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Economists with a Clue: Supporting the EFCA


If you have studied economics, you know the work of Kenneth Arrow, for his work in growth theory, information economics, and social choice. You also know the work of Robert Solow, one of the architects of Neo-Keynesian economics. Bloggers know J. Bradford DeLong for his willingness to "grasp reality with both hands."

Recently Dean Baker has become one of those people who becomes an overnight sensation because of decades of hard work for his cogent attacks at the pieties of finance worship that have led us to this particular crisis. Alan Blinder, who has mixed successful work on macro-economic theory with public policy innovations has been a beacon of the pragmatic search for economic justice.

Jeffrey Sachs has gained a rock star aura for pointing out the simple reality that the worst poverty is allowed by the pernicious choice of inaction. Lester Thurow has been an advocate for making difficult choices, to restore long term growth in works stretching back before anyone knew what the internet was, or had seen a fax machine. Peter Temin is known for his landmark study on macro-economic policy and the Great Depression. I think a copy of Robert J. Gordon’s macro-text has passed through the hands of virtually every economics student in the last 20 years.

What is amazing about the list of supporters that Larry Mishel has managed to gather in support of the Employee Free Choice Act is that there is not one filler name in the group, each and every signer is a member of the economics profession of distinction.

So what is the economic case for the EFCA? The first part of the case is simple: capital can organize. That’s what a corporation is, a legally protected way for capital to organize. For a market to function, the participants have to have roughly equal power: that means that because we need concentrations of capital to run a modern society, we must also have concentrations of labor, and that means that labor must be able to organize to bargain fairly. In far too many places, a few companies have a monopoly on the good jobs, and can therefore pay less than the work is worth.

The second part is that there has to be a linkage between productivity, and wages. If not, then eventually consumers burn through savings, burn through credit, and collapse in a heap. As they are doing now. Finally the economic case for unionization is that a better work force can do better work. America’s period of most rapid economic growth, was also the period of growth of unions. If the profits of work fall behind the profits of speculation, soon work will be seen as something that fools do.

So what about the argument that unions make companies "less competitive?" It’s only true if de-unionized companies are allowed to act as a free rider for services and innovations that unionized labor forces create. It isn’t that unions are less competitive, it is that de-unionized companies steal from the common good. This was the motivating purpose behind the original National Labor Relations Act: so that a few factories paying poor wages did not drive down wages for all. And without buying power for all, inequality festers, and people cannot afford to buy the very things the society can afford to make.

EFCA is not a broad change, it is a small re-balancing of the scales. It is not a cure all, nor a revolution. It is more like COBRA, or like the Americans with Disabilities Act, or the recently passed S-CHIPS. It is not the perfect, but it is an essential step, that can be taken now, one that does not preclude others to be taken later. Employers have rights, you can make yourself crazy thinking of all the rights employers have, it is time to make sure that employees have a way of protecting theirs.

It’s something so obvious, even an economist can see it.

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