Unions and Unemployment: The Battle Over the Employee Free Choice Act Gets Ugly

In Washington, money talks. And we all know that the folks opposed to the Employee Free Choice Act have lots of money. That means that they are doing lots of talking. And, they are saying some pretty strange things.

Recently, they have sought to promote the argument that unions lead to higher unemployment. To help push this case they have been circulating a study that examines differences in unionization rates and unemployment among Canadian provinces. [Chris Kromm has more on the funding of the study.] This study purports to find that a 3 percentage point increase in unionization rates leads to a 1 percentage point increase in unemployment. Based on this study, the opponents of the Employee Free Choice Act argue that any resulting increase in unionization will cost millions of jobs.

Of course the immediate response might be to ask, if this study's findings are accurate, why Canada's unemployment rate isn't 7 percentage points higher than the U.S. rate? Canada's unionization rate is about 20 percentage points higher than in the U.S., yet its unemployment rate is somewhat lower.

More substantively, there is a large body of research on this topic. While some of the research does find a correlation between unemployment and unionization rates, much of more recent research finds no link between unemployment and unionization rates.

In 2006, the Organization of Economic Cooperation and Development (OECD) did an exhaustive analysis of the research on this topic and concluded that there was no link between unionization rates and unemployment. It is easy to find examples of countries with very high unionization rates and low levels of unemployment. For example Norway and Denmark have unionization rates near 80 percent. Before the current crisis their unemployment rate was under 3.0 percent.

Of course we don't have to go overseas to prove the case that unions don't lead to unemployment. If we go back 40 years, the unionization rate was over 30 percent. Presently, it is just over 12 percent. In the 60s, the unemployment rate fell as low as 3.0 percent and was below 5.0 percent for most of the decade.

It is possible for economists to produce studies that tie unions to unemployment just as industry funded studies have tied the minimum wage to unemployment, even though a large body of academic research shows the opposite. For this reason, the OECD has performed an extremely valuable service with its careful analysis of the data. Until someone can show cause to question this OECD analysis, there is no reason to accept the employer claims that the Employee Free Choice Act will cost jobs.

-- This article was published on March 13, 2009 by TPMCafé (Talking Points Memo).