Unions, what good are they?

Yesterday at the Corner, Jonah Goldberg asked:

This is a good faith question: I often hear advocates of unions claiming that unions are "good for the economy." What is the proof of this? ...

You can make the case that unions are good according to other priorities that fall under the jurisdiction of "social justice" and all that...But as a purely economic matter, where's the evidence that unions actually improve the efficiency, productivity, or competitiveness of specific firms or industries or the nation as a whole?

Today's response is a starting point: there are two questionable technical analyses, neither of which (at least from the provided abstracts) seem to take into account the depressive effects of inequality, as these models often don't. This is followed by one from The Makinac Center for Public Policy, a conservative think tank funded by forces who have made the destruction of labor power one of their priorities. Goldberg fails to mention this, although maybe he's assumed his audience is familiar with their ideological presumptions. He does include a solid response from the political director of a union (he doesn't say which one) that's worth reading.

But there's a more succinct way to explain this, which is that post-depression American economic history can be roughly divided into two phases: before 1980, and after. Before 1980, we had strong economic growth that was broadly shared across all levels of income (these graphs are courtesy of Demos' Inequality.org):


After 1980, things changed. We still had growth, but nearly all of the results of this growth went to the top:

One primary feature of the economic landscape that changed over this time: plummeting rates of unionization. Reversing that trend isn't the whole answer. We need all sorts of policies that democratize economic power, such as employee ownership incentives, asset-building programs, changes in corporate governance and executive pay and a return to progressive income and wealth taxes. But encouraging union formation is the most common-sense and democratic reform to start with.

Goldberg clumsily tries to separate out questions about inequality and ""social justice" and all that" from "purely economic matters," as if it's unthinkable for the purpose of economics to be about improving the lives of ordinary Americans. But there's more to economics than determining the rate at which oligarchs can stuff suitcases of cash into their helicopters. We tried it that way and it didn't work out so well. It didn't even work out so well for a lot of the oligarchs. The Employee Free Choice Act is a key step in making the next few decades look more like the first bar graph and less like the second.

Most conservatives have yet to acknowledge that income inequality is even a problem. For those that do, as David Frum puts it in the last paragraph a September 2008 NYT piece, "Equality in itself never can be or should be a conservative goal." It's a strange statement for a piece that's trying to make exactly the opposite case, that Republicans should be worried about growing inequality. This bet hedging and cognitive dissonace is a direct result of the collision of their governing philosophy with the hard reality of the generally poor results it produced.

There was another example of this kind of thinking this week over at the new Enterprise Blog, a new house organ for the American Enterprise Institute (scroll down the page and note their commitment to racial diversity):

A major cultural schism is developing in America. Not over the issues that divided us in the past, like abortion, same-sex marriage, or home schooling, important as they are. The new divide centers on free enterprise—the principle at the core of American culture. As the recent “tea parties” showed, a growing ethical populism is now brewing in America. Protests are being raised against administration policies that punish “makers” and reward “takers.”

This is flat-out absurd. AEI is funded by the biggest takers in our economy, the kingpins of the financial services and extractive energy industries, and the network of foundations they've put into place to keep the system that allows them to do this taking in place. They wouldn't know an actual maker if one fell on them. If they did, they'd be pushing hard for universal health care and shorter workweeks, the lack of which are two of the biggest impediments to startup formation.

Despite their significant role in helping to elect Obama, most actual makers remain nearly completely politically disorganized. This has to change, because if one side clearly makes an argument and the other side is silent, even if that argument makes no sense it will prevail. There is some hope: places like New Deal 2.0 could become a must-read and lead the process of building a strong counterargument. Conservatives don't have solutions to these problems. Progressives do, but have a long way to go in figuring out how to tell the story.

Update: This is an excellent response to Goldberg about the biggest dislocator of jobs, which is technology. The only long-term answer to that, and the only thing that can protect our long-term global competitiveness, is that firms have to be come democratized learning organizations. It's hard to imagine that happening without unions.