Sun, 11 Jan 2004

Unions vs. Prosperity

Steven Den Beste asserts, by way of finding, some good -- any good -- in Marxism, the hoary chestnut that " it is the rise of labor unions in the 19th century, which led to a rising standard of living for blue collar workers." Steven is a very good, generous, and kind-hearted person, but in this case he gives undue credit. The unions are for the unions.

There is a problem with giving credit to unions. Von Mises, in Human Action, points out that all costs to a corporation have been allocated. Wages go to the workers, inputs go to the suppliers, dividends go to the capitalists, and profits go to the entrepreneurs. Yes, from a corporation's point of view, dividends and profits are costs.

Consider why a servant is so expensive. Personal help used to be so cheap that any middle class person had at least one servant in the house. The job has not changed and yet almost nobody can afford a servant anymore. Somehow, the wages that a servant can demand have risen far out of proportion to their increase in productivity. A clothes washer, or a dishwasher, or a vacuum cleaner might help a servant do their job better, but not so much better.

The reason is not because the servant's tasks have changed. The reason is that all the other jobs a servant might employ themselves at have changed. Capital makes workers more productive, and yet capitalists get the same 5% (on a relatively risk-free loan) that they've always gotten. The rest of the productivity gains have been allocated to workers.

This, not labor unions, is the reason why workers are so prosperous in free market economies. Free markets are wonderful for the common man. Capital earns only a small percentage of the gains of production, and competition drives out the entrepreneurial profits. The rest of the gains go to workers, and entrepreneurs are forced to continue to create new business opportunities.

Now, let's say that workers wanted higher wages than supported by the increase in productivity. There are only three sources for the money to pay those increased wages: the customers, the capitalists, and the entrepreneurs. In each case, the only way they could get more money is by persuading or coercing the entity to continue with the deal for less money.

Customers might pay more for the same goods if they can be persuaded that unions are good for the customer. This has been done by propagandizing customers. A union might say "Look for the union label on the garment." Unions say things like "Unions ... the people who brought you the weekend." Since everybody likes not having to work on weekends, they pursue this non-sequiter to its illogical conclusion -- that since people don't have to work on weekends, and unions don't want union members to work on weekends, that unions have been responsible for people not working on weekends. No, it doesn't follow.

Unions can get capitalists to settle for a lower return on their money by threatening to harm the capital investment. This is most commonly done by destroying the workplace, sabotaging the workplace, occupying the workplace (the sit-down strike), or boycotting the workplace. The latter only works if the union can monopolize the workforce. In a town with a single large employer, there usually aren't enough spare laborers to replace the entire workforce. Replacement laborers are looked down as 'scabs'.

Entrepreneurs are harmed in the same manner.

You can see, therefore, that to the extent that unions have helped their membership, they have done it through fraud and force. The results of their efforts have been to discourage customers, capitalists, and entrepreneurs. Nobody can say how much better-off people would be had unions not held so many people in their thrall. The one bright light is that union membership is steadily declining in all but the public sector. That employment in the public sector is growing cannot be said to be a good thing, but that's another subject.

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