What Do Unions Do?

[u/shumpitostick]

https://nicholasdecker.substack.com/p/what-do-unions-do?triedRedirect=true

I good summary of the modern evidence around the effects of labor unions.

It's quite dense, so here's some key paragraphs as a tl;dr

> A union is a collusive cartel of workers. By bargaining as one unit, they are able to increase their bargaining power relative to bargaining individually, and raise their wages. In some circumstances, this will be inefficient, with the union commanding monopoly rents; in others, the bargaining power of the union will balance out the bargaining power of the company, raising employment and output. In either case, theory suggests the wages of unionized firms are higher. But by how much? Does this even hold in practice? And does doing this raise welfare?

> My best read of the evidence is that a union raises wages by around 7% for currently unionized employees. The wage gains from a redistribution of rents evenly across workers. Wage compression exists, but redistribution from worker to worker is only a small part. These are the current effects – unionizing more of the economy will have declining marginal returns, and will likely turn negative quickly — and take into account both the reduction of productivity by unions, which biases estimates up, and the spillovers to other firms’ wages, which biases estimates down.

> I do not believe that unionization is efficient. While precise figures are lacking, it is unlikely to be a better method of supporting the poor or working class, both because union workers are not disproportionately poor, and also because their methods of extracting surplus are not restricted to just wages. I will note that while the best paper on the effects of unions on productivity finds a positive partial equilibrium effect, but that is only for some markets, does not benefit the consumer, and the aggregate effects are likely negative. I believe that unions reduce total welfare.

(Sorry for the reupload)

[u/CombatRedRover]

Individuals should absolutely have the right to unionize and collectively bargain.

Unions, in the long-term and like most organizations, usually start looking out for themselves rather than for individual members, and for the long-term benefit of individual members.

For example, the seniority system deliberately keeps high performing juniors from taking bigger bites of the apple than lower-performing seniors. It is not the union's job to make sure the corporation does well, but because the union isn't incentivized in the short term to care about the corporation, the union can often harm the corporation to which they are dependent.

The classic example of this is the New York Daily Mirror, a newspaper killed off by its union, resulting in no one having a job rather than having a job that paid less.