For all those who still believe that labor unions should be given more
power. Please note that all current labor organizing law wants to increase
the unions's power to organize on the private propertty of employers, depsinte
thier opposition. This is a violation of private property rights that sets the
for the communization of society and one that the labor union member I remember
from the 60s would reject summarily.
I remain emphatically in support of the right to organize among private
employees, not government workers. I believe that unions from a good counter
to the unrestricted pursuit of profits that motivate corporations which I feel
should be disbanded. Eliminate them and unions should disappear also.
Roderick T. Beaman,D.O.
Board Certified Family Physician
Politicians and government officials are like diapers.
They should be changed often and for the same reasons.
Forgotten Facts of American Labor History
by Thomas E. Woods, Jr.
Just about everything that people think they know about labor unions and wage
rates is wrong.
The standard tale that practically every student hears over the course of his
education is that before the emergence of labor unions, American workers were
terribly exploited and their wages were consistently falling. The improvement
in labor's condition was due entirely or at least in large part to labor
unionism and favorable federal legislation. In the absence of these, it is
widely assumed, people would still be working 80-hour weeks and children would
still be working in mines.
This oft-heard tale is, however, almost entirely false, and those parts of it
that are true (the low standard of living that people enjoyed in the nineteenth
century, for example) are true for reasons other than those alleged by
pro-union historians, who see in them only confirmation of their prejudices
against the market economy.
As late as the 1920s, labor law in America was based on the following
considerations.
Freedom of contract and association were essential principles. A laborer was
perfectly free to reject any offer of compensation that an employer might make
to him, and an employer was likewise entitled to reject any offer made by a
laborer. An employee was free to withhold his labor services if unsatisfied
with his employer's terms; likewise, a group of laborers jointly exercising
this individual right were permitted to do so. No one, however, was allowed to
prevent individuals who wished to work from exercising their right to do so.
Strikers –– like anyone else –– were forbidden to interfere with consumers'
right to shop where they liked. And strikes could not obstruct suppliers from
making deliveries, since to do so would again violate the rights of others.
Finally, since the employer's plant was private property, the employer had the
absolute right to decide who would be permitted to enter, and complete
strangers who wished to enter for the purpose of agitating his employees could
be lawfully excluded altogether.
This common-sense legal approach to labor unionism began to give way with the
Norris-La Guardia Act, signed by Herbert Hoover in 1932. The legislation made
"yellow dog" contracts –– in which an employee could be required to promise to
refrain from union activity as a condition of employment –– unenforceable in
the courts. The Act also exempted labor unions from prosecution under the
Sherman Antitrust Act. Although the Sherman Act should certainly have been (and
still should be) repealed, if there were ever an institution guilty of
"restraint of trade" it was labor unions, which not only withheld their own
labor but which also used intimidation and force to keep down non-union
competition. They would henceforth be exempt from behavior that the law deemed
criminal in any other context.
The Act also prohibited the federal courts from issuing injunctions against
labor unions in some cases and seriously crippled their ability to do so in
others. Subsequent Supreme Court decisions made clear that the Act in effect
shielded unions from prosecution for activities they may have engaged in during
labor disputes. The injunction had been used to put a stop to union violence
and property destruction when local authorities seemed unwilling or unable to
protect life and property. Unions hated them.
As labor historian Morgan Reynolds explains, "An injunction temporarily
restrained union actions pending a trial and this explains the intense union
campaign against its use in labor disputes because once violence-ridden strikes
were enjoined for a few days, they were difficult to revive, reorganize, and
rekindle."
It is one of the many myths of American labor history that the courts issued
injunctions frequently and indiscriminately. Labor economist Sylvester Petro
undertook a thorough study of the period from 1880 to 1932 and found
injunctions to be exceedingly rare: federal injunctions were issued in not even
one percent of all work stoppages, while state injunctions were issued in less
than two percent of all work stoppages. And these few injunctions were issued
not to thwart labor union activity per se but to put a stop to violence against
persons and property. Now even this protection of the employer's rights –– yes,
employers have rights, too –– would henceforth be absent.
The New Deal added the National Labor Relations Act of 1935, more commonly
known as the Wagner Act, to the mix. It had once been the case that a worker
who did not wish to join a union or pay its dues refrained from joining and was
not obligated to pay dues. Thanks to the Wagner Act, that individual freedom
disappeared. From then on, if a majority of workers in a given bargaining unit
chose to unionize, then that union represented all the workers and could
require them either to join or at least to pay dues.
The usual defense of such coercion is that since the Wagner Act called for a
single certified bargaining agent to represent all workers in a given
bargaining unit, it was only fair that all such workers be required to
contribute something to the union. After all, it is argued, since all workers
gain from the union's activities on their behalf, it would be wrong for them
not to contribute toward union expenses. This objection overlooks the real
problem, which is the idea of having an exclusive bargaining agent in the first
place.
If unions were content to bargain solely on behalf of their own members, then
there would be no problem of non-members getting union benefits for free. If
individuals were allowed to represent themselves and to enter into contracts
with their employers on their own terms, those who wished to remain non-union
would not be "free riding" on the benefits bestowed by labor unions, since the
union would simply not bargain on their behalf. But federal labor law no longer
guarantees workers this freedom.
(As a result of the Taft-Hartley Act of 1947 –– which labor historians detest
despite the mildness of its provisions, which did little to overturn settled
labor law –– states have the right to pass "right-to-work" laws, which prohibit
unions from attempting to force union membership and dues on workers as the
price for keeping their jobs.)
Once officially designated by a majority of workers as the exclusive bargaining
agent for all workers, the union is never required to stand for re-election.
Even after all the workers who originally voted for the union have died or
retired, the union is simply assumed to have the support of a majority of
workers. The new slate of workers has no say in the matter at all.
The Wagner Act also forced employers to bargain "in good faith" with unions
that were established by a majority of workers. Whether an employer had
complied with the vague instruction to bargain "in good faith" would be
determined by the all-powerful National Labor Relations Board.
Moreover, the Wagner Act also interfered with employers' freedom of speech by
making it an "unfair labor practice" to attempt to influence their employees'
decision whether to unionize or not. Employers were required to permit union
organizers –– that is, total strangers –– who did not work for them to use
company property for the purpose of persuading employees to unionize.
Furthermore, the Wagner Act gave labor unions a degree of legal insulation
afforded to no other group in society. The Act made labor unions immune to
claims of vicarious responsibility. In plain English, that means that labor
unions are not legally responsible for any violence their members might commit,
even if union officials themselves order the violence.
All of these legislative measures made it much easier for labor unions to
accomplish their goals. In order to fulfill their stated purpose of increasing
the wages of their members, labor unions must restrict an employer's access to
alternative sources of labor. That is to say, nonunion workers who wish to seek
employment on the terms offered by an employer whose firm is unionized must be
prevented from doing so. Harvard University's Edward Chamberlin once described
the unique legal status that labor unions had been granted:
If A is bargaining with B over the sale of his house, and if A were given the
privileges of a modern labor union, he would be able (1) to conspire with all
other owners of houses not to make any alternative offer to B, using violence
or the threat of violence if necessary to prevent them, (2) to deprive B
himself of access to any alternative offers, (3) to surround the house of B and
cut off all deliveries, including food (except by parcel post), (4) to stop all
movement from B's house, so that if he were for instance a doctor he could not
sell his services and make a living, and (5) to institute a boycott of B's
business. All of these privileges, if he were capable of carrying them out,
would no doubt strengthen A's position. But they would not be regarded by
anyone as part of "bargaining" –– unless A were a labor union.
No wonder Nobel Laureate F.A. Hayek once said, "We have now reached a state
where [unions] have become uniquely privileged institutions to which the
general rules of law do not apply."
In practice, during strikes the police have typically stood aside and done
nothing in the face of union intimidation and even violence against non-union
workers or those who simply wish to continue working. (This is one reason that
the court injunction was so often sought in the past against violent strikes.)
By means of this kind of coercion, labor unions are able to deprive employers
of labor if they do not accede to union demands.
As Henry George wrote in the nineteenth century, "Those who tell you of trades
unions bent on raising wages by moral suasion alone are like those who would
tell you of tigers that live on oranges." The result of union activity,
therefore, is to reduce the number of jobs in an industry and to raise the
money wages of union labor, while at the same time relegating many workers,
driven out of this line of work by the decreased quantity of labor demanded
there, to other lines of work, whose money wages must decrease as a result of
the greater supply of workers now forced to compete for them.
The net result is that the gains to certain workers are more than offset by the
disabilities inflicted upon other workers. When union activity reduces the
number of people who can be profitably employed in skilled trades, it
correspondingly increases the number of skilled laborers who are forced to find
work in fields that are well below their level of competence. The outcome of
this displacement of skilled labor is no different from a situation in which
laborers never possessed these skills in the first place. If union privilege
prevents some workers from putting their skills to their proper use, the effect
is the same as if they had never gone to the trouble to acquire them at all.
Thus society produces below its potential, and wealth that would otherwise have
been created never sees the light of day.
The ways in which labor unionism impoverishes society are legion, from the
distortions in the labor market described above to union work rules that
discourage efficiency and innovation. The damage that unions have inflicted on
the economy in recent American history is actually far greater than anyone
might guess. In a study published jointly in late 2002 by the National Legal
and Policy Center and the John M. Olin Institute for Employment Practice and
Policy, economists Richard Vedder and Lowell Gallaway of Ohio University
calculated that labor unions have cost the American economy a whopping $50
trillion over the past 50 years alone.
That is not a misprint. "The deadweight economic losses are not one-shot
impacts on the economy," the study explains. "What our simulations reveal is
the powerful effect of the compounding over more than half a century of what
appears at first to be small annual effects." Not surprisingly, the study did
find that unionized labor earned wages 15 percent higher than those of their
nonunion counterparts, but it also found that wages in general suffered
dramatically as a result of an economy that is 30 to 40 percent smaller than it
would have been in the absence of labor unionism.
Although labor unionism has actually made working people worse off, however,
the usual argument for labor unionism and government legislation on behalf of
labor is that in the absence of these things, employers will pay their workers
unconscionably low wages.
Economist George Reisman proposes a useful thought experiment to the contrary.
Suppose you own a car in New York City but eventually decide that the hassle
involved in finding and paying for parking is simply too great, and you would
like to get rid of the car for that reason. Suppose, further, that you have
grown so frustrated with owning a car in the city that you would be willing to
sell it for one dollar. Does that mean that you will in fact have to sell it
for one dollar? Of course not. Given the great many potential buyers of your
car, they will outbid each other. If a potential buyer offered you only one
dollar, you would certainly turn him down even if, in a state of complete
despair, you would have been willing to sell it at that amount. This person,
because of his low bid, will miss out on the opportunity to own the car
altogether since his rivals will simply outbid him.
Exactly the same process takes place in the labor market. The California State
University's Charles Baird explains:
This idea, that workers without unions will inherently have a disadvantage in
bargaining power relative to employers, is the basis for most individuals'
support of unionism and is picked up again in the Wagner Act. But that
disadvantage is a hoary myth. A worker's bargaining power depends on the
worker's alternatives. If a worker either works for Employer A or does not work
(i.e., if Employer A is a monopsonist), the worker has little bargaining power.
If the worker has several employment alternatives, he has strong bargaining
power. There may have been instances of monopsony or oligopsony in the 19th
century, but……they were short-lived. Monopsony has not been a significant
factor in the American labor market since the introduction and widespread use
of the automobile.
The empirical evidence simply does not bear out the conventional wisdom
regarding unions. If employers were really in a position to impose whatever
wage rate they wished, then why in the decades prior to large-scale labor
unionism did wages not diminish to near zero? (In fact, as we shall see below,
real wages skyrocketed in the decades before modern labor law took shape.) For
that matter, why did skilled workers earn more than unskilled workers? If firms
were really in a position to tell workers to take or leave whatever pathetic
wage they might choose to offer, why would they have felt a need to pay skilled
workers more than unskilled workers? Why not just pay them both the same
pittance?
The case for labor unionism does possess a superficial plausibility, but it is
in fact entirely fallacious. Real wages rise not because of union activity but
because of the process that George Reisman describes in his productivity theory
of wages (which I describe here). In short, business investment in machinery
increases the productivity of labor and therefore the output that the economy
is capable of producing, and this greater supply puts downward pressure on
prices.
As Reisman explains, "It is the productivity of labor that determines the
supply of consumers' goods relative to the supply of labor, and thus the prices
of consumers' goods relative to wage rates." This phenomenon is not always easy
to see in an inflationary economy such as ours, in which prices of most goods
seem to go up consistently. But the point remains: prices become lower than
they would otherwise be, and all real incomes (wages included) increase.
This is why taxes on business and capital are so foolish and counterproductive.
Such taxes hamper business investment, which is precisely what raises our
standard of living. The vast bulk of high school teachers and college
professors spend their time condemning the wickedness of businessmen and the
wealthy, and describe taxation as a righteous method for redistributing the
supposedly ill-gotten gains of the wealthy to the oppressed poor. To put it
kindly, such people have not the faintest idea of how wealth is created, and
their envy-driven policy proposals inevitably make society poorer than it would
otherwise be.
The vast bulk of the existing scholarship on American labor history is
essentially unreadable. It takes for granted all the economic myths of
unionism, the essential righteousness of the union cause, and the moral
perversity of anyone who would dare to oppose it. Major incidents in the
history of American unionism, as with the Haymarket incident of 1886 and the
Homestead Strike of 1892, are often misleadingly described in order to conform
to the ideological demands of this one-dimensional morality play.
Labor historians and activists would doubtless be at a loss to explain why, at
a time when unionism was numerically negligible (a whopping three percent of
the American labor force was unionized by 1900) and federal regulation all but
nonexistent, real wages in manufacturing climbed an incredible 50 percent in
the United States from 1860––1890, and another 37 percent from 1890 to 1914, or
why American workers were so much better off than their much more heavily
unionized counterparts in Europe. Most of them seem to cope with these
inconvenient facts by neglecting to mention them at all.
Labor economist W.H. Hutt referred to the Norris-La Guardia and Wagner Acts in
1973 as "economic blunders of the first magnitude." Economists Vedder and
Gallaway find that New Deal labor legislation played a significant role in
aggravating the unemployment problem. Both theory and history reveal the same
conclusion: a society that genuinely wishes to become wealthier, to enjoy more
leisure time, and to live longer will simply repeal all taxation on business
and capital. That would do more for the material well-being of American workers
than did all the storied episodes of labor's "struggle" –– labor historians'
favorite word –– put together.
Reprinted from Mises.org.
