14A004 United We Tumble by Jim Davies, 4/21/2014    

 

There's a first-class graphic here produced by Human Resources MBA, about what's been happening to Trade Unions during the last few decades, and it brings good news; their membership and influence have fallen steeply. (If the reader clicks on that link, the graphic should open in a separate window so that it can easily be referenced as we go.) The welcome decline has applied everywhere except among government employees (slide #3) - which is rather interesting. First, government workers don't trust their bosses much (good! - go here for more!) but second, the rest of society suffers a double whammy: we are forced to "buy" services from government, and their "prices" are boosted by union-controlled labor costs. One monopoly, whose cost is magnified by another monopoly.

Unions support government (members vote for it) and government supports unions (by enacting laws to favor their activities) - a mutual back-scratching is at work, both involving force, so that they both gain while everyone else loses. Hence, the news of their decline is good. It reduces the amount of force at work in society.

The appeal and claim of a union is perfectly true and fair: if unions represent you, you will receive a higher wage (or better benefits) than by negotiating with the employer by yourself. Nobody disputes this, and the HR graphic confirms it: the fourth slide shows median weekly earnings of union members at $950, compared with $750 for others. That's a 26.7% pay advantage, for union members. Who wouldn't want a 26.7% pay hike?

88.8% of all workers, that's who; for in 2013, only 11.2% belonged to unions.

When you or I "get a job", a market transaction normally takes place. You make an offer of services, the employer wants those services, and a price is agreed. A contract is made. Labor is a commodity, like any other; the price is "fair" provided neither party is forced to agree to it. If and when force is applied, the price is not fair, for one party is less satisfied with the deal than the other.

It's rather like buying gasoline. The vendor (Big Oil) might offer to sell a gallon for $1.50, but governments step in with their laws and say NO! you may not make that agreement. You must fix a price of $3.50, and pay Us the difference. In that example the vendor loses the sales he might have made if the price had been lower, while the buyer loses $2.00 in return for nothing - it was a dead loss, to him. Neither is happy, but I suspect the buyer got the worst of it. Big Oil did still, after all, get his buck-fifty.

So with unions: they extort an extra 26.7% from the hirer, above the price that he thinks the labor is worth. How can they extort? - by threatening to pull out all his workforce on strike, regardless of the individual contracts to which they have agreed. That's the key to union power; a third party (government) favors them by over-ruling freely made agreements. If the employer were to try to sue for the damages suffered in such a strike, no government court would even hear the case. The dice are loaded, the fix is in.

Why, then, should union membership continue to fall?

The seventh slide suggests employers have increased their opposition to unions, but that is hard to believe; I know of no time when employers favored them. More relevant is the public approval, and that has declined from 75% in 1956 to 52% today - a substantial drop. Little wonder: whenever a union goes on strike, the public (which played no part in the dispute) suffers along with the employer. I'm surprised that approval remains as high as 52%. On the same chart, though, it's shown that DISapproval has doubled, and that may be the key. Slowly, it may be dawning on public awareness that when A gets paid more than his labor is worth, B gets no job at all. That is: unions may be good for those with a job, but they have a negative effect on those who don't. They take away money that might have been spent on hiring extra people.

Government says unemployment is 6.7%; Shadowstats reckon it is nearer 23.2%. This negative effect is not trivial - yet they go further: unions vigorously support raising the minimum wage, which forces those whose skills are not worth that minimum to stay unemployed. (A quick proof of this is to consider why, if it is good to raise that minimum to $15 an hour, it should not be better raised to $150 or $1,500.)

Sometimes, their overall negative effect has been to destroy an entire industry, even an entire city, like Detroit. The stranglehold the UAW had on the car trade pushed labor costs so high as to bankrupt the Big Three, once some of the world's most successful enterprises.

I question, then, even the assertion that unions are good for those with a job. Think: you get paid more than you are worth; 26.7% more, perhaps. What does that do for your self esteem? What does it do for your resumé? - for your ability to change jobs, if you should happen to want that? Obviously, there's a short term gain. But careers are about the long term. And sometimes, being paid more than the market rate ruins the industry and leaves the employee with a handful of unfulfillable promises, in a rat-infested neighborhood.

There's one part of the HR graphic that is flat wrong: the eighth slide. It shows 15 changes wrought by union influence, under the heading "In Praise of Unions." There is nothing at all praiseworthy about several of them (minimum wage laws, collective "bargaining rights"...) but those that are positive result from normal market operations, not from unions. Firms wishing to recruit the best workers will make their package attractive - competition in the labor market ensures that. In the 1970s I was working for a large company which provided such goodies, and had never been unionized; the government then compelled it to provide unions with the chance to present their sales pitch to us (in company time!) and to hold a vote, about whether or not to unionize. Ninety four percent of us said, "no way, José."

There is no more efficient, or more fair, way to exchange anything at all than the market; the free exchange of goods, money and labor without anyone participating except those with skin in the game; and the sooner you take action to cause it, dear Reader, the sooner that will come to pass - for when government has evaporated, only the market will remain. The individual contracts made will not be subject to any third-party interference at all.

 
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