Sunday, June 10, 2012

new empirical research on unions and upward mobility

At various points during Anti-Mankiw's history we've devoted ourselves to a topic that is often completely ignored by the mainstream: institutions. And even when they are talked about, it's usually in the context of their distorting or enhancing effects on economic efficiency. Schooling, we are told, raises the productive potential of the individual by imparting on him or her the skills or signals conducive to success in the labor market. Unions, we are told, distort labor market equilibrium by artificially raising wages. No matter the story, you can bet that it has something to do, in the end, with economic efficiency. [Read this post which sums up Anti-Mankiw's view of the education debate with the mainstream quite well.]

Those devoted to a social economy approach, on the other hand, realize that mainstream economics' views about efficiency are overly simplified at best and downright biased at most. Boiling efficiency down to a simple, monetized concept of "welfare" in which outcomes are compared to an idealized market equilibrium is inappropriate when other social desiderata are relevant -- such as health, or stable living standards, or a sustainable environment. In the social economy approach, unions are signals of a stable society because collective bargaining can be used to counter employer power.

New state-level evidence from the U.S. presented by our colleague at UMass Eric Hoyt as well as CEPR senior economist John Schmitt shows that there is at least a weak positive relationship between union density and various measures of upward economic mobility (see the link for the details -- it's a short post and would be a great teaching resource in an intro-level course). Such evidence goes a long way in furthering the social economy approach to economics, in which economic mobility is dealt with in a concrete manner. While Mankiw may suggest time and again that education is the means by which economic opportunity is realized, neither the data nor the theory -- from a social-institutional standpoint -- validates his claim (at least, not as education is currently done in the U.S.!).

Hoyt and Schmitt, on the other hand, suggest an alternative institution for enhancing economic mobility and have the data to back it up.


  1. Professor Lars Pålsson Syll- Greg Mankiw and Richard Epstein – libertarian mumbo jumbo
    19 July, 2012 at


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