The Public Interest

The two faces of unionism

James L. Medoff & Richard B. Freeman

Fall 1979

TRADE unions are the principal institution of workers in modern capitalist societies, as endemic as large firms, oligopolistic organization of industries, and governmental regulation of free enterprise. But for over 200 years, since the days of Adam Smith, there has been widespread disagreement about the effects of unions on the economy. On the one side, such economists as John Stuart Mill, Alfred Marshall, and Richard Ely (one of the founders of the American Economie Association) viewed unions as having major positive effects on the economy. On the other side, such economists as Henry Simons and Fritz Maehlup have stressed the adverse effects of unions on productivity. In the 1930s and 1940s, unions were at the center of attention among intellectuals, with most social scientists viewing them as an important positive force in society. In recent years, unionism has become a more peripheral topic and unions have come to be viewed less positively. Less and less space in social-science journals and in magazines and newspapers is devoted to unions. For example, the percentage of articles in major economies journals treating trade unionism dropped from 9.2 percent in the 1940s to 5.1 percent in the 1950s to 0.4 percent in the early 1970s. And what is written is increasingly unfavorable. The press often paints unions as organizations which are socially unresponsive, elitist, nondemocratic, or ridden with crime. In the 1950s, 34 percent of the space devoted to unions in Newsweek and Time was unfavorable; that has risen to 51 percent in the 1970’s. Economists today generally treat unions as monopolies whose sole function is to raise wages. Since monopolistic wage increases are socially deleterious-in that they can be expected to induce both inefficiency and inequality-most economic studies implicitly or explicitly judge unions as having a negative impact on the economy.

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