US workers pay more from less unionization

Workers in the European Union are faring better than their American counterparts in the latest economic downturn due to higher unionization rates and job-security legislation, according to a feature in today's Wall Street Journal. Even non-union workers have benefited from union-negotiated laws linking wage-increases to inflation.

These types of measures predictably come under fire from economists who emphasize the dangers of a wage-price inflationary spiral, and naturally that would not be a good outcome. However, what we know at present is that millions of American workers are under significant economic stress in a way that their EU counterparts are not. Whether or not EU labor policies will lead to a wage-price spiral is an important question, but it is still a question, not a certainty. Given the impact that higher unemployment rates have on people's lives, one might hesitate to adopt a hawkish position on inflation in response to problems that are not yet obvious. (Albeit this is only a concern when the quality of "most people's lives" is assigned some value -- a dubious notion when we are talking about the breed of business economists who can praise "jobless recoveries," and so on.)

Dean Baker additionally points out the threat posed by US-style wage-stagnation to domestic consumption, and its potential role in hastening economic decline.