Readers Chime in on Union Productivity

By: Mike Shedlock | Mon, Aug 2, 2010
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I received several interesting responses to Blog Wars? No, Hopefully Not - Just Temporary Insanity at Naked Capitalism Regarding Unions.

Laurent who is from Europe writes:

Hello Mish,

I happen to read your blog very regularly from Europe, and I am obviously shocked by the graph from Strong unions, strong productivity by the Economic Policy Institute, that shows over 90% of union-covered people in France.

Although what is called "branch agreement" cover everybody working with an employer, it is very far from outright "unionisation" of workers. Typically 15% of private company workers and 35-60% of public worker are unionised in France. Thus the implied strong "unionisation" in the graph is a complete and dishonest fallacy.

Although neither workers nor employer can opt out of collective bargaining agreements, those agreements are in general, not very significant with only modest impacts on work organisation and rules. Moreover, collective bargaining has little reach because the law is already so rigid in directing work contracts that there was moderate motivation for unions to add further insanity in the collective bargaining.

Best regards.

Laurent.


Strong Unions, Strong Productivity or Strong Nonsense?

The graph Laurent refers to is from Strong unions, strong productivity. Yves posted it, but I didn't. Here it is with some paragraphs from the article.

Unionization in the United States has declined since the late 1970s, when 27% of U.S. workers were covered by union contracts, to today, when only about 12% are covered. This has had substantial adverse effects on inequality, the wages of typical workers, and pension and health benefit coverage.

By contrast, most of the major continental European countries have maintained strong unions, and most of their employees are covered by collectively bargained contracts, ranging from 68% in Germany to over 90% in Belgium, France, and Sweden (see the first chart below).

Share of Workeres Covered Under Collective Bargaining Agreements


The Underground Economy

In my article, I made a reference as to the increasing slope of the underground economy. Here is the chart once again for convenience.

Size of Informal Economies

Reader "Josh" correctly pointed out that county by-country comparisons are difficult because of the stacked nature of the chart. I removed one line in my article referencing "slope" because it is a cumulative effect.

Nonetheless, a second chart (repeated below for convenience) does show the shadow economy as a percentage of GDP is far bigger in Europe than the United States.


Worldwide Shadow Economies

Worldwide Informal Economies

With hedonics in the US, and huge underground economies in Europe, and the fact that union work rules increase costs thus overstating GDP everywhere - (government spending no matter how useless is reflected in GDP), attempts to purport productivity in Europe is higher because of unions is simply absurd.

There are simply too many factors at play, and as I have pointed out "correlation is not causation", even if the conclusion that productivity in general is higher in Europe, something I highly doubt.

As Laurent pointed out, the collective bargaining graph sited by the Economic Policy Institute is grossly misleading in the first place.


Italian Cash Economy

JP writes ...

Hello Mish

Unless you live in Italy, it's really difficult to grasp how big the "underground" economy is. Other than at large supermarkets, every shopkeeper and service provider always asks "Got cash?" Paperwork is called "facture". My dentist just asked me "You don't need a facture do you, do you have any cash on hand?"

Even my car insurance company asks for cash. You can live your whole life in Italy with no connection to anything other than the cash economy. Italians who visit the States find it bizarre that almost everything is on the books, it is incomprehensible to them.

JP


Union Bus Drivers in Italy

Kenneth writes ...

My aunt is married to a man from Sicily, to where they go on vacation each year. They can confirm Mr. Giavazzis view about the Italian labor market.

For example, if you want to take the bus on a Sunday, you cannot trust the time table. The bus driver might simply stay home because he doesn’t like to work on a Sunday. Timetable be damned, you’ll be standing on the bus stop til the next day

Kenneth
Stockholm, Sweden

That is one of the big problems with unions that I forgot to mention. Union work rues are such that it is impossible to fire incompetent teachers, bus drivers who get the "blue flue", corrupt policeman, police who use excessive force, etc.


Impossible to Get Rid of Incompetent Union Workers

In the private sector if you fail to show up for work you get fired. In the public sector nothing happens. If a teacher is incompetent the teacher gets "more training", decades of it if necessary.

Even predatory teachers are impossible to dismiss as are police officers who use excessive force.


Union "Productivity" in Greece

Here is an article from last Thursday regarding union strife in Greece. The Guardian reports Greek police fire tear gas at striking truckers

The stand-off between striking truck drivers and authorities in Greece intensified today hours after the government issued an emergency order to force protesters back to work.

With fuel shortages stranding thousands of tourists and disrupting supplies of food and medicines nationwide, prime minister George Papandreou resorted to emergency legislation, more usually used at times of war or great natural disaster, to end the walk-out.

But hopes of a return to normal were quickly dashed when riot police fired tear gas at thousands of truckers gathered outside the transport ministry this morning.

"The order is coming through to [drivers] but I have no idea how they are going to react to it," said Giorgos Stamos, a member of the truck drivers' union. "It is highly unusual that after just three days of going on strike we should be mobilised in this way."

The ruling socialists called for the mobilisation - the fourth time since the collapse of military rule in 1974 that such an order has been issued - as it became clear that Greece was facing a public health crisis because of the strike.

The mayhem began on Monday when some 33,000 licensed truck drivers walked off the job in protest at government plans to open up the freight industry, one of many 'closed-shop' professions blamed for keeping the Greek economy isolated and uncompetitive.

The strike has further dented tourism - widely seen as the linchpin of the country's economic recovery this summer. With one in five Greeks working in the sector, tourism accounts for almost 20% of GDP.


Union "Productivity" in the US

In response to How public-sector union greed, arrogance, and influence peddling broke California "Bryan" sent in this video referred to in the post.

Thanks Bryan

I can post hundreds of examples like that. One literally has to have holes in their head to think unions increase productivity.

Public-sector union greed, arrogance, and influence peddling broke California, and it will break every state in the nation unless you vote union supporters out of office.

For example, please consider Inspired Reader Stands Up To Union Mobs

Public union wages and benefits (especially defined benefit pension plans) are the biggest problems states face. Any candidate winning endorsement of public unions is a candidate deserving to be thrown out on their ass in the upcoming election.

 


 

Mike Shedlock

Author: Mike Shedlock

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Mike Shedlock

Michael "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Visit http://www.sitkapacific.com/ to learn more about wealth management for investors seeking strong performance with low volatility.

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