Trades union membership has fallen to its lowest level since the 1940s. In principle, this should trouble conservatives.
This is because trade unions are an example of non-statist self-reliance, of people organizing to help themselves rather than looking to government.
I say this because of a fact pointed out by Philippe Aghion and colleagues - that there is a strong negative correlation across countries between union membership and minimum wage laws. Countries with strong unions, such as the Nordic nations, tend to have no minimum wage laws whilst countries with lower union membership, such as Greece or France, have stronger minimum wage legislation.
The UK had no national minimum wage in the 50s and 60s, believing that collective bargaining could better regulate wages. It was only after the collapse in union power that a NMW was enacted.
I suspect that what's true of minimum wages might also be true of other aspects of regulation. Elf n safety laws also increased after the decline of unions.
Unions, then, are an alternative to state intervention.There's a simple reason for this. Workers, naturally, will always want their working standards improved. If they cannot pursue this aim through unionization, they'll do so through politics instead.
But the thing is that collective bargaining is a more efficient way of protecting workers than the law.One reason for this is that the law inflexibly applies to everyone, whereas bargaining allows for workers to accept worse wages or working conditions where it would be prohibitively expensive to improve them. Also, the complexity of the law creates uncertainty which can be worse for business than good working relations with a union.
These considerations lead me to this chart. Drawn from the OECD and other sources, it plots union density in 1991 (admittedly an arbitrary date) against GDP growth since then. You can see that there is only a negative correlation between the two because of that Korean outlier.If Korea is excluded, there is a positive correlation (0.25) across the 22 advanced nations in my sample between union density and subsequent growth.Highly unionized Finland and Sweden have done better than less unionized Japan or the US.
This isn't so robust as to suggest that unions are definitely good for growth. But it does mean they aren't obviously bad*.
In this sense, people who want less state intervention and stronger growth should be sympathetic towards unions. So, why aren't Tories mourning their decline? I mean, it's not as if they just blindly hate the working class, is it?
* There is a strong negative correlation between the change in union density and GDP growth over this time; faster-growing economies have seen bigger falls in union density. But there's an endogeneity issue here. It could be that fast growth is associated with more creative destruction, which sees the decline of unionised workplaces and emergence of more non-unionised ones, whereas a sclerotic economy preserves unionized workplaces.