Do Unions Kill Prosperity? Not So Much, It Seems. Actually, QTC.
You hear from lots of people — including lots of economists — that they do. Because they’re monopolistic price-fixers, they distort economic decisions and make us all worse off.
The theory makes sense, as far as it goes. But if it were really true you’d expect to see it in the data. This got me curious…
Compare percent union representation to GDP/capita by state:
The correlation is actually pretty strongly positive — .56. More union representation, more prosperity. (Or the other way around…)
It’s also worth noticing: Lower-left, red states. Upper right, blue states. Go figger.
Update: I really do have to point out the other delicious oddity here: Sarah Palin’s Socialist Utopia of Alaska is second only to the Evil Empire, New York, in union representation.
Union density: http://www.bls.gov/news.release/union2.t05.htm
State GDP/capita: http://www.bea.gov/regional/gsp/
The theory makes sense, as far as it goes
beware of things that make sense.
the rationale behind the theory is that if workers would only work for less we could hire more of them. even samuelson thought that made sense. but when workers are treated like slaves the country gets poorer not richer.
My eyes went straight to Michigan, a traditionally strong union state, now missing 800,000 jobs and deteriorating rapidly.
Generalization should always be used with caution, there are a lot of factors involved.
@save:
Nobody would suggest, I think, that strong union representation is a *sufficient* cause of prosperity. It might, however, be a necessary cause.
Also strongly correlated: large financial services industry. A quick look at the top GDP countries shows similar apparent concentration.
@J.goodwin:
Right, also oil producers. I often like to use the “EU13” as a comparison base: EU15 minus Norway and Luxembourg.
Yes, but it might have done harm (deteriorationof the US auto industry) or cause future harm (hesitance to move jobs to Michigan).
To Goodwin’s point, This looks like different data sets plotted on the same graph.
Frex, WV, MI, OR, WA, HI, AK, NY as seperate and distinct from MS, CS, AR, TN, LA, OK, CO, WY, VA.
What are the similarities and differences?
I also wonder about wealth disparity within each state. Is this data available anywhere?
JzB
I guess I’m suspecting that a third axis would allow the data to cluster (or spread, I suppose) in meaningful way.
What should that axis measure?
JzB
Looking at correlation is the first step in looking for causation.
Higher Union membership leading to higher GDP is easier for me to rationalize than the alternate premise of increased GDP causing higher union membership.
If I have this right, then the graph is set up the wrong way. You want the dependent variable on the Y axis.
JzB
rusty
you are making the same mistake you accuse steve of making. “overgeneralizing” in fact arguing correlation therefore causation. “MI was unionized. MI has hard times. Therefore unionizatioin causes hard time.”
Can I say this is bad reasoning without hurting anyone’s feelings?
my own view is that states that were prosperous because of geographic factors could afford unions, partly because manufacturing is easier to unionize than cattle driving. And Virgina of course suffers from the Southern disease.
The argument I would accept from the data is that in genral unionizatioin of the work force does not make a state poorer.
and frankly that is so obvious, i wouldn’t waste my time trying to prove it.
if nothing else unions are the only protection workers have, other than the government. it takes a pretty diseased mind to think a corporation vs a worker is an “even playing field.
doesn’t need to be a corp. any business large enough to effectively control the local economy will do it.
jazz
you could be right about the direction of causation. i tend to think its the other way, but not so strongly i’d bet on it. it just seems that the “rich” states got unionized…after a terrible fight. and the poor states never did.
but i’d look hard for cause and effect and not worry so much about the statistics.
time…im sure the correlation would be shown to have been stronger 50 years ago…
I like your musing about income disparity measures. Higher per capita GDP may in some situations relate to higher income disparity. Higher income disparity logically could lead to higher union membership.
Cause of greivance –> Method of action –> Result
This should be measured over time though, not as a snapshot. Delta Gini should lead with some lag to Delta union membership.
Census provides Gini by district (including state) from the ACS
http://factfinder2.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=ACS_10_1YR_B19083&prodType=table
“You hear from lots of people — including lots of economists — that they do. Because they’re monopolistic price-fixers, they distort economic decisions and make us all worse off.”
Like corporations, eh? 🙂
Funny that economists think that in an n-person game, coalitions are bad. Sorry, folks, that’s how games are played.
coberly: “And Virgina of course suffers from the Southern disease.”
What do you mean? Virginia is a great success, having relatively high per capita GDP with low unionization. Maybe it is doing something right.
On the other hand, Alaska and New York are failures, with relatively low per capita GDP given high unionization.
I was trying to be brief, not simplisitic.
Yes, there are lots of factors, pro and con.
Is VA prosperous because of proximity to Washington DC? The counties near the beltway look like it.
Is VA prosperous because of proximity to Washington DC? The counties near the beltway look like it.
Proximity to D. C. would be my guess. Maryland has higher GDP per person, and greater unionization.
I believe more government-generated wealth is in Northern Virginia than any other place on the planet.
That’s pretty simplistic. Half of union members are government workers. All this shows is that more prosperous states have more government services. The presernce of WY and AK should be tipoffs – their prosperity comes from natural resources not from human beings in unions. The resources fund government for them.
Also, it’s pretty obvious that with the exception of those two hydrocarbon centers, the propserous states have much better coastal access than the less prosperous which are more landlocked. So this just shows that states with ports get more prosperous, draw more people, have more government and the govt workers tend to be unionized. The correlation is actually not very impressive once you introduce other variables.