Free trade

Free traders are worried that unions will push Obama to adopt protectionist policies.

And the leaders of the G-20 should take note: Mr. Gerard and his fellow labor leaders are just getting started.

While labor’s opposition to free trade is nothing new, having an ear in the White House is. The Obama administration, though it says it supports free trade, has so far seemed more aligned with labor’s trade agenda than has any administration in decades.

Let's review the charges against labor:

- The steelworkers' union pushed Obama to impose tariffs on Chinese tires. A provision of the legislation that admitted China to the WTO allows the US to do this when there is disruption in an industry. If we're not going to enforce this provision, why was it included in the legislation? Furthermore, China imposes a slew of protectionist policies that affect US goods. Shouldn't we use the tools at our disposal to get them to eliminate these provisions?

- Unions want border adjustment taxes to be included in climate change legislation. If the US adopts a cap-and-trade system to regulate greenhouse gas emissions, US manufacturers will be at a disadvantage relative to manufacturers in China, India, and other countries without such a system. This is the main reason climate change legislation generates so much opposition. Compensatory tariffs would have the effect of raising the price of imported goods by the same amount as if the producing countries had signed onto cap-and-trade. As Paul Krugman argues, this makes perfect economic sense and it is legal under WTO. Also, by imposing a system in which Chinese manufacturers are subject to high prices for carbon emissions, yet the revenue generated by those restrictions goes to the US, imposing these border adjustments may be just the tool to encourage China to sign on to a global emissions reduction system.

- The steelmakers' union is pushing many individual trade cases. Well, China subsidizes many of its exports illegally. The Commerce Department imposes tariffs when it finds evidence of illegal subsidies.

After so many decades in which labor has taken it on the chin, I'm going to tolerate some push-back for awhile.

Union mines are safer

John Nichols at The Nation reports:

Writing in the Pittsburgh Post-Gazette several years ago, former Pennsylvania Center for the Study of Labor Relations director Charles McCollester made the essential point: "There's no question that union mines are safer."

"Critically, workers in a union mine are not afraid to speak," explained McCollester. "In a non-union operation, asking questions or challenging company mining practices or safety procedures can lead to termination."

Brad Johnson at The Wonk Room elaborates (while noting some idiocy from Rush Limbaugh):

Union mines have a significantly better safety record than non-union mines especially for major disasters, as union miners can refuse unsafe work and report dangerous conditions without fear of retaliation. In addition to preventing Blankenship-style intimidation, the proposed Employee Free Choice Act would increase whistleblower protections for non-union and union workers alike. Under Blankenship’s direction, the U.S. Chamber of Commerce and the National Mining Association have spent millions to oppose passage of such legislation for worker rights, comparing it to a “firestorm bordering on Armageddon.”

More on unions and mine disasters

David Moberg of In These Times finds some evidence that there are more fatalities in nonunion mines, but it does not seem conclusive. Someone needs to do some work on this topic. If the media won't investigate, how about an enterprising student in need of an honors thesis topic?

Would 29 miners be alive today if Massey mines were unionized?

The president of the Steelworkers' union says they would be.

“I can absolutely say that if these miners were members of a union, they would have been able to refuse unsafe work… and would not have been subjected to that kind of atrocious conditions,” said Gerard. “In some places like in Australia and Canada, this kind of negligence would result in criminal negligence [charges] being brought against the management and the CEO.”

Do laws that make it harder to dismiss employees stimulate innovation and growth?

Yes, say Viral Acharya, Ramin Baghai and Krishnamurthy Subramanian.

Stringent labor laws can provide firms a commitment device to not punish short-run failures and thereby spur their employees to pursue value-enhancing innovative activities. Using patents and citations as proxies for innovation, we identify this effect by exploiting the time-series variation generated by staggered country-level changes in dismissal laws. We find that within a country, innovation and economic growth are fostered by stringent laws governing dismissal of employees, especially in the more innovation-intensive sectors. Firm-level tests within the United States that exploit a discontinuity generated by the passage of the federal Worker Adjustment and Retraining Notification Act confirm the cross-country evidence.

In other words, when a company faces few legal restrictions on firing employees the fear of being dismissed may cause employees to innovate less. This may have an impact on profitability and growth. The authors test this hypothesis in a number of ways, first looking at cross-country data and than at the effects of the WARN act in the US. The WARN act test is especially interesting. The WARN Act was passed in 1988 and came into effect in 1989. It required private companies with more than 100 employees to give workers 60 days' notice before instituting mass layoffs. So Acharya et al. ask whether companies subject to the WARN Act subsequently had greater rates of innovation (defined by patent filings) than those that were not subject to the Act. They compared the change in patent filings before and after the act in companies with 95-99 employees to those with 100-105 employees and got the graph on the left: following the act, companies with 100-105 employees increased patent filings significantly relative to the control group. To test whether this was just an anomaly they did the same experiment with companies above and below a 50 employee cutoff line (right graph). As predicted, there is no difference between these groups of companies because WARN applies to neither group.



This is not my field, but it seems to be a really nice, careful piece of research. It would seem to have applications to the issue of the impact of unions as well. Obviously, as Acharya et al. note, when unions protect their weakest performers from dismissal there is a reduction in efficiency ex post. But ex ante, protection from dismissal through unions should encourage employees to innovate in ways that can enhance a company's profitability. Obviously in most environments patent filings aren't the appropriate measure of innovation, but a teacher can innovate by trying out new teaching methods, a state employee can suggest different ways of organizing the office, an auto worker can suggest new quality control techniques.

[Update: but when unions negotiate strict workplace rules innovation might be suppressed. Perhaps the ideal union would protect workers from dismissal while preserving flexibility of work assignments.]

On the other hand, a tenured professor can spend his morning blogging instead of revising his paper on the Great Inflation...

Public opinion of public sector unions

Two pieces of data from Gallup:

Republican governors' war on public sector unions may come back to bite them politically, especially when it comes to the Independent vote.

Countervailing power

Many commentators on the right have made the argument that public sector workers should not be allowed to unionize because they can use their political power to elect the very officials who they negotiate with over compensation. For example Daniel DiSalvo writes:

When it comes to advancing their interests, public-sector unions have significant advantages over traditional unions. For one thing, using the political process, they can exert far greater influence over their members' employers — that is, government — than private-sector unions can. Through their extensive political activity, these government-workers' unions help elect the very politicians who will act as "management" in their contract negotiations — in effect handpicking those who will sit across the bargaining table from them, in a way that workers in a private corporation (like, say, American Airlines or the Washington Post Company) cannot. Such power led Victor Gotbaum, the leader of District Council 37 of the AFSCME in New York City, to brag in 1975: "We have the ability, in a sense, to elect our own boss."

This is a fair enough criticism, but it applies equally to business groups that support political campaigns and then cash in favors when their man or woman takes office. For example, road builders contributed $128,000 to Scott Walker's campaign. One of Walker's first acts as governor was then to cancel plans to use stimulus money to build high-speed rail and petition the Obama administration to redirect the $800 million of federal money to road projects. Wisconsin Manufacturers and Commerce, one of Wisconsin's biggest business lobbying groups, spent $950,000 to help elect Walker. Danged if Walker and the Republican legislature didn't pass a big tax cut for manufacturers as soon as they took office.

Government - federal, state or local - is not a neutral forum where disinterested public servants allocate resources in the public interest. It is an arena where organized interest groups compete to wrest public resources from each other by bribing and threatening self-interested politicians. When the competing interest groups are numerous and diverse, we can reasonably hope that each group checks and balances the others and something approximating the public interest can emerge. This is John Kenneth Galbraith's idea of "countervailing power."

Critics of the public sector unions decry the attempts of unions to work the political system to feather their nests while ignoring the efforts of business interests to do exactly the same thing. Here's a proposal: let's have a system of public financing of campaigns at the state and federal level so that public officials are less dependent on organized interest groups and are therefore more likely to act in what they perceive to be the public interest. Let AFSCME continue to bargain on behalf of workers, but reduce its power to choose the people on the other side of the bargaining table. And reduce the ability of government contractors to choose the people to whom they submit bids, reduce the ability of developers to choose the people voting on zoning variances that affect them, reduce the ability of business groups to choose the people voting on their tax rates,... But if you're not willing to take that step to curtail the lobbying power of business, then leave labor alone.

George Will on Tea Parties and unions

In January, George Will says that those rambunctious Tea Partiers are the standard bearers of a great American tradition of disharmony:

The tone of today's politics was anticipated and is vindicated by a book published 30 years ago. The late Samuel Huntington's "American Politics: The Promise of Disharmony" (1981) clarifies why it is a mistake to be alarmed by today's political excitements and extravagances, a mistake refuted by America's past...

The American Creed's values are liberal, as that term was understood until liberalism succumbed to 20th-century statism. The values, expressing the 18th century's preoccupation with defending liberty against government, are, Huntington said, "individualistic, democratic, egalitarian, and hence basically anti-government and anti-authority." The various values "unite in imposing limits on power and on the institutions of government. The essence of constitutionalism is the restraint of governmental power through fundamental law."...

America is an inherently "disharmonic society" because the ideals of its creed are always imperfectly realized, and always endangered. Government is necessary but, Huntington says, "the distinctive aspect of the American Creed is its anti-government character. Opposition to power and suspicion of government as the most dangerous embodiment of power are the central themes of American political thought."...

"It has been our fate as a nation," wrote historian Richard Hofstadter, "not to have ideologies but to be one." It is an excellent fate, even if — actually, (BEG ITAL)because(END ITAL) — the creed periodically, as now, makes America intensely disharmonic.

In February, George Will says those union demonstrators in Wisconsin are just a bunch of rabble whipped up by outside agitators:

Hitherto, when this university town and seat of state government applauded itself as "the Athens of the Midwest," the sobriquet suggested kinship with the cultural glories of ancient Greece. Now, however, Madison resembles contemporary Athens.

This capital has been convulsed by government employees sowing disorder in order to repeal an election. A minority of the minority of Wisconsin residents who work for government (300,000 of them) are resisting changes to benefits that most of Wisconsin's 5.6 million residents resent financing...

A few days after President Barack Obama submitted a budget that would increase the federal deficit, he tried to sabotage Wisconsin's progress toward solvency. The Washington Post: "The president's political machine worked in close coordination . . . with state and national union officials to mobilize thousands of protesters to gather in Madison and to plan similar demonstrations in other state capitals." Walker notes that in the 1990s, Wisconsin was a trend-setter regarding school choice and welfare reform. Obama, he thinks, may be worried that Wisconsin might again be a harbinger.

But he's so erudite, he's convincing even when he's completely contradicting himself!

Charles Woodson supports Wisconsin unions

Green Bay Packers cornerback Charles Woodson today became the most prominent member of the Super Bowl-winning team to come out in support of the public employees in Wisconsin currently protesting against Gov. Scott Walker's proposal to strip many of the them of their collective bargaining rights:

"Last week I was proud when many of my current and former teammates announced their support for the working families fighting for their rights in Wisconsin. Today I am honored to join with them.

Thousands of dedicated Wisconsin public workers provide vital services for Wisconsin citizens. They are the teachers, nurses and child care workers who take care of us and our families. These hard working people are under an unprecedented attack to take away their basic rights to have a voice and collectively bargain at work.

It is an honor for me to play for the Super Bowl Champion Green Bay Packers and be a part of the Green Bay and Wisconsin communities. I am also honored as a member of the NFL Players Association to stand together with working families of Wisconsin and organized labor in their fight against this attempt to hurt them by targeting unions. I hope those leading the attack will sit down with Wisconsin's public workers and discuss the problems Wisconsin faces, so that together they can truly move Wisconsin forward."

Filibustering with their feet

Democrats in Wisconsin's State Assembly have fled the state to deny Republicans a quorum. I have no special insight, only to note that this is the moral equivalent of the filibustering tactics that Republicans in the US Senate used to such great effect in 2009-10. Hope it works.

Go Red, Beat State

The Marxist revolutionary's dream come true: students, workers, intellectuals join forces in Madison, Wisconsin to protest the new governor's assault on the union movement. Newly elected Republican governor Scott Walker proposes vastly scaling back, in some cases eliminating, the collective bargaining rights of Wisconsin state employees including faculty and students at public universities. The pretense is the state's budget crisis. But if that was the only issue, the direct solution would be to negotiate cuts in salary and/or benefits with the public employee unions. Instead, the governor wants to eliminate some workers' (for example faculty's) collective bargaining rights entirely, while reducing the rights of others. Under the proposed law teaching assistants, for example, would no longer be able to bargain over health benefits or "just cause" protections against arbitrary discipline. How does preventing teaching assistants from demanding protection against arbitrary discipline solve the state's budget problems?

Meanwhile, Professors Joined Coal Protest in Kentucky Governor's Office. My brother claims he's in this picture, but I don't see him.

Sing with me everybody: There's somethin' happenin' here, what it is ain't exactly clear...