Tuesday, October 12, 2010

Unions increase unemployment

Via Marginal Revolution, here is a highlight from a 2003 paper written by Christopher A Pissarides [PDF], one of yesterday's Nobel Laureates in Economics.
Unemployment in Britain has fallen from high European-style levels to US levels. I argue that the key reasons are first the reform of monetary policy, in 1993 with the adoption of inflation targeting and in 1997 with the establishment of the independent Monetary Policy Committee, and second the decline of trade union power. I interpret the reform of monetary policy as an institutional change that reduced inflationary expectations in the face of falling unemployment. The decline of trade union power contributed to the control of wage inflation. The major continental economies failed to match UK performance because of institutional rigidities, despite low inflation expectations.

Timmy provides us with a brief translation, for easy digestion.
Fewer trade unions, less unemployment. An interesting point, eh?

Indeed. And it is hardly a surprising conclusion, to be honest. Unions, in this day and age, exist to do only two things: inflate wages and protect their members' jobs (regardless of ability or need).

High wages reduce the number of jobs that are created—especially as technology becomes cheaper—and making it difficult to sack people not only means that jobs can be occupied by those who are not best suited to them, but also reduces the willingness of employers to take people on in the first place (thus reducing the available jobs).

This isn't exactly rocket science, is it?

Meanwhile, is anyone surprised that Ed Miliband (who owes his leadership to the unions and is thus now their bitch) has appointed a talentless turd—mostly known for being a union man to the bitter fucking end—to the most powerful job in his Cabinet?

Really? Weird.


Old Codger said...

He might be a "talentless Turd" but at least he does have some experience of the real world, unlike his leader, our leader and the present Chancellor of the Exchequer.

Ian E said...

What can one say - Maggie (for all that she lingered much too long) saved the UK, only for NuLav to screw it again!

Whether ScamCam will do much to stop the rot, let alone reverse it, is not too clear to me. Chris Huhne however is most definitely contributing big time to the destruction of our economy!

John Demetriou said...

Good article, though it notably omits any references to Chris Keates.

Care to comment?