Thursday 723

Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.

PART 9 The Real Economy in the Long Run

Chapter 28 of 36 Unemployment

Section 16 of 21

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Economists disagree about whether unions are good or bad for the economy.

Critics of unions argue unions are a type of cartel.

When unions raise wages above the level equilibrium level of competitive markets

· the quantity of labor demanded is reduced

· some workers become unemployed

· wages in the rest of the economy are reduced, because of increased supply of nonunion workers

The resulting allocation of labor is both inefficient and inequitable.

Inefficient because high union wages reduce employment in unionized firms below the efficient and competitive level.

Inequitable because some union workers benefit at the expense of other non-union workers.

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Union advocates contend unions are a necessary to counter-balance market power of firms.

Excessive market power of a company most common causes are

· the company town where there is a single large company

· it is the main employer in a geographical region

In a company town if workers do not accept the wages and working conditions the firm offers, their choices become a long drive, move away or stop working.

In the absence of a union in a company town, the firm could use its market power to pay lower wages and maintain worse working conditions than would prevail if the firm had to compete with other firms when hiring workers.

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In the company town case a union may counter-balance the firm's market power and protect the workers from dictates of firm's owners.

Advocates also claim unions help firms by making them to respond efficiently to workers' needs and concerns, including work hours, overtime, vacations, sick leave, health benefits.

Thereby unions offer the benefit to firms of helping them keep a happy and productive workforce.

… …

there is no consensus among economists

keizai gakusha no aida de sōi wanai

経済学者 の 間 で 総意 は ない

… …

In the 1950s a third of the U.S. labor force was unionized. Today it is 10 percent. Give main reasons unionization decreased so much. ChatGPT:

The union membership rate fell from nearly one-third of workers in the mid-1950s to 10.0 percent in 2025. The main reasons are:

-Decline of heavily unionized industries. Employment shrank in steel, automobiles, mining and other large manufacturing industries where unions had been strongest.

-Globalization and foreign competition. Imports, overseas production and offshoring eliminated or weakened many unionized American factory jobs.

-Growth of nonunion industries. Most new employment developed in services, technology, retail, small businesses and the South and West — areas that historically has had lower unionization.

-Automation and changing production methods. Machinery and new technology reduced the number of workers needed in traditional union occupations. Recent economic research identifies technological change as a major contributor to the long-term decline.

-Employer resistance. Companies increasingly hired anti-union consultants, challenged organizing campaigns, relocated operations, subcontracted work and opposed first-contract negotiations.

-Labor-law and political changes. The Taft–Hartley Act of 1947 restricted union tactics; expanding right-to-work laws weakened unions’ finances and organizing power; and labor-law enforcement often failed to prevent delays or retaliation. Research has found adopting a right-to-work law reduces unionization substantially.

-Deregulation and intensified competition. Deregulation in trucking, airlines, telecommunications and other industries placed unionized companies under greater pressure from lower-cost nonunion competitors.

-Union difficulties adapting. Many unions concentrated on defending established manufacturing memberships and were slower to organize rapidly growing groups of service, professional, immigrant, part-time and contract workers.

The decrease resulted from the interaction of economic restructuring, globalization and technology, combined with employer opposition and a legal system that made new union organization difficult.

In general, market forces —especially globalization, automation, industrial decline, and the growth of less-unionized service sectors— reduced unionization, while employer resistance and labor-law changes reinforced the decline.