Magazine article The American Enterprise

How Unions Keep Workers Unemployed

Magazine article The American Enterprise

How Unions Keep Workers Unemployed

Article excerpt

Edward Bierhanzl and James Gwartney, "Regulations, Unions, and Labor Markets," in Regulation (Summer 1998), Cato Institute, 1000 Massachusetts Avenue N. W., Washington, D.C. 20001.

America continues to lead the world in job creation, while Japan and Europe continue to stagnate. From 1980-96, the 15 countries of the European Union increased their employment by 1.7 percent, while U.S. employment rose 26.8 percent.

What accounts for the difference? Edward Bierhanzl of Florida A & M and James Gwartney of Florida State believe unions play a crucial role. Analyzing data from the Organization for Economic Cooperation and Development (OECD), they find a strong correlation between rising unemployment and unionism.

Most Western European countries and Australia have centralized bargaining for wages, where the confederation of unions meets with the employers' confederation to set wage rates. Only 9 percent of French workers belong to unions, but centralized bargaining ensures that 91 percent of French labor has its wages fixed by unions. By setting wages artificially, these wage boards create inflexibility and rising unemployment among the marginally skilled.

In Italy, for instance, highly skilled workers tend to live in the north, while less skilled workers live in the south. Since wage boards mandate that Italian corporations pay northerners and southerners equal rates, factories tend to congregate in the north, leaving southern Italy with unemployment rates as high as 30 percent. …

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