One thing. Having a union increases wage growth, makes labour relatively more expensive compared to other inputs. As firms set the marginal revenue product equal to the marginal cost for an input, countries with higher wages must hire less employees (as marginal revenue product is decreasing in the number of employees).
As a result, countries that have the highest level of wage growth should, by definition have the highest level of average labour productivity growth (as the marginal figure is higher). So the fact that unions and labour productivity are correlated is not surprising, its just the result of making an input more expensive. This is not necessarily a good thing, and will ultimately lead to a lower level of output.
I don't see a pattern at all, Phillip John. Some countries with decreasing union coverage have rapidly increased labour productivity. Some countries with increasing union coverage have rapidly increased labour productivity. Some countries with decreasing union coverage have lowered productivity.
What your post shows is no correlation, whatsoever, between union coverage and labour productivity. Unless you choose to highlight a couple of examples, and ignore the rest of your data. Which isn't a pattern at all.
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One thing. Having a union increases wage growth, makes labour relatively more expensive compared to other inputs. As firms set the marginal revenue product equal to the marginal cost for an input, countries with higher wages must hire less employees (as marginal revenue product is decreasing in the number of employees).
ReplyDeleteAs a result, countries that have the highest level of wage growth should, by definition have the highest level of average labour productivity growth (as the marginal figure is higher). So the fact that unions and labour productivity are correlated is not surprising, its just the result of making an input more expensive. This is not necessarily a good thing, and will ultimately lead to a lower level of output.
I don't see a pattern at all, Phillip John. Some countries with decreasing union coverage have rapidly increased labour productivity. Some countries with increasing union coverage have rapidly increased labour productivity. Some countries with decreasing union coverage have lowered productivity.
ReplyDeleteWhat your post shows is no correlation, whatsoever, between union coverage and labour productivity. Unless you choose to highlight a couple of examples, and ignore the rest of your data. Which isn't a pattern at all.