Sunday, March 6, 2011

Perverse Incentives

Reihan writes:
So what do we make of the thesis that organized labor's power and influence is a critical resource for all working class individuals in a given society, rather than for those affiliated with organized labor? I'd suggest that we can't really draw any final conclusions, but that the evidence looks somewhat less strong in light of the Canadian example.

Moreover, there is another way to look at pro-regulation activism on the part of organized labor. Just as firms like Wal-Mart are less inclined to resist increases in the minimum wage than small firms, organized labor has a keen interest in raising rivals' costs. By mandating family leave, etc., for all firms, unionized firms insulate themselves from firms that would otherwise undercut them with more flexible practices.

This is something that FLG has always found rather interesting. All things being equal, union shops are going to have higher labor costs than non-union shops. To the extent that unions want to mitigate that differential, and, if FLG is being charitable, unions probably believe all workers should have the same rights and privileges as they do, then they'll agitate for getting their benefits not just in contract with employers, but also enshrined into law. That way, everybody has the benefits and there's no cost differential between union and non-union firms.

The thing that FLG finds interesting is that the more successful unions are at this strategy, the less unions are needed. If the protections are regulatory or legal rather then what's the point of paying dues?

1 comment:

Withywindle said...

You're right--it's an interesting trade-off. I've read the same formulation re Tammany Hall and the welfare state. I think current events say that the union's function becomes the political defense of government guaranteed benefits.

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