Capital Commerce

Obama Adviser Summers: Unions Cause Unemployment

January 31, 2009 RSS Feed Print

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Greg Mankiw helpfully points to this entry in The Concise Encyclopedia of Economics written by Lawrence Summer, the director of the National Economic Council:

Another cause of long-term unemployment is unionization. High union wages that exceed the competitive market rate are likely to cause job losses in the unionized sector of the economy. Also, those who lose high-wage union jobs are often reluctant to accept alternative low-wage employment. Between 1970 and 1985, for example, a state with a 20 percent unionization rate, approximately the average for the fifty states and the District of Columbia, experienced an unemployment rate that was 1.2 percentage points higher than that of a hypothetical state that had no unions. To put this in perspective, 1.2 percentage points is about 60 percent of the increase in normal unemployment between 1970 and 1985.

Me: Of course, reunionization of America seems to be a key plan in Obama's plan to strengthen the middle-class. Know what would help the middle class? Faster economic growth. As I have written before:

The problem is a lack of sustained or even spectacular economic growth. Consider this: During the 1980s, the economy notched 19 quarters of 3.5 percent GDP growth or better. In the 1990s, the economy also notched 19 quarters of 3.5 percent growth or better. So far this decade? Just eight. Or look at the number of quarters of "hypergrowth," say, 5 percent or better. (This was JFK's GDP goal in the 1960s, by the way.) There were 12 in the '80s, eight in the '90s. So far this decade? Just a single quarter, the third quarter of 2003.

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It's helpful to remember that although De-unionization began under Ronald Reagan with the firing of the nations air traffic controllers, it accelerated under Bill Clinton in the 90's after he pushed NAFTA through. Under Bill Clinton, the rise of temporary agencies began and union manufacturers heading for Mexico and China,skyrocketed. I, myself, spending 20+ years as a union steelworker went through two union plant closings in 1998 and 1999, not under Bush.

Cheryl of OH 9:09AM February 02, 2009

Ah, yes. The Great State of Hypothetical. The reason these guys resort to making up a state is because the antiunion arguments don't work in the real world.
The primary causes of our unemployment problem are Republican politicians and greedy, amoral business managers.

jimatmadison of WI 12:14AM February 02, 2009

Let's see. The people who make a produce usually can't afford to buy it, since they are on the lowest level of trickle down from the producer's profits.
The people who sell the produce usually can't afford to buy it, for much the same reason, they are the bottom of the retailer's profit trickle down.
These are the people who would be in unions. So explain again how their wages cause the producer or the retailer to fail economically?

Marnie of VA 6:21PM February 01, 2009