Wednesday, June 27, 2007

Leonhardt on Unions

In today's NY Times, David Leonhardt buys into Richard Freeman's pro-union views. David writes:

Since 1980, as union membership has dropped sharply, the share of economic output going to corporate profits has more than doubled.

He could have written:
Since 1980, as union membership has dropped sharply, the natural rate of unemployment has dropped sharply as well.
I have no doubt that making it easier for workers to form cartels would raise wages--at least for those workers in the cartels. But demand curves slope downward. When unions push wages above the equilibrium of supply and demand, the side effects are not entirely benign.