Economic Efficiency and Unionization

Judge Posner today posted about the inefficiencies in public sector job security and private sector job security achieved through unionization. He suggests that we should do away with job security at return to pure at-will employment if we want to maximize our efficiency. Here is a blurb from the post:

"If tenure is an efficient employment contract, employers will institute it without union prodding. The steep decline of unionization in the private sector is a convincing "Darwinian" refutation of the argument one used to hear that unions actually promote efficiency."

Unfortunately, the argument that the all-knowing market, if left to its own devices, will pump out the most efficient result is too often parroted without addressing some of its real-world defects. Lack of information (or worse, an ample supply of misinformation) is the most frequently ignored and perhaps most influential flaw with a truely efficient market. For instance, one possible influence on the steep decline of unionization in the private sector is best exemplified (as many things are) by WalMart.

When a manager gets wind of an inclination of the workers to unionize, the manager contacts HQ, and HQ sends out a team to talk to the workers about the dangers of unionization. In addition, when a worker first starts at WalMart, part of the training involves watching a video on the dangers of unionization. Everything the workers hear from day one about unions is negative. The employer has the resources to control the content of the message. Everything the workers hear about unions, if they hear anything, is about how unions make stores close down because the cost get too high.

Couple the one-sided information they get at work with the fact that the majority party in the US is anti-union (perhaps proportionally to amount of money corportions donate to the pols campaigns), and the fact that the minority party is every day retreating from their pro-union stance, and the worker is entirely deprived of easy access to information about the pros of unionization. The two party political situation makes matters worse. With both parties luke-warm or openly hostile to unions, the only advocates are painted as outsider extremists. Unions have become associated with extremist political positions (communism and socialism, mainly).

So the real marketplace where the decisions about unionization are made is the political marketplace. Access to the political realm is limited to those with money. Some unions have money and thus political influence, but those unions are forces to use their resources to battle for what meager scraps they have managed to tear away over the past eighty years. The majority of influencing power thus falls to the big businesses who find unions a distasteful trespass into their absolute control in the political and economic marketplaces. There is no voice for the workers.

The lack of accurate information and the lack of access to the marketplace mean that the steep decline in unionization is evidence of nothing more than decline in voice among the workers. That Judge Posner takes this as evidence that the workers don't want unions is a mistake.