Adam Smith, the first great economist, would not have been surprised that the electricians union wants Minnesota’s technical college system to train fewer students for this trade. Smith gave many examples of how different groups feather their nests by restricting competition. The impulse is widespread and entirely rational. Smith would, however, rebuke the state system’s subservient response to an anti-competitive request.
Labor unions perform a useful economic function in providing a counterweight to the disproportionate bargaining power of large employers. In many situations, this can improve economic efficiency. However, public policy has been particularly hostile to unions since 1981. The proportion of the private-sector labor force that is unionized is a fraction of what it once was. The skilled building trades are a partial exception to that general trend.
However, unions also function to restrict competition for their members. That has been part of their role since the craft guilds of medieval times. For any given demand for skilled-trade labor, the fewer trained people, the better the wages. If the economy is booming, a limited labor supply fosters power to seek wage increases. If the economy is slow, it minimizes downward pressure on wages and unemployment.
But what is optimal for a union is not necessarily optimal for society. It is good for society that the technical colleges in the Minnesota State Colleges and Universities system be responsive to the changing skills needed in a dynamic economy. It is not good, however, if MnSCU tries to determine exactly where supply and demand should meet and at what wage rate, particularly at the behest of a group with a monetary ax to grind.
The four-year institutions in MnSCU don’t limit the number of philosophy or political science majors so as to minimize unemployment or bolster earnings for these graduates. They should not for electricians and plumbers either.
It would be unfair to single out labor unions, however. Employers are quick to demand that technical colleges train people for specific jobs in their companies. That keeps their training costs down and keeps wages lower than if the state did not subsidize such training. Society as a whole benefits from publicly funded vocational training, but employers can capture a chunk of these benefits
Moreover, members of white-collar professions are just as avid in restricting competition as any labor union. The American Medical Association and associations of specialists have long exerted subtle but very real pressure to limit the number of doctors and specialists turned out in a year. Licensing requirements and codes of ethics for professions may protect the public from unqualified practitioners but often limit competition.
It is perfectly legitimate for a skilled trade to try to limit new entrants. But educational administrators need to remember that they serve the public and not just one interest group.
© 2007 Edward Lotterman
Chanarambie Consulting, Inc.