Why is collective bargaining so difficult in the United States compared to its international peers?

Posted on by Bridget Ansel
SEIU Local 1 union members protest for an increase in the minimum wage late last year at the Detroit Metropolitan Airport in Romulus, Mich.

Part of the story of why income and wealth inequality is rising is tied to the decline in the bargaining power of organized labor over the past half-century. That decline is the result of multiple complementary forces, but one of the biggest and most illustrative is the dramatic shrinking of the unionized workforce.

Two important indicators, union density and collective bargaining coverage, highlight the severity of the decline. Union density is the proportion of workers who are members of a union. Collective bargaining coverage is the proportion of workers covered by a collective bargaining agreement regardless of whether they are members of a union. Both have been dropping for decades, and those levels pale in comparison what we observe in other countries with similar standards of living as the United States.

From 1960 to 2016, the union density rate fell by more than half. In 1960, nearly one in three workers was a union member. According to the most recently released annual data from the U.S. Department of Labor’s Bureau of Labor Statistics, that number is down to just over one in ten. (See Figure 1.)

Figure 1

International comparisons shed some important light on the U.S. experience. It’s immediately obvious from comparing union density and coverage data assembled by Jelle Visser at Amsterdam Institute for Advanced Labour Studies that labor market institutions vary dramatically across a range of economies with a roughly similar standard of living as the United States. Among 21 member countries of the Organisation for Economic Co-operation and Development, the United States is 20th in union density, coming ahead of only France. Interestingly, though, France is tied for 1st with Austria in collective bargaining coverage. On that measure, the United States is last. (See Figure 2.)

Figure 2

In many OECD countries, including France as mentioned above, there are striking magnitudes of difference between union coverage and density rates. In the United States, a worker might not be a member of a union but nonetheless may be covered by a collective bargaining agreement since by law a union must represent all workers at a firm, even those who decline to join the union. Elsewhere though, as in many of these high-coverage countries, there might not be a single union member at a firm or even a contract that was negotiated at the firm level, but nonetheless those workers are covered by a collective bargaining agreement that was negotiated by representative unions across employers in most or all of the industry. Levels of union coverage observed in these countries are the result of more union-friendly legal frameworks and in some cases the administration of social insurance by unions, among other things.

Beyond instances of very high coverage levels, there are noticeable differences, for example, between countries with similar institutional arrangements. In the United States and Canada—where collective bargaining coverage within unionized firms is 100 percent and 0 percent within non-unionized firms—there is a much smaller difference between density and coverage rates. In Canada, the gap between union density and coverage is 1.8 percentage points, only slightly larger than the gap in the United States, but overall both density and coverage rates are significantly higher in Canada than in the United States.

So why might it be the case that these two neighboring countries exhibit such a dramatic difference in density and coverage? Part of the reason is the process by which workers at individual firms unionize. Modest policies that are more favorable to union formation and recognition, such as majority sign-up and first contract arbitration, can be very consequential for boosting worker power in circumstances similar to those found in both countries.

In terms of policy here in the United States, organized labor has been on the losing side of those important battles for a long time. There are now 28 “right to work” states and the political opposition to collective bargaining is intense at the federal level as well. But going forward, it’s important to keep in mind the international context. There is tremendous policy variance between the countries shown above. That variance must be thoroughly explored and considered if we’re going to make progress in bolstering the bargaining power of labor and reversing the current trend of worsening inequality.

Must- and Should-Reads: February 21, 2017

Posted on by Brad DeLong

Interesting Reads:

Must-Read: Jim Tankersley: Obama solved one economic crisis. It’s the second that haunts him

Posted on by Brad DeLong

Must-Read: Jim Tankersley: Obama solved one economic crisis. It’s the second that haunts him: “If you worked a factory shift in Michigan in January 2009…

…you were wrestling with two manners of economic crisis. One was the immediate threat to your job. If you lost it, you were in danger of losing your car, and your house too. The other… was the realization that… the economic future you were once promised was drifting away. That imminent crisis has long since receded. History will record that President Obama and his economic team presided over a historically swift end to a massive recession, along with a better rebound than any other industrialized country enjoyed at the time….

[Obama] appears to understand — to have internalized — that he was unable to soothe the longer-running sense of economic crisis in much of working-class America once the recession itself was over. Yes, income gains for the middle class were finally arriving in the last years of Obama’s presidency…. Yet they were still not nearly enough to bring the American dream comfortably into view for autoworkers in Akron, Ohio, or home health aides in Richmond, Virginia…. Real median income is just getting back to where it was in 2000…. For all of our detailed assessments and long wanderings through the Obama economic record, this remains the simplest snap assessment: He solved one crisis, but not both.

It doesn’t matter that he didn’t create the longer-term crisis…. It doesn’t matter that his record might look different if a Democrat had won a “third term” of sorts for him…. What matters is that Americans had grown accustomed to the economy delivering broad wage gains and strong job growth, in the years after World War II, of the type that lifted up workers across race, gender, and class lines, though certainly not all at the same rate…. What he did, history will record, was critical. But so was what he, and Congress, left undone…

Must-Read: Raj Chetty et al.: Mobility Report Cards: The Role of Colleges in Intergenerational Mobility

Posted on by Brad DeLong
Mobility Rates Success Rate vs Access by College www equality of opportunity org assets documents coll mrc slides pdf

Must-Read: Raj Chetty et al.: Mobility Report Cards: The Role of Colleges in Intergenerational Mobility: “We characterize rates of intergenerational income mobility at each college in the United States using administrative data for over 30 million college students from 1999-2013…

…First, access to colleges varies greatly by parent income. For example, children whose parents are in the top 1% of the income distribution are 77 times more likely to attend an Ivy League college than those whose parents are in the bottom income quintile. Second, children from low and high-income families have very similar earnings outcomes conditional on the college they attend, indicating that there is little mismatch of low socioeconomic status students to selective colleges.

Third, upward mobility rates – measured, for instance, by the fraction of students who come from families in the bottom income quintile and reach the top quintile – vary substantially across colleges. Much of this variation is driven by differences in the fraction of students from low-income families across colleges whose students have similar earnings outcomes. Mid-tier public universities such as the City University of New York and California State colleges tend to have the highest rates of bottom-to-top quintile mobility. Elite private colleges, such as Ivy League universities, have the highest rates of upper-tail (e.g., bottom quintile to top 1%) mobility.

Finally, between the 1980 and 1991 birth cohorts, the fraction of students from bottom-quintile families fell sharply at colleges with high rates of bottom-to-top- quintile mobility, and did not change substantially at elite private institutions. Although our descriptive analysis does not identify colleges’ causal effects on students’ outcomes, the publicly available statistics constructed here highlight colleges that deserve further study as potential engines of upward mobility.

The Equality of Opportunity Project Www equality of opportunity org assets documents coll mrc slides pdf Distribution of Access Across Colleges Enrollment Weighted www equality of opportunity org assets documents coll mrc slides pdf Mean Child Rank at Age 34 vs Parent Income Rank www equality of opportunity org assets documents coll mrc slides pdf Correlates of Top 20 Mobility Rate www equality of opportunity org assets documents coll mrc slides pdf

On Marc Levinson and His “The Box That Changed the World”: Hoisted from the Archives

Posted on by Brad DeLong
Shenzhen Skyline 2015

Hoisted from the Archives: The Box That Changed the World (July 25, 2006): It is 40 feet long, 8.5 or 9.5 feet high, and eight feet wide.

It carries up to 29 tons in its 2,000 cubic feet of recommended available space – goods worth roughly $500,000 (or more) when sold at retail.

It, and what it carries, can be transported in a month anywhere in the world where there are suitable harbors, railways, locomotives, flatcars, truck tractors, diesel fuel, and roads.

It is the modern cargo container, and it is able to move non-fragile, non-perishable goods from any modern factory with a loading dock to any modern warehouse anywhere in the world for about 1% of retail value.

Indeed, it can be transported for a marginal cost of perhaps $5,000 – less than the price of a first-class airplane ticket, as Marc Levinson, author of the excellent The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger, puts it.

All of this has happened since 1960 or so. Back then, the costs of international trans-ocean shipment for most commodities could easily amount to between 10% and 20% of retail value. The cargo container has changed everything.

When my family bought a German-made washing machine from a warehouse store in San Leandro, California, more of its cost was absorbed in the ten minutes the saleswoman spent telling us about it than in the entire journey from the factory in Schorndorf, Germany, to the loading dock in San Leandro, or in forklifting it from the loading
dock to its place in the serried ranks of washing machines which filled that corner of the warehouse. In the end, it cost to us of getting our washing machine to our front door was about eight times the cost of the machine’s voyage from the German factory to the warehouse where we purchased it.

The world is certainly not “flat,” as the New York Times columnist Thomas Friedman believes. But, in an economic sense, it is extremely small for non-perishable, non-fragile goods. Every modern factory with outgoing volume large enough for container traffic and a suitable loading dock is next door to every modern warehouse with similar features.

Yet it is not the whole world that is so small, but only that part of it that is attached to the global container-handling network. Areas that lack the necessary infrastructure are still far away from the global trading system that carries high-end German manufactured washing machines from Westphalian factories to California warehouses for just a penny a pound.

For example, if your electricity is unreliable, so that you can’t count on being able to pump the diesel into the truck tractor, you are not attached to the network. If the volume of your production is too small to fill 2,000 cubic feet of space headed for a single country, you are not attached to the network.

Likewise, if the money to fix your roads was embezzled, so that nobody wants to risk their tractors on them, you are not attached to the network. If your courts function so badly that few outsiders are confident that what you say is theirs really is theirs, you are not attached to the network. If nobody has yet noticed what your workers can produce, you are not attached to the network. If your entrepreneurs cannot build organizations at container-scale without attracting politically well-connected extortionists, you are not attached to the network.

For any poor segment of the world economy, getting attached to the global container network is an immense opportunity. But it is an opportunity that requires that everything – infrastructure, scale, public administration, governance, and foreign knowledge of your production capabilities – work just right. And if you have not first built up the social networks that enable your workers and their bosses to know what kinds of manufactured goods would generate high demand in the rich post-industrial core of the world economy, it doesn’t matter even if you are attached to the global container network.

Many have written about how telecommunications technology is bringing about the “death of distance.” Indeed, nowadays, you can talk to anybody, anywhere. But it is the cargo container that appears to have brought about a more effective and – so far – more significant “death of distance.” For, in a commercial sense, at least, the goods we ship across oceans still far outweigh the words we chatter around the world.

Twenty-First Century American Nationalism Needs to Be Profoundly Cosmopoiltan

Posted on by Brad DeLong

It’s disturbing. As we face the probable abrogation of NAFTA, possible trade wars with China, Germany, and others, and the total cluster* that is the Trump administration’s policies (if any) toward NATO and Russia, a number of really smart and really well-intentioned people are, I think, making rhetorical–and in some cases substantive–errors that are degrading the quality of the debate and increasing the chances of bad outcomes. And they are doing it while trying to be forces for good, light, human betterment, truth, justice, and the American way…

So let me do some boundary policing here. Let me ask people–all of whom are wiser than I am, or if not wiser smarter, or if not smarter more knowledgeable–to think about whether they really hold the positions they set forward, and think about whether they have set them forward in a way most calculated to guard against destructive misinterpretation. Today: Dani Rodrik. And–hopefully–more tomorrow…

Let me start with Dani Rodrik.

We find Rodrik beating his breast about how “Cosmopolitans often come across like the character from Fyodor Dostoyevsky’s The Brothers Karamazov who discovers that the more he loves humanity in general, the less he loves people in particular…. The best way to serve global interests is to live up to our responsibilities within the political institutions that matter: those that exist…” In today’s political context, that will be read as: “only weenies care about the impacts of policies on people outside national borders, and any consideration of those impacts has no place in any political debate.” In today’s political context, that will be read as: “the well-being of Mexicans and the stability of Mexico must have a zero–nay, a negative–weight in the U.S. discussion about whether to abrogate NAFTA.”

But the major reason to do NAFTA is and always was that it is an important and a big good deal for Mexico. Having a good relationship–i.e., being in a positive-sum gift-exchange relationship–with the country on our southern border is a matter of elementary prudence in international relations. And doing what we can easily and cheaply to increase the chances that the country on our southern border is stable and prosperous is elementary prudence as well.

NAFTA is close to rounding error in terms of its effects on the U.S.–not one of the thirty most important things the U.S. government could do for good or ill for the U.S. economy. It has small net benefits, yes. It had some costs for groups that had flourished under the umbrella of the pre-1993 barriers to imports from Mexico, yes. Those costs should have been better cushioned–and would have been had not Americans voted for Gingrich as House Speaker and Dole as Senate Majority Leader in 1994–yes. But those costs are now sunk, and those firms and sectors have adjusted and moved on. Abrogating NAFTA would impose a new and different set of costs, and would have no net positive benefits as an upside, yes.

But NAFTA is, substantively, not worth committing political capital to attack or to defend if one is required to limit one’s view to its direct effects on the U.S. The rational strategy, therefore, if one is forced to look at the direct effects in the U.S. and at the U.S. only is to let the point go and keep your powder dry for more important struggles, rather than wasting energy and stressing political alliances.

That’s where Dani’s rhetoric takes us.

And that is, I think, very wrong. The indirect and long-run benefits for the U.S. in living in a more peaceful, more stable, and more prosperous world are large and mighty. NAFTA is and was worth doing for the reason that it is and was a stone placed in that still-unfinished arch. But to point that out is to be a rootless cosmopolite–the thing that Dani wants to rule out as a political position. And if one has to argue that abrogating NAFTA is “poor domestic governance” in terms of its direct effects on the U.S. economy–well, that is a very heavy lift indeed…

At the end of the 1910s, the Republicans turned isolationist: America was protected from Europe and Asia by two oceans, and did not need to engage with and spend treasure and blood trying to make the rest of the world better. At the start of the 1940s, the Democrats–led by the great Franklin Delano Roosevelt–undid that isolationist turn. The world and the United States are vastly better off as a result. The true American nationalism is to recognize the importance for American prosperity, peace, and security of being a good neighbor and a benevolent hegemon. Dani Rodrik’s rhetoric says: “the more he loves [global] humanity in general, the less he loves [American] people in particular…. The best way to serve global interests is to live up to our responsibilities within the political institutions that matter: those that exist.” But that denial of global interdependence serves even the narrowest of the long-run interests of the American people ill.

The right pose–substantive and rhetorical–is to recognize that, just as since 1620 the good American nationalism has always held that people anywhere can elect to become Americans by joining our utopian project here at home, so in the twentieth and twenty-first centuries that good American nationalism is one that puts global prosperity and being a good neighbor and benevolent hegemon first.

Dani Rodrik: Global Citizens, National Shirkers: “Real citizenship entails interacting and deliberating with other citizens in a shared political community…

…Global citizens do not have similar rights or responsibilities. No one is accountable to them, and there is no one to whom they must justify themselves…. Political representatives are elected to advance the interests of the people who put them in office. National governments are meant to look out for national interests, and rightly so….

But what happens when the welfare of local residents comes into conflict with the wellbeing of foreigners – as it often does? Isn’t disregard of their compatriots in such situations precisely what gives so-called cosmopolitan elites their bad name?… Countries should maintain open economic borders, sound prudential regulation and full-employment policies… because they serve to enlarge the domestic economic pie…. Policy failures… reflect poor domestic governance…. Hiding behind cosmopolitanism… is a poor substitute for winning policy battles on their merits….

Cosmopolitans often come across like the character from Fyodor Dostoyevsky’s The Brothers Karamazov who discovers that the more he loves humanity in general, the less he loves people in particular…. We have to live in the world we have, with all its political divisions, and not the world we wish we had. The best way to serve global interests is to live up to our responsibilities within the political institutions that matter: those that exist.

Should-Read: Dani Rodrik: Global Citizens, National Shirkers

Posted on by Brad DeLong

Should-Read: Dani Rodrik: Global Citizens, National Shirkers: “I know what a ‘global citizen’ looks like…

…I see a perfect specimen every time I pass a mirror. I grew up in one country, live in another, and carry the passports of both. I write on global economics, and my work takes me to far-flung places…. Yet May’s statement… contains an essential truth…. Real citizenship entails interacting and deliberating with other citizens in a shared political community…. Global citizens do not have similar rights or responsibilities. No one is accountable to them, and there is no one to whom they must justify themselves…. Political representatives are elected to advance the interests of the people who put them in office. National governments are meant to look out for national interests, and rightly so….

But what happens when the welfare of local residents comes into conflict with the wellbeing of foreigners – as it often does? Isn’t disregard of their compatriots in such situations precisely what gives so-called cosmopolitan elites their bad name?… Economics teaches that countries should maintain open economic borders, sound prudential regulation and full-employment policies, not because these are good for other countries, but because they serve to enlarge the domestic economic pie…. Policy failures… reflect poor domestic governance….
Hiding behind cosmopolitanism… is a poor substitute for winning policy battles on their merits…. Cosmopolitans often come across like the character from Fyodor Dostoyevsky’s The Brothers Karamazov who discovers that the more he loves humanity in general, the less he loves people in particular….

We have to live in the world we have, with all its political divisions, and not the world we wish we had. The best way to serve global interests is to live up to our responsibilities within the political institutions that matter: those that exist.

Must- and Should-Reads: February 20, 2017

Posted on by Brad DeLong

Interesting Reads:

Must-Read: Lawrence Summeers: Revoking Trade Deals Will Not Help American Middle Classes

Posted on by Brad DeLong

Must-Read: Five things are going on with respect to America’s blue-, pink-, and–increasingly–white lower-middle and middle-middle working classes. Three of them are real, and two of them are fake:

  1. Technology: It has–worldwide–greatly amplified manufacturing labor productivity, accompanied by limited demand for manufactured goods: few of us want more than one full-sized refrigerator, and very very few of us want more than two. That means that if you are hoping to be relatively high up in the wage distribution by virtue of your position as a hard-to-replace cog on a manufacturing assembly line, you are increasingly out of luck. If you are hoping for high blue-collar wages to lift your own via competition, you are increasingly out of luck.

  2. Legal and institutional bargaining power: The fact that bargaining power has flowed to finance and the executive suite and away from the shop- and assembly-floor is the second biggest deal here. It could have been otherwise–this is, primarily, a thing that has happened in English-speaking countries. It has happened much less elsewhere. It could have happened much less here.

  3. Macro policy: Yes, the consequences of the Reagan deficits were to cream midwestern manufacturing and destroy worker bargaining power in export and import-competing industries. Yes, the low-pressure economies of Volcker, late Greenspan, and Bernanke wreaked immense damage. Any more questions?

  4. Globalization: Globalization deepens the division of labor, and does so in a way that is not harmful to high-paying manufacturing jobs in the global north. The high-paying manufacturing jobs that require skills and expertise (as opposed to the lower-paying ones that just require being in the right place at the right time with some market power) are easier to create and hold on to if you can be part of a globalized value chain than otherwise. This is largely fake.

  5. Trade agreements: This is a nothingburger: completely fake.

As somebody who strongly believes that supply curves slope up–are neither horizontal nor vertical–and that demand curves slope down–are neither horizontal nor vertical–I think that Larry Summers is misguided here when he talks about how “companies have been able to drive harder bargains with workers, particularly in unionised sectors, because of the threat they can outsource.” This was certainly true since the 1950s with the move of American manufacturing to the south, and the rise of deceptively-named “right-to-work” laws. But the threat to outsource is zero-sum on a national level: the balance of payments balances. Individual sectors lose–and manufacturing workers have been big losers. But that is, I think, only because of our macro policies. If we were a normal global North manufacturing power–a Germany or a Japan–exporting capital and running a currency policy that did not privilege finance, he would not be talking a out how “companies have been able to drive harder bargains with workers, particularly in unionised sectors, because of the threat they can outsource.” He would be talking about how the opportunity to participate in global value chains increases the productivity of semi-skilled and skilled manufacturing workers in the U.S.

Thus I think Larry conceded too much here. Blame macro policy. Blame technology. Blame the conflict between the market society’s requirements that only property rights matter and that everything pass a profitability test against people’s strong beliefs that even if they have no property rights they have rights to stable communities, stable industries, and stable occupations. But, to channel Pascal Lamy, look not at the finger but at the moon here.

However, Larry is right on his main point: NAFTA really ain’t the problem:

Lawrence Summeers: Revoking Trade Deals Will Not Help American Middle Classes: “There is a debate to be had about the impact of globalisation on middle class wages and inequality…

…Increased imports have displaced jobs. Companies have been able to drive harder bargains with workers, particularly in unionised sectors, because of the threat they can outsource. The advent of global supply chains has changed production patterns in the US. My judgment is that these effects are considerably smaller than the impacts of technological progress. This is based on a variety of economic studies, experience in hypercompetitive Germany and the observation that the proportion of American workers in manufacturing has been steadily declining for 75 years….

But an assessment of the impact of trade on wages is very different than an assessment of trade agreements. It is inconceivable that multilateral trade agreements, such as the North American Free Trade Agreement, have had a meaningful impact on US wages and jobs…. American tariffs on Mexican goods, for example, averaged about 4 per cent before Nafta came into force. China had what was then called “most favoured nation” trading status with the US before its accession to the World Trade Organization…. The irrelevance of trade agreements to import competition becomes obvious when one listens to the main arguments against trade agreements. They rarely, if ever, take the form of saying we are inappropriately taking down US trade barriers….

Incremental agreements like TPP have been largely irrelevant to the fate of middle class workers. The real strategic choice Americans face is whether the objective of their policies is to see the economies of the rest of the world grow and prosper. Or, does the US want to keep the rest of the world from threatening it by slowing global growth and walling off products and people?… A strategy of returning to the protectionism of the past and seeking to thwart the growth of other nations is untenable and would likely lead to a downward spiral in the global economy…