Labor Pains: Because Being in a Union can be Painful

“Another cause of long-term unemployment is unionization.”

Lets play Guess Who Said It: “Another cause of long-term unemployment is unionization.”

No, it wasn’t the Chamber of Commerce.

No, it wasn’t Chicago Law Professor Richard Epstein.

No, it wasn’t CATO.

It was Obama’s Director of the National Economic Council Larry Summers writing in the “Concise Encyclopedia of Economics.

When I twittered that quote a few minutes ago, SEIU heavyweight Anna Burger shot back: “Summers now gets that we can only rebuild our economy with workers having a voice through strong unions.”

Right Anna, I’m sure you guys made sure that he “got it.”

Here is the complete quote:

Another cause of long-term unemployment is unionization. High union wages that exceed the competitive market rate are likely to cause job losses in the unionized sector of the economy. Also, those who lose high-wage union jobs are often reluctant to accept alternative low-wage employment. Between 1970 and 1985, for example, a state with a 20 percent unionization rate, approximately the average for the fifty states and the District of Columbia, experienced an unemployment rate that was 1.2 percentage points higher than that of a hypothetical state that had no unions. To put this in perspective, 1.2 percentage points is about 60 percent of the increase in normal unemployment between 1970 and 1985.

There is no question that some long-term unemployment is caused by government intervention and unions that interfere with the supply of labor. It is, however, a great mistake (made by some conservative economists) to attribute most unemployment to government interventions in the economy or to any lack of desire to work on the part of the unemployed. Unemployment was a serious economic problem in the late nineteenth and early twentieth centuries prior to the welfare state and widespread unionization. Unemployment then, as now, was closely linked to general macroeconomic conditions. The great depression, when unemployment in the United States reached 25 percent, is the classic example of the damage that collapses in credit can do. Since then, most economists have agreed that cyclical fluctuations in unemployment are caused by changes in the demand for labor, not by changes in workers’ desires to work, and that unemployment in recessions is involuntary.

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