Monday, September 3, 2018

Labor day! ... and declining union membership

Not everyone has today off, but I do — probably at least in part due to the fact that I'm among the declining fraction of the US population represented by a private sector union (this one). Inspired by John Handley's tweet proposing a possible mechanism behind declining union membership in the US (transition to low union density sectors like service from manufacturing), I thought I'd have a look at the data using the dynamic information equilibrium model. I used data via EPI appearing in the graph in this blog. Here is the result:


We have two major shocks centered in 1938.2 ("beginning" in 1934.4) and 1987.7 ("beginning" in 1979.9) with widths computed using the measure discussed in the footnote here. There's an overall "equilibrium" decay rate of 1% per year (the "dynamic equilibrium").

So how does this compare to the shock structure of manufacturing employment? Luckily, I already looked into this a few months ago in my post on "robots versus shipping containers" — here's the model and data:


Manufacturing employment shows a large shock from roughly 1970 to the early 90s (with a second, smaller "shipping container" shock in the early 2000s). So John's story holds up against the data (interpreted with this model): a decline in manufacturing causing a decline in unions is consistent with the data. The cause of this decline in manufacturing isn't nailed down by this data — if could be e.g. a shift towards the service sector or moving manufacturing overseas (or both).

However, besides the shocks there is a general decline in union membership rate. This could be an ambiguity in the data because there's a second local entropy minimum near 0.0%/year. If we force a 0.0% per year dynamic equilibrium, we get a comparable model fit:


I was able to improve it a bit more by dividing the initial positive shock into two with a pause during WWII:


This gets us very close to the decline in the rate of union employment being essentially coincident with the two shocks to manufacturing.

So we have two possible stories: 
  1. An "equilibrium" decline in union employment (1%/year) with a shock that "begins" in the late 70s lagging behind the shock to manufacturing employment
  2. An "equilibrium" constant rate of union employment (0%/year) that essentially tracks manufacturing employment, with a shock to both beginning in roughly 1970
Story (1) has some consistency with the "deregulation"/"anti-union" narrative of the late 70s and the Reagan era, but still leaves a question of why union employment generally declines.

Story (2) has a better fit with the data, and is consistent with an Occam's razor "single explanation" approach to manufacturing and union employment. It makes sense of the data in Noah Smith's original tweet that John was responding to: union decline happens in many European countries as well. It also kind of obviates the "anti-union" narrative [1]. However, story (2) effectively shifts the question to why manufacturing employment declined in the first place (and also why service sector unions didn't organize in their place [2]). [Per the update below, maybe the manufacturing decline is due to employers being anti-union.]

I like story (2) from a scientific perspective, but story (1) isn't completely ruled out by the data (as interpreted by this model). Oh, uninformative macro data ...

Happy labor day everyone!

...

Update 4 September 2018

John Handley saw that unionization within manufacturing fell to 10-15%, meaning that sector shift out of manufacturing doesn't explain much of the decline. It could still be shift within manufacturing. That is to say a greater loss of unionized manufacturing jobs over non-union ones — i.e. employers facing unionized employees disproportionately moved manufacturing overseas or anti-union states. This would makes sense in the light of the "union derangement syndrome" that causes employers to try and move jobs to so-called "right to work" (i.e. anti-union) states regardless of whether it makes sense — surely highly educated researchers would just love to live in Oklahoma City.

...

Footnotes:

[1] Maybe causality actually goes the other way? Did declining manufacturing jobs cause declining union membership — weakening unions politically — so that politicians could enact anti-union policy?

[2] Maybe the story in Footnote [1] is really 1) decline in manufacturing → 2) decline in unions → 3) decline in political power of unions → 4) politicians enacting anti-union policy → 5) service sector unions prevented from forming.

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