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Sunday, March 18, 2012

12. Unions

The Concise Guide To Economics

by Jim Cox

12. Unions

Unions are a matter of pitting one group of workers against other workers; it is not a worker versus manager phenomenon.  Successful unions are those which are able to exclude workers, and the unions most able to exclude workers are those composed of skilled workers.  Skilled workers are more difficult to replace than unskilled workers and thus are better able to succeed in a strike.  As Milton Friedman has stated, "unions don't cause high wages, high wages cause unions."
When unions strike they are not merely refusing to work but are preventing any labor from being offered to the employer.  Those workers who do cross a union line are called "scabs," thereby illustrating the lack of working class solidarity and clarifying the fact that the issue is one group of workers against other workers. 
When unions are successful they raise the wages of their membership but do so only at the expense of reducing the number of workers employed by the firm.  Those workers unable to find employment in the unionized sector must seek work in the non-unionized sector, thereby depressing the wages for the non-union workers.  Unions do not raise wages, they increase wages for one group of (unionized) workers at the expense of lowering wages for the remaining (non-unionized) workers.
The problem with unions in modern America is that like businesses which enjoy government protection through regulation, unions have been granted legal privileges.  These legal privileges include the Wagner Act, the Norris-LaGuardia Act and lenient courts which treat job related violence as somehow legitimate.  In a free market, the limited role of unions would be beneficial as they might act as job clearinghouses and standards-certifying boards.
Anyone truly concerned with the welfare of workers should first analyze the source of wages.  Wages are determined by worker productivity.  Worker productivity is determined by the availability of capital goods (tools) to the worker to help him in his production.  The availability of capital goods is determined by the prospect of profiting from such an investment.  And the appropriate mix of investment in capital goods results from freedom in the marketplace.  Thus anyone concerned with the welfare of workers should be the greatest advocate of free markets. 
If this sounds too theoretical, consider the action of real world workers concerned with their personal welfare without regard to theory or ideology.  The experience the world over is one of workers constantly seeking out freer economies, escaping from East Berlin to West Berlin, from China to Hong Kong, from Mexico to the U.S.  The world has yet to see such a mass migration of workers from the freer economies to the less free economies.

Concise Guide to Economics, The

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