Tyler Cowen: prediction

Transcript context

…The first thing I learned was that I should probably stick to my day job of economics because, while I typically find myself reasonably cogent relative to others in discussing economic issues, attending that literary conference, I did not find myself relatively cogent relative to other literary experts. I am not sure I would have made it through that experience without the help of my wife, who is a professor of English at Harvard. I guess what I took, what I learned from that was that literature had a way of evoking what an economist would call the nonpecuniary aspects of work. They are lacking when you say nonpecuniary aspects of work and you write a mathematical function, utility of consumption, leisure, and job attributes. There was a texture of alienation and depersonalization that was provided by Melville that one missed if one thought about things in the economic paradigm, is what I learned. Speaking of work, your last op-ed was on labor unions. You suggested a hope for a future where labor unions are stronger. Let me tell you my worry and see if you can talk me out of it. If I look at the labor economics literature, it seems to me the union wage premium is declining. It used to be about 15 percent. Now maybe it’s 7 or 8 percent. Some studies find it’s zero. If you’d say it’s 7 or 8 percent, if you take the 7 or 8 percent, a lot of that’s a tax on capital but surely some of it turns up in the form of higher prices. So labor gives back some of it. Surely some of it turns up in the form of lower demand for labor, so some people don’t get that job. If I think of unions being much stronger, even without worrying about allocative efficiency costs, I just see this one-time bump upwards of maybe 3, 4 percent, which would be a gain but wouldn’t change the fundamental reality on the ground. Can you talk me into more optimism on this? Or do you think 3 or 4 percent is a lot; let’s do it? Three or four percent is pretty large relative to real wage growth that’s taken place over the last generation is the first thing I’d say. Secondly, I’d say that, as I learned reading Melville, there are important nonpecuniary aspects of jobs. [laughter] If you look at turnover, which is a measure of job satisfaction, it’s much lower in union employers. If you look at the way in which employee grievances are dealt with, it is more respectful of those potentially discriminated against in union workplaces. If you look at job safety, it appears to be better in union workplaces. So looking at wages is a good way to miss the local benefits of unions. The third thing is that — again, this would depend on one’s broad policy views — but that more successful unions push for policies like the preservation of Social Security, the expansion of the healthcare safety net that are for the benefit of everyone. The political impact of a society in which labor is better organized on the broad contours of policy is another way in which stronger unions can make a difference. But part of the argument of that piece was, I don’t know what exactly the right level of unionization is. I don’t know exactly what would be optimal. If we got a system where, if somebody tries to organize the workers at a company and the company fires the attempted organizer, and the only remedy the organizer has is to spend five years fighting through the courts where, if they win, they’ll get back salary, less whatever they earned in whatever new job they got. The cost-benefit for the employer has to be that it’s incredibly attractive to fire the would-be organizer. We don’t have a remotely level playing field where workers are given an opportunity to make whatever choice they prefer, and that seems wrong to me. I look at an America where corporate profits rose last year by 16 percent and wages have been stagnant. And it seems to me that more bargaining power for workers almost certainly has to be good. I agree with you that the technological dynamics, the globalization dynamics of a modern economy mean that it’s not clear just how large the benefits of more bargaining power will be. But it’s like the question of how much weight I should lose. I don’t know how much weight I should lose, but I know which direction I should be moving. [laughter] That’s how I feel about more labor power.…

Stored transcript either side of the excerpt. The highlighted words are the published quote; the surrounding text is unedited source, never generated.