Unions Will Not Get Us Out of this Recession

Economist Paul Krugman wrote an open letter to President Obama explaining how the country needs the Employee Free Choice Act and unionization throughout America in order to get out of the recession we are currently in.  Although Mr. Krugman is a Nobel-prize laureate in Economics and a professor at Princeton University, he is wrong on this one.  First, Mr. Krugman is a columnist for the New York Times, and as I’ve said before, the New York Times supports EFCA.  So, no biggie that Mr. Krugman does too.  But, his errors go deeper than that.

The basis of Krugman’s argument is that the “U.S. economy needs to add more than a million jobs a year just to keep up with a growing population, and as of today, we’re continuing to lose jobs at a rate of half a million a month.”  There’s no arguing with the number of jobs we’re losing, but I can’t find any support for the fact that we need to add a million jobs a year.  Even if this is true, the rest of his theory is where he loses his argument.

Krugman looks at lessons from the FDR administration (like so many others are these days) during its successful attempt at navigating the U.S. through the Great Depression in the 1930’s, and noted that FDR was very bold on his job creation plans.  Otherwise, according to Krugman, the economy turns to a vicious cycle: cutbacks on spending lead to a “shortfall in demand,” which leads to a fall in employment, and the spiral continues.  What isn’t included in Krugman’s analysis is that the United States of America was in a depression or stagnant growth economy until World War II when factories were buildingmilitary equipment at record paces – a period in time called the Great Compression.  Certainly Mr. Krugman isn’t opining that Obama continues to find wars to wage until we’re out of this recession.

Krugman then opines that the Great Compression was reversed starting in the 1970’s, “as American workers once again lost much of their bargaining power,” and “we can create another Great Compression by enhancing worker’s rights.”

In all, Krugman sees a direct correlation to labor unions rise in the 1930’s and decline beginning in the 1970’s and or economy.  Sort of like, “as unionization goes, the economy goes.”  Wrong. 

The 1930’s is when the National Labor Relations Act was developed and at that time it provided much needed protections for workers.  But since then, our country has civil rights laws that prohibit discrimination and harassment, we have OSHA laws that make workplaces safe, we have workers compensation laws for when employees get injured on the job, we have mandatory wage laws requiring a minimum wage and overtime after 40 hours for most employees, we have the availability of 401Ks which have solved the problem with drastically underfunded union pension plans, and the list goes on.

And I also disagree with Krugman’s implicit message that prior to 1970s the individual worker had a higher standard of living.  Differences I come up with off the top of my head which lead me to conclude that today’s workers, and their families, have a better standard of living than they did between 1930s and 1970s is: almost every family has two cars; homes are bigger; amenities inside the homes regularly include computers, microwaves, gaming consoles (Nintendo, X-box, PlayStation), finished basements, a washing machine and dryer, cable TV, and homes built after 1970s include bathrooms inside the master bedroom.  We have more restaurants to go to, more and healthier food options at the grocery store, better hospitals, prescription drugs, and medical technology, and a health club at every corner.  Our life expectancy has also increased.  All of these lifestyle improvements came about after the 1970s when unionization began to decline.

On the flip side, statistically, companies that go union do not have job growth at levels compared to their non-union competitors.  The only reason the Big Three became the Big Three was because it was too costly/difficult to ship cars from oversees until the 1990s, and it wasn’t until then that foreign manufacturers started building plants in America.  Until recently, having a “foreign car” meant a luxury.  Now it means affordable quality.  In essence, the Big Three were the only game in town and amounted for much of the job creation until the 1980s.  But now where are they?  Now that foreign, non-union car manufacturers build cars in the U.S. and it is cheap and easy to ship cars here from other countries, the Big Three are still flirting with bankruptcy despite record levels of bailout money from the federal government.

In closing, Mr. Krugman’s credentials are impeccable, but when it comes to linking this country’s prosperity on the backs of labor unions, his analysis defies belief.


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