But two other factors are omitted from this narrative. The first is the price of labor. The Wagner Act, the great modern labor statute, became law in 1935. It made possible the closed shop, under which only unionized workers were allowed into a unit. In 1937, after Roosevelt was safely elected, labor leader John L. Lewis and his Congress of Industrial Organizations began using their new power to its full extent. Labor's tour de force in this period is memorialized in the photos we still recognize today of sit-down strikes at the General Motors Co. plant in Flint, Michigan. Strike days in 1937 totaled 28 million, up from 14 million during the election year.
Such labor stoppages, and the threat of more, led companies to raise wages more than they could afford to. Harold Cole of the University of Pennsylvania and Lee Ohanian of the University of California, Los Angeles, have demonstrated that wages in the latter half of the 1930s were well above trend for the entire century. Employers also hired less: Even as unionization increased, nonfarm unemployment did as well.
http://www.bloomberg.com/news/2011-06-06/what-paul-krugman-misses-about-1937-redux-echoes.html
This is nothing but common sense. Anything that makes it more expensive to employ workers makes it less likely they will be hired. If I could get my lawn mowed for $1, I'd never mow it again - but right now, my son won't even mow for the price I'm willing to pay so he's unemployed and I burn up an hour of my week on a mower.
This is the effect of unions - fewer workers making more money, for a while; and "after a while" those higher paid union workers get pushed out of the marketplace by workers who provide more productivity than do their union competitors. Exception - government employees, who rarely have to compete and those from places like Boeing and the big, old automakers who are protected from the folly of their abusurd contracts by their ability to buy off politicians.
Such labor stoppages, and the threat of more, led companies to raise wages more than they could afford to. Harold Cole of the University of Pennsylvania and Lee Ohanian of the University of California, Los Angeles, have demonstrated that wages in the latter half of the 1930s were well above trend for the entire century. Employers also hired less: Even as unionization increased, nonfarm unemployment did as well.
http://www.bloomberg.com/news/2011-06-06/what-paul-krugman-misses-about-1937-redux-echoes.html
This is nothing but common sense. Anything that makes it more expensive to employ workers makes it less likely they will be hired. If I could get my lawn mowed for $1, I'd never mow it again - but right now, my son won't even mow for the price I'm willing to pay so he's unemployed and I burn up an hour of my week on a mower.
This is the effect of unions - fewer workers making more money, for a while; and "after a while" those higher paid union workers get pushed out of the marketplace by workers who provide more productivity than do their union competitors. Exception - government employees, who rarely have to compete and those from places like Boeing and the big, old automakers who are protected from the folly of their abusurd contracts by their ability to buy off politicians.
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