February 17, 2007


Workers are fine with fewer unions: Wealth and productivity have soared while union membership has declined (Russell Roberts, February 17, 2007, LA Times)

When more than 90% of the private-sector labor force isn't unionized, why do 97% of us earn above the minimum wage? If our bargaining power is so pitiful, why don't greedy employers exploit us and drive wages down to the legal minimum?

The simple answer is that bargaining power comes from having alternatives. Even in the absence of unions, employers have to treat workers well to attract and keep them. In a workplace as dynamic as that of the United States, where millions of jobs are destroyed and created every quarter, a company's ability to exploit workers is greatly limited by how easy it is to find another job.

Ultimately, it is competition among employers that protects us from exploitation. Even those who would seem to be the most vulnerable -- immigrants who struggle to speak English, for example -- can earn much more than the minimum wage simply because of competition for their skills. Cleaning people routinely earn $20 an hour, more than most cities' so-called living wage.

Look at workers' share of the nation's income. In 1950, employee compensation was 53% of gross domestic income. In 2005, that number was 57%. Somehow, as unions' strength dwindled over the decades, employees' share actually grew. And it's a share of a dramatically larger pie, the result of the incredible economic boom of the last half a century.

Ronald Reagan broke the labor movement and all we got was a quarter century of uninterrupted economic growth....

Posted by Orrin Judd at February 17, 2007 7:58 AM

"Bargainiing power comes from having alternatives"--such as having a car to take you to any place, any time.

Spatial mobility fascilitates competition. What a great insight--I wish I'd thougtht of that earlier.

Posted by: Lou Gots at February 17, 2007 9:00 AM

One of my wife's lifetime friends in Denver is a case in point. She was divorced and didn't have a car or a driver's license. Her choice of jobs was limited to places along the bus lines.

Every time we told her about a better opportunity than her current job, it was foreclosed to her because she couldn't get there on a bus. Or it would have taken a 2 hour ride with multiple transfers.

Posted by: ray at February 17, 2007 9:44 AM

She should have married, not bought a car.

Posted by: oj at February 17, 2007 12:13 PM

oj. Again, glad I invoked the no coffee drinking on line here at the bros. This is one of your crazier statements.

How will getting married help Ray's wife's friend get to work off the bus lines?

Posted by: erp at February 17, 2007 3:06 PM

What work? She only needs a job because she has an abnormal home structure.

Posted by: oj at February 17, 2007 4:17 PM