And I agree with dd. I still think this discussion ignores the very different historical pattern and influence of unionisation in America as opposed to Australia.

Unions by definition represent their members, who in turn are the people employed in a paticular industry or workplace/s. Unions don’t represent the unemployed or “the working class” generally. The fact (if correct) that it’s mainly the working class who have been keen on unionism doesn’t undermine Nicholas’s argument or say anything at all about whether they have “mistaken their self-interest”. The members of the working class not employed in a particular industry are NOT members of the union, and those who are clearly have a self-interest in taking collective action to enhance their terms and conditions. Equally clearly, by doing so successfully they increase the cost of labour and potentially price out of the market some of the marginal unemployed who might conceivably have got jobs had the labour price been a bit lower.

Whether one regards that as a sufficient argument for deregulation of the labour market, given labour economists who suggest that the net employment-enhancing effect of such deregulation is likely to be very modest, is much more arguable. Clearly such deregulation is significantly inegalitarian, in that the wages and conditions of significant numbers of existing working people (in occupations lacking strong marketplace bargaining positions) will fall over time, while this increasing inequality will only be counterbalanced by a rather lesser number of new employees entering the labour market at the lower entry-level wages.

Personally, I could have supported some aspects of the Howard government’s recent changes if they had simultaneously enhanced the social security safety net and boosted spending on genuine retraining programs (as opposed to bullshit makework schemes like Work for the Dole). But even then, they should have retained a reasonably rigorous “no disdvantage” test as applied when AWA’s were first introduced. I fear that the new regime is already promoting a “race to the bottom” in some industry sectors, potentially producing a nasty US-style dog eat dog society for little real net economic benefit.

BTW I question the assertion that the working class are the main group who have shown a commitment to unionism. In fact, I suspect that at least for the last 30 years or so public sector white collar unions (including nurses and teachers) have been considerably more successful in retaining higher levels of unionism than blue collar occupations. But i may be wrong; it’s only a subjective impression and I certainly haven’t checked the figures.

1) high unionisation in unskilled work has historically been associated with relatively low poverty in the surrounding society. Sure correlation doen’t imply causality, but this at least rules out high levels of unionisation having a *strong* pro-poverty effect.
2) its always been the working classes that are keen on unions. Do you seriously think such large numbers of people over such a long time have systematically mistaken their self-interest?

And its a bit rich, BTW, to blame the unions for all of Detroit’s troubles. Those health and pension plans were freely offered by management as a substitute for wage rises and as a means of providing “golden handcuffs” to reduce turnover costs (BTW, its strange how the Japanese carmakers, with a much older workforce and even more generous pension plans, don’t have to blame unions much). And it ain’t unions that insisted on making poorly engineered SUVs and V8s at a time when it was obvious cheap oil couldn’t last and American consumers were rich enough to prefer better engineering.

Unionisation has destroyed Detroit which I’m saying is bad for people who live in Detroit and especially bad for those who want to work in the fast departing car industry - but you want me to check out the empirical literature, on the grounds that the poor don’t drive cars.

Let me propose a hypothesis. Where what looks like facts don’t look like you want them to, you call for closer attention to the evidence. Where they do - well I don’t know.

But we’re dealing with a dearth of evidence about what the real facts are our whole lives and I’m quite happy with the generalisations I’ve made.

Higher wages drive up prices (I assume this is fairly general unless otherwise demonstrated). Certainly work in Australia on protection in the 1970s showed that areas where we were trying to drive up wages (with protection - particularly in clothing and cars) hurt the working class’s purchasing power disproportionately.

My point really is that you seem to be relying on a theoretical impact of unionisation, and I’m suggesting that deunionisation affects different (and far fewer) people in the US than in Australia, and I wonder if you looked at the empirical literature on its effects before disagreeing with Krugman. That’s all.

But I don’t know what you mean in practice by the first statement. Do you mean that prices are higher because of unionisation? Unfortunately if you’re on minimum wage, you don’t get to consume much at all beyond the basics of food, shelter and clothing (if indeed you can afford these), so I imagine you must be referring to “the general community” as those with higher purchasing power?

Pretty obviously unions that are successful increase wages for their members. That’s the benefit. The costs? They’re paid by the general community including by those on lower wages, and those (for instance those wishing to work in unionised industries - like cars in Detroit) that would like to work for less, but are not able to.

My suggested answer: With more money, comes more power, both of which increase the ability to push their agenda.

At the same time, the stressed out po’ folk are more susceptible to the mendacious scare campaigns which assist the passing of this agenda.

At this rate, we should have enough ‘pain’ to see a revolution occur in 50 years, or so.

I’m not sure deunionisation belongs there ‒ unions have typically compressed wage outcomes it’s true. But they’ve typically assisted those above the minimum wage, not those at the bottom of the pile.

I’m not sure how your formed that impression, Nicholas.

It’s true in part because a lot of deunionisation in the States has been about closing manufacturing plants and relocating them to “right to work” states (ie largely the South) and since NAFTA, Mexico.

But it’s untrue in part because a lot of low paid workers in low skill jobs (ie shop clerks, hospitality workers, storemen, janitors, cleaners) have been deunionised in the States and are now just paid minimum wage.

Nicholas - Thanks for asking about that. I did it almost automatically because I’m cautious about the explanatory value of character traits (as opposed to other individual level variables like intelligence or skill). There’s a large body of evidence from social psychology which shows that people tend to overestimate the importance of personality traits and underestimate the importance of situational variables. Some psychologists call this the ‘fundamental attribution error.’

For policy makers it’s an important kind of explanatory bias because it can lead to wasteful and ineffective responses to problems like crime, unemployment and welfare dependency. The idea that violent crime or terrorism can be abolished by identifying people with criminal or terrorist personalities and either killing or incarcerating them is a good example. Whenever a politicians tells you the root cause of a problem is bad character it’s time to hold on tight to your wallet.

That said, it is rational for employers to be cautious about hiring people with criminal records. It’s unlikely that a few years in prison have had a major effect on the variables which influence criminal offending. I’d think very carefully before hiring an accountant with a history of embezzlement.

“Amateur tattoos or gaps in a CV might signal a spell in prison which in turn acts as a signal of “‘poor character’”.

Why the scare quotes around “poor character”. Do you think a spell in prison tends to suggest

1) poor character or
2) ‘poor character’ ?

Krugman is talking about the big winners. I was taking exception to the list of causes for those at the bottom set out by the authors of the study. That wasn’t really their topic either, so they were just writing stuff down, and their list of causes seemed to me to be complacent.

The ‘O-ring’ theory doesn’t require a space shuttle to blow up. Just a car to be built wrong, a financial settlement to be missed - a concrete pour to go wrong because the right people didn’t turn up at the right time. These things are commonplace. I think our culture has been very slack about them. But it’s tightening up because of competition. That’s mostly a good thing. But it leaves a huge hole for those who don’t go for that kind of thing.

He is a personable extravert.

Jason, I didn’t say they hated their work or that exraverts do badly in the new economy, but in Tasmania?? Details Jason, details….

On the o-ring theory, I’m just not sure that the increase in sophistication of the workplace is broadly based enough to explain the kind of shifts Krugman is pointing out. For sure there could be a disproportionate effect among workers in any production process towards the low skilled (because of the information problem), but there always would have been. Have there really been that many ‘o-rings’ added to the economy? As Jason points out, we’ve also added alot of new areas where the potential exists for those who are selected aginst in some areas, to be selected for in others.

One person’s introvert signifies lost sales, while for another it signifies insightful economic analysis….. Maybe I should grow a beard and go out less..

Good point — and if you’re right there are policy implications. There is an asymmetrical information problem here (although it’s not exactly parallel to the used car example).

In a 1985 paper Gary Burtless reported on an experiment with targeted wage subsides that seemed to show that the subsidies reduced the job seeker’s chances of being hired. He wrote:

Although the vouchered worker was offered at steep discount, employers appeared to interpret the voucher as implying "damaged goods." Given this interpretation, job applicants using the voucher were placed at a disadvantage in comparison to identical job applicants who refrained from identifying themselves as welfare recipients.

As Burtless notes, other government programs could produce the same effect. If participation in a training or job search program is a reliable signal that the government has classified a job seeker as long term unemployed or disadvantaged then employers may be less likely to hire them.

Employers use signals because they aren’t able to observe a job seeker’s productivity directly and can’t rely on the job seeker to tell them. So,as you say, they use a variety of signals they believe are statistically associated with suitability for the job (sometimes the process might be unconscious). Amateur tattoos or gaps in a CV might signal a spell in prison which in turn acts as a signal of ‘poor character’. Slovenly dress might signal a lack of interest in the job or a lack of awareness about what employers and customers expect and so on.

Too often economists assume information problems away.

also see this
http://www.wired.com/wired/archive/9.12/aspergers.html

The New Economy is adapted for introverts