Sunday, April 19, 2009

Unions and Universities -- A New Deal?

Just this week, the faculty at my alma mater (Montana State University) voted to unionize. The measure passed by a small margin (only 52 percent in favor). Not surprisingly, only 39 percent of tenured faculty voted to unionize, whereas 66 percent of adjunct and non-tenured faculty voted in favor of unionization. I wonder who expects to gain from this measure...

Unionizing the faculty at a state school raises a bunch of questions. In fact, a short article by the Chronicle of Higher Education had numerous interesting user comments. My favorite is #8:

What exactly are they getting for their union dues besides another hierarchy to deal with? Is there any power in a strike with a state school?

I like this comment because I'm skeptical that professors at MSU (even adjuncts and non-tenured faculty) have much to gain from unionizing. As a former adjunct professor at MSU, I can see little marginal benefit from unionizing. When I worked at MSU, I could not complain about the pay for two reasons: (1) I loved the work, and (2) the pay was actually pretty good. Honestly, having a university job in a town like Bozeman is living the good life. Pushing for better treatment seems horribly out of place at Montana State.

However you feel about unions, you can still wonder what they do to the broader economy. As a first-year doctoral student in economics, I tend to think that unions sap productivity by compressing wages: less productive workers get more money under unions, while the best people get to finance that with union dues. Wherein lies the incentive to be a good worker?

Taking that logic a couple of steps further: mo' unions, no mo' productivity, less stuff being produced, less income for everyone (on average). That's what the theory tells us anyway. But, what do the data say?

A fairly recent study by Cole and Ohanian (Journal of Political Economy, 2004) looks to the uncharacteristic persistence of the Great Depression as a setting to study the significance of unions (and cartels) on macroeconomic performance. Most reasonable macroeconomic models predict the Great Depression to end by 1936. But, the Depression lasted until the onset of World War II in 1941-2. Cole and Ohanian cite the New Deal's cartel and union-friendly policy as a significant reason why the United States did not see rapid recovery to trend.

As Cole and Ohanian document, the United States only saw recovery to trend by 1941 after the FDR administration reversed course on unionization and cartelization policy. By incorporating the negative productivity effects of unionization and cartelization into their macroeconomic framework, they were able to explain 60 percent of the lack of recovery. That's a heck of an omission by previous research which neglected the role of unions and cartels.

As a kid who grew up in a pro-union mining town, this punchline rocked my world. What's even better? The research is careful, well-documented, and so widely respected that it is taught in first year graduate macroeconomics at University of Chicago. It is encouraging that research can be so relevant to actual policy. But, it is too bad to see past mistakes made again.

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