The End of Unions?

We have seen a long term decline in union membership in this country.  There are those who argue that this is to the financial detriment of the middle class.  But apparently the facts are something quite different.  The following excerpt is from a piece by Prof. Richard Epstein from NYU Law School:

The Decline of New Deal-Style Unions

A perfect example of these intellectual risks is found in the current debate over the adoption of a right–to-work law in Michigan, an economic basket case and the cradle of American unionism . Right-to-work laws are understood on both sides as a real threat to union power because they allow workers to keep their jobs without having to join a union, or to pay union dues (at least for unit-related activities) if they choose not to join. The key question for conservatives and libertarians is how to defend a proposal that curbs union power.

In this connection, Michigan Governor Rick Snyder, a Republican who signed the right-to-work law in his state this month, gets top marks for political courage and skill in dealing with the Michigan legislature, notwithstanding receiving threats of political retribution from the Democrats. State Representative Douglas Geiss, a Democrat, chose his words carefully when he said “there will be blood,” on the floor of the Michigan House of Representatives.

The effects of the legislation confirm the classical liberal defense of competitive federalism, which argues in favor of state, not national, control over local labor markets. As Snyder pointed out, Michigan has to compete for new jobs and industry with its next-door neighbor, the business-friendly Indiana. The data support him. As F. Vincent Vernuccio and Joseph G. Lehman of Michigan’s Mackinac Center for Public Policy report in their recent Wall Street Journal op-ed, since Indiana adopted its right-to-work legislation, the state has gained about 43,000 new jobs—chiefly from new businesses that have chosen to locate there. In contrast, Michigan, during that same period, lost about 7,000 jobs, and its key automotive business remains on life-support from the federal government.

The gains from right-to-work laws are not just confined to Indiana. As Venuccio and Lehman report, between 1980 and 2011, overall employment levels rose by 71 percent in right-to-work states. In non-right-to-work states, they only rose by 32 percent. That differential does not come at the expense of wages, which grew four times as fast in right-to-work states: 12 percent versus 3 percent elsewhere. The explanation is clear enough. The productivity gains from escaping union work rules are shared with employees as employers bid up wages. The short-term monopoly gains to unionized workers eventually are, over time, more than offset by productivity losses. The New Deal union model is an economic mistake of major proportions.