Changing View of Unions

The arguments against trade unions are long and familiar; every economics textbook since Samuelson's has insisted that unions restrict the labor supply and extract from management higher wages for a blue collar elite, at the expense of jobs for thousands of others. And ever since organized labor became an integral part of the American economy, experts have called unions inefficient and unproductive because they give too many jobs to unions members who perform superfluous functions. Laymen, too, dislike unions simply for the corruption they feel many unions leaders display.

But for the first time, with the publication last month of What Do Unions Do? a pair of Harvard economists have challenged the common prejudices against unions and, contrary even to the trend in their profession, come out in defense of the controversial organizations. After eight years of research and with the use of an unusually extensive amount of empirical data, Professor of Economics Richard B. Freeman and Associate Professor of Economics James L. Medoff conclude that, far from being the sources of inefficiency, unions actually have a positive effect on the economy and on American Society as a whole.

Their findings fly in the face of most of the current arguments against unions and against the attitudes of industry management. In the course of their research, which took nearly eight years, Freeman and Medoff, both of whom are affiliated with the Cambridge-based National Bureau of Economic Research (NBER), ported over countless government records on industry and personal histories of union members. Finally, they came up with the overwhelming verdict that unions are worth rescuing.

What distinguishes What Do Unions Do? from similar works on the topic is the authors' heavy reliance on data to prove their case. For the first time, they use tools such as production functions and econometrics to demonstrate unions' effects on the economy. "The book is a quantitative approach to a subject previously vague and qualitative," says Medoff, adding, "it has a theoretical framework broader than the neo-classical approach."

"The book has moved the discussion about unions beyond where it's been for years, beyond anecdotes and on to facts," says Bernard E. Ichniowski '77, deputy director of NBER's labor studies program. "No longer will it be possible to use off-the-cuff anecdotes in the face of scientific facts," he adds.

The book stresses what the authors call the "two faces of unionism." While conceding that unions do in fact act like a monopoly in restricting the labor supply. Freeman and Medoff argue that unions are also socially and economically valuable for three reasons. First, because unions give workers a voice and establish grievance procedures, turnover rates in unionized workplaces are far lower than in non-unionized ones. This spares firms the cost of constantly hiring and retraining new workers to replace the disgruntled ones who have left. Therefore, unions are actually productive. In addition, because unions raise wages, management must find other ways of cutting costs in order to maintain their profits, and this effort usually results in more efficient production.

Second, the authors say, unions help equalize the distribution of income throughout society. Over the years unions have fought for equal pay for similar jobs throughout specific industries. Higher wages for workers result in lower returns for owners of capital, thus narrowing the economic gap between management and labor.

Finally, their research shows that unions foster democratic ideals and values. Union members gain valuable experience in the running of their local unions and can then go on to be active citizens and voters.

But what about the infamous corruption traditionally associated with unions? The authors claim that its prevalence is simply exaggerated. "There are more crooked businessmen than union members," says Freeman. Both he and Medoff, who describe themselves "in their 30s," say that the extortionate behavior of unions is isolated and overpublicized, what matters to unions members, they say, is how democratic their local unions is--and this can usually be measured by the amount of turnover among elected officials. "We found that at local unions there was a great amount of democracy. People usually point to the lack of turnover at the national level, but there's a lot of turnover at the local level," says Medoff.

With the publication of What Do Unions Do?, Harvard continues its traditional role as a leader in the field of labor economics. According to Freeman and Medoff, the book draws heavily on work previously done by Harvard faculty, in particular The Impact of Collective Bargaining on Management by Professors Summer H. Slichter, James J. Healy and E. Robert Livernash, which was published in 1960, and President Bok's and Lamont University Professor John T. Dunlop's 1970 book, Labor and the American Community.

"Freeman and Medoff have done a lot for the way Harvard's labor studies are viewed. Harvard is seen as one of the top, if not the top, places for labor economics in the country," says Linda Bell, a graduate student in economics.

Dunlop, long considered the godfather of labor economics, advised Freeman on his 1969 dissertation, and he has similar praise for the duo's work. "Their book has the virtue of crisply recognizing that labor organizations may have some adverse effects on the economy and in addition may have some very favorable impacts on industry and the economy in general."

Freeman, a native of Newburgh, N.Y., attended Dartmouth as an undergraduate before coming to Harvard to obtain his doctorate. He taught at the University of Chicago from 1970 to 1973, after which he returned to Harvard as a junior faculty member, gaining tenure in the late 1970s. Most of Freeman's early work focused on external labor markets, in simple terms, this meant the problem of finding a job. As his mentor Dunlop has done. Freeman has chosen to publish his research in books, rather than in articles in technical journals, which he says are often forgotten. Before What Do Unions Do? he published a study of job markets for college graduates entitled The Overeducated American and another called The Black Elite. He is now teaching Economics 1650. "Trade Unions. Collective Bargaining, and Public Policy" as well as a graduate seminar on labor economics.

But, according to students of Freeman, economics is not his only passion. Second-year law student Glen A. Fine '79, who wrote his undergraduate Economics thesis under Freeman, describes the professor's love of professional wrestling; in addition. Freeman is said to have a terrific bank shot styled after the Boston Celtics' Sam Jones.

For Brown graduate Medoff, exposure to unions began in his childhood. His grandparents owned textile mills near his native Woonsocket. R.I., and from an early age he observed the life of blue collar workers in the textile industry, with its characteristic low wages and poor working conditions.

"My grandfather recognized that unions did have two faces. They did bargain for higher wages, yet also provided a vehicle with which management and workers could collaborate," Medoff recalls.

As a teenager, Medoff worked during a summer in one of the textile plants, sorting out cashmere in what he describes as a hot room filled with dirty air. "They gave me the worst job, so I got first hand experience about what bad working conditions were like," he says.

After a successful career as a lacrosse player at Brown, where he was known as "the Woonsocket Rocket," Medoff came to Harvard and received his Ph.D in 1975, and has been on the Faculty ever since. He has published a number of articles on internal labor markets, and also on topics such as salaries, promotions and seniority within firms. Medoff teaches Economics 1660. "Operation of Labor Markets" as well as a graduate seminar. His only hobby, he says, is playing basketball with his three-year-old son, Justin.

At the same time Medoff was doing work on internal labor markets, Freeman was publishing reports for the Department of Labor and the American Economics Association on the positive effects unions have on productivity because of reduced turnover. After meeting at Harvard, the two decided in 1976 that by pooling their combined knowledge of internal and external labor markets, they could write a comprehensive study of unions.

Freeman says that the two already sensed there was ample evidence in favor of unions even before the formal research began. "We knew that there was something sitting there and things came out more or less consistent with our earlier data," he says.

That the book, which was funded by a grant from the National Science Foundation to NBER and published by Basic Books, took eight years to produce colleagues call a testimony to the duo's thoroughness as researchers. "The book was four years overdue but we wanted to be careful and cautious," says Freeman, adding. "Research isn't a bunch of quickies."

"We take being right very seriously," Medoff adds.

The critical response to What Do Unions Do has been overwhelmingly favorable "What they say isn't controversial, because they're so thorough," says Bell Freeman adds, however that the Journal of Labor Research recently published" an incredible attack on us by someone who hasn't read the book Nobody who's attacked us has had any data or evidence. They just scream.

But both Freeman and Medoff say they realize that it will take more than one book to halt the decay of unions taking place nationwide. Including decline in membership, management's hostility, and non-enforcement of labor laws by the government. In 1954, a peak year, 34 percent of the non-agricultural work force belonged to unions while today that number stands at 18 percent From automobiles to airlines, management is demanding wage concessions from unions and in some sectors even seeking their demise. In their book Freeman and Medoff urge government to enforce right-to-organize laws and halt the illegal anti-union campaigns that management has been conducting. While in the 1970s unions bargained to keep wages in step with inflation, such attempts today, in the face of management offensives, are likely to fail.

"Unions will be sobered in the coming years," says Medoff. "The average union will not be trying to get big wage increases as they did in the 1970s." Instead, the authors say, unions will be devoting most of their energy to simply making up lost ground.

Members' top concern is how democratic their union is, argues Associate Professor of Economics James L. Medoff, and while there's a "lack of [leadership] turnover at the national level, ...there's a lot of turnover at the local level."

Professor of Economics Richard B. Freeman discredits the idea of infamous corruption associated with unions, saying, "There are more crooked businessmen than union members."