Bad logic on unions

Matt Yglesias writes:

[W]hen you hear about the evils of EFCA recall that when unionization rates were higher in the first half of the postwar era, overall economic growth was stronger and distributed more equally. But declining rates of unionization have helped create a situation where the richest get most of the pie and there’s less overall pie.

I hope everyone catches the logical fallacy inherent in this statement. If I say "Back when I wasn't taking any medicine I was perfectly healthy; therefore this medicine must be making me sick," I'm confusing correlation with causation in a potentially dangerous way.

Economics (for better or worse) is largely about telling "stories." You can tell a story of how declining union rates allowed employers to capture more of the gains from employment, causing wages to stagnate while profits soared. OR you can tell a story of how globalization put downward pressure on wages and upward pressure on profits, and companies were forced to de-unionize to stay competitive. If the second story is true, increasing unionization would wreak economic havok; if the first story is true, it would boost income for the middle class.

The problem is, I suspect that both stories are true to some degree. If you look at heavily unionzed private industries in America, you'll find that they don't do so well in global competition, and are often forced out of business or forced to seek government support. The same holds true for unionized firms (GM and Ford) competing with no-unionized local rivals (Toyota and Honda's U.S. factories). And countries like Germany that remain heavily unionized have also seen big increases in inequality over the last few decades. So the second story - that globalization, not Republicans, killed the unions - seems to be a part of what's going on.

Which means that although it may raise incomes for some working Americans, forcing unionization rates up could easily inflict lot of collateral damage on others. The EFCA doesn't seem like it explicitly forces people to join unions, but it does abolish secret ballots for unionization, which makes me a bit uneasy. President Obama, if he is elected, should tread cautiously.