Unions = Jobs

America needs stronger unions… This piquant idea recently occurred to a New York Times business writer as he contemplated the economic question of the day: Where are all the jobs? It’s the question on everyone’s minds. Most economic reports indicate that the economy—at least the corporate profit and Wall Street side of it—is recovering slowly. Profits are soaring and U.S. GDP is up, but job creation remains sluggish, at best.

So what do unions have to do with it? Before exploring that issue, let’s review why job creation—or it’s lack—is worrying people who are paid to worry about the economy. According to a recent National Journal article, "The Great Recession wiped out what amounts to every U.S. job created in the 21st Century. But even if the recession had never happened the United States would have entered 2010 with 15 million fewer jobs than economists say it should have."

The article adds that, while the period 2001-2008 witnessed "solid growth" in GDP and corporate profits and a low unemployment rate, job creation was far lower than at any time since World War II.

What happened?

Are Public Employee Unions To Blame For States' Budget Crises?

A disturbing number of people are blaming public sector unions for states’ current budget crises (also here, here and here). Their basic argument is that unions have seriously exacerbated budget shortfalls because a significant proportion of state spending is tied up in employee compensation, and unions, via collective bargaining, increase salaries and benefits.  As a result, so the line goes, unions have created unsustainable expenses for state governments in a time of declining or still-recovering revenues.

Needless to say, the relationship between unions and state revenue/spending is complex.  The claim that unions are responsible for state budget gaps (or at least for larger gaps) is therefore extremely difficult to examine, especially during a fiscal crisis. Nevertheless, we can take a quick, modestly rigorous look. 

There are 30 states that provide collective bargaining rights for state employees, virtually all of them via state laws. One way to evaluate the merit of the accusations above is to see whether states that allow collective bargaining have more severe budget problems than those that do not.

The “Jobless” Recovery: Implications For Education?

Our guest author today is James R. Stone, professor and director of the National Research Center for Career & Technical Education at the University of Louisville.

The headline of the USA Today article reads: “Tense Time for Workers, As Career Paths Fade Away” (January 13, 2011). The article notes that while most key economic indicators have improved over the past two years, the unemployment rate has remained persistently high. This is a jobless recovery.

Is this a time for pessimism or a time for a reality check?

This is not the first jobless recovery. The recession of the early 1990s spawned books with titles such as The Jobless Future (1994), A Future of Lousy Jobs (1990), The End of Work (1995), The End of Affluence (1995), and When Work Disappears (1996). Any one of those, and many other, similarly-titled books and articles could speak to today’s labor market crisis. Were these authors prescient or is the creative destruction in the labor market wrought by our relatively unbridled free enterprise system’s speeding up the cycles? I’ll leave that for economists to argue.

What is new this time around is the effect of the recession on recent college graduates.

Help The Economy: Put A Teacher's Aide In Every Classroom

Economist Robert Shiller (co-creator of the Case-Shiller Home Price Index, an essential tool for investors and economists) has an interesting idea for stimulating the economy: Put a teacher’s aide in every classroom.

Why? As reported by the Wall Street Journal, "Not only would it employ millions, but it would be good for the children," who would benefit from "the extra attention of another person."

Shiller is regarded as one of the most important economists today. The Arthur M. Okun professor of economics at Yale University and professor of finance at the Yale School of Management, he forewarned about both the dot.com bust and the housing bubble. For years, he criticized the so-called efficient markets model of economics, which many today cite as a key driver of the policies that led to the financial crisis. He is also the author of many books, including, Irrational Exuberance in 2000, which warned that the peaking real estate and stock markets were in bubble territory.

Shiller is worried about today’s economy. He estimates that the likelihood of a double-dip recession is growing and that we are "teetering" on the brink of a dangerous deflationary spiral. What to do?