Friday, 1 March 2013

Study: Strong industrial unions have positive impact on productivity growth

Some people may think that unions hamper economic growth, but a recent study by Guy Vernon and Mark Rogers (abstract) finds differently. In countries with industrial unions, stronger unions actually promote productivity growth.
Vernon and Rogers examined the effect of high union density on manufacturing labour productivity growth in 14 OECD countries over the period 1971 – 1995. They distinguish among countries by their predominant organizing principles: craft and general unionism (Australia, Denmark and UK); industrial unionism (Belgium, Finland, France, Italy, the Netherlands, Norway, Sweden and West(ern) Germany); and enterprise unionism (Canada, Japan and the US). With general and craft unionism, union strength is negatively correlated with productivity growth; with industrial unionism, the correlation is positive; and with enterprise unionism, there is no consistent correlation (in all cases correcting for other economic variables).
Further research should clarify the precise mechanism through which strong unions promote productivity growth, but Vernon and Rogers suggest that consistent conditions of employment across a sector may instill trust among employees and promote active cooperation.
The authors estimate that Finland’s 17 percentage point growth in union density has created 2.6 percent additional labour productivity growth per year. “Finland’s manufacturing productivity performance is certainly remarkable – and no mere ‘Nokia’ effect”, they conclude.
They also discuss the merger of Dutch and German unions into multi-industry ‘super unions’. Since negotiations are still conducted at the sectoral level, ‘the prositive growth effect of their strength appears secure’.

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