets one thing right: Government policy did have a lot to do with the decline of unions. But it wasn’t labor law that mattered. In a study of the decline of unions between 1973 and 1988, economist Henry Farber and sociologist Bruce Western found that the chief reason was that nonunionized companies grew faster than unionized ones. Employment at unionized companies dropped by 2.9 percent per year while employment at nonunionized companies rose by 2.8 percent a year.

Another paper by the same authors confirms that the union elections overseen by the NLRB were a sideshow: If the NLRB had held no unionization elections since 1972, the percentage of Americans in unions would have dropped by only an additional 1.7 percent.

You might be thinking that unionized companies shrank mainly because they tended to be in declining industries. But you would be wrong. Economist Barry T. Hirsch has found that only 20 percent of the decline in unions between 1983 and 2002 resulted from shrinking unionized industries. Eighty percent of it resulted from a decline within industries. Take manufacturing: Between 1973 and 2006, the number of unionized workers in that sector dropped by 6 million, but the number of nonunion employees rose by 1.5 million. In short, unions declined because unionized companies couldn’t compete with nonunionized ones.

Role of Government

Government abetted the decline by encouraging competition among companies: For example, by liberalizing trade and deregulating product markets such as trucking. The more competitive markets became, Hirsch concludes, the worse unionized workforces did. It is therefore not surprising that over the last few decades the labor movement has become increasingly public-sector in its orientation: Government workforces are of course largely shielded from competitive pressures.

This explanation for union decline fits with what we know about how unions grew in the first place. Michael Wachter, a professor of law and economics at the University of Pennsylvania, points out that union membership exploded in this country thanks to the highly unusual circumstances of the Great Depression and World War II, when discouraging competition was official government policy. Organized labor began its slow decline as government policies gradually liberalized.

Let Them Go

The shift toward a more competitive economy has not hurt workers in general: Total employee compensation as a share of the economy held fairly steady during the second half of the last century even as unions were shrinking. (It’s true that wages as a share of the economy fell, but that was a result of the increased cost of benefits.) The shift has, however, increased inequality among workers, with more rewards going to those with higher skills.

If we want to reverse the unions’ decline, the kind of labor-law changes that the Obama administration’s appointees to the NLRB have in mind -- such as speeding up elections -- are unlikely to do the trick. We would have to reduce competition among companies, too, domestically and internationally. The economy would have to be far more regulated than anyone in the mainstream of American politics has advocated. And we would almost certainly have to be willing to be a poorer country. We shouldn’t want any of that.

Our country has plenty of economic problems. But we also have blessings, and the continued decline of labor unions is one of them.

(Ramesh Ponnuru is a Bloomberg View columnist. The opinions expressed are his own.)

Read more Bloomberg View columns.

--Editors: Timothy Lavin, Stacey Shick

Click on “Send Comment” in the sidebar display to send a letter to the editor.

To contact the writer of this column: Ramesh Ponnuru at rponnuru@bloomberg.net.

To contact the editor responsible for this column: Timothy Lavin at tlavin1@bloomberg.net.


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