The
New York Times has
proved once again that it is a reliable font of
economic ignorance. This time, it’s through an
op-ed piece titled “A
More Perfect Union,” by a lady named Ruth
Milkman, whose credentials in economics are that
she is a “sociologist” and “director of
U.C.L.A.'s Institute of Industrial Relations and
a visiting scholar at the Russell Sage
Foundation.”
The
purpose and substance of Ms. Milkman’s piece is
an attempt to pump for the resurgence of the
labor union movement via the election of one
Andy Stern to the presidency of the A.F.L.-C.I.O.
Stern, who is currently president of the largest
individual union within the A.F.L.-C.I.O, is
threatening to break up the organization if his
agenda of vast new union organizing campaigns is
not enacted. His and Ms. Milkman’s goal is to
bring about a repeat of organized labor’s rise
in the 1930’s, when it increased its membership
from 13 percent of non-agricultural workers to
35 percent by 1955. The further effect will
allegedly be prosperity for all: “Given a
chance, Mr. Stern's proposals can restore labor
as the counterforce it once was in an era that
saw remarkable gains in prosperity for all
Americans.”
Ms.
Milkman and the Times would have their
readers believe that the growth or decline in
labor union membership is something that depends
essentially on the personality and skills of
union leaders, that the right leaders were
responsible for the growth of unionism starting
in the ‘thirties and that union leaders less
dynamic and less competent than Mr. Stern have
been responsible for the decline in unionism in
more recent decades.
This is
simply dishonest. It chooses to ignore major
historical facts that were crucial to the rise
of unionism in the ‘thirties. These included the
enactment of the Norris-LaGuardia Act of 1932,
which deprived employers of the ability to
obtain Federal Court injunctions against
labor-union coercion, and then the enactment of
the National Recovery Act in 1933 and The Wagner
Act of 1935, which compelled employers to
recognize labor unions and to bargain with them
under threat of being found guilty of “unfair
labor practices” by the newly established
National Labor Relations Board. By the same
token, Ms. Milkman and the Times conceal
from their readers that only the enactment of
major new and additional legislation increasing
the coercive power of labor unions could succeed
in once again substantially increasing union
membership.
The truth
is that unions are essentially parasitic
organizations that thrive only by draining and
ultimately destroying the companies and industries
they control. The essential goal of the unions is to
compel the payment of higher wages for the
performance of less work and less productive work.
Unions are notorious for their hostility to labor
saving machinery and to any form of competition
among workers, for featherbedding practices, indeed,
for “making work” by deliberately and arbitrarily
increasing the number of workers required to
accomplish a given task and sometimes even by
compelling the disassembly or destruction of
products already produced.
It should
be no wonder that the percentage of the labor force
controlled by unions tends progressively to decline.
Where the unions hold sway, companies cannot
compete. Their market share falls and they
ultimately go bankrupt. The only way that unions can
maintain any given share of the labor force is by
finding new victims to replace the ones they have
sucked dry. The finding of new victims, by means of
new government intervention is the unstated agenda
of Mr. Stern, Ms. Milkman, and The New York
Times.
The actual
effects of labor unions are arbitrary inequalities
in wage rates, mass unemployment, and substantially
lower real wages for the average worker. Labor
unions are aptly described as a leading vehicle of
what von Mises called “destructionism.”
Whenever a
union succeeds in obtaining above market wage rates
for its members, it also reduces the number of
workers who can be employed in its field. This is
because of the operation of one of the best
established principles of economics: Namely, the
higher the price of anything, including the wage of
any kind of labor, the smaller is the quantity
demanded of that good or labor service.
Thus,
workers who could have been employed in the lines
controlled by labor unions are instead displaced and
forced to seek work elsewhere. The added competition
of these workers in other lines then serves either
to depress wage rates in those other lines, thereby
resulting in an arbitrary, union-imposed inequality
in wage rates, or, if those other lines are also
unionized or are forced to pay union wages in order
to avoid becoming unionized (which is often the
case), to cause still other workers to be displaced.
It should be clear that to the extent that the
effect of union activity is to depress wage rates in
other fields, the union slogan “Live Better, Work
Union” turns out to mean “Live Better by Forcing
Other Workers to Live Worse.”
If wage
rates in all lines of work are forced above the
free-market level either because labor unions are
able to impose their wage scales everywhere, or
because upward union pressure on wage rates is
joined by minimum-wage legislation, the effect is
mass unemployment. In this case, there is simply no
branch of the economic system that is allowed to pay
wage rates low enough to make possible the
absorption of workers displaced from elsewhere by
the imposition of union wages. The result is the
kind of situation presently existing in France and
Germany, where unemployment is in excess of ten
percent. And, of course, the cost of supporting the
masses of unemployed falls mainly on the workers who
manage to keep their jobs. Here higher taxes are
their reward for “working union.”
Andy Stern,
Ms. Milkman, and The New York Times are
probably too ignorant to know that labor unions and
minimum-wage laws cause unemployment. They all
almost certainly believe instead that what causes
unemployment is labor-saving machinery and anything
else that raises the productivity of labor. It is on
this foundation that labor unions have typically
opposed all such improvements.
To whatever
extent unions have succeeded in preventing increases
in the productivity of labor, what they have
actually succeeded in doing is holding down the
supply of consumers’ goods relative to the supply of
labor, because labor-saving improvements do not in
fact cause unemployment. Their actual effect is to
enable the same number of workers to produce more.
Of course,
many workers have to change their jobs in the
process. For example, if the average farm worker
becomes able to produce fifty times more food, that
does not mean that people will want to eat fifty
times more food. They may want to eat only the same
amount of food. In this case, forty-nine workers are
made available to produce new and additional goods
that previously could not be produced, from air
conditioners to zoology texts, and including to some
extent improvements in the processing, delivery, and
preparation of food.
This
description of matters is overwhelmingly borne out
by economic history. In the last two centuries or
more the average productivity of labor in the
economic system has increased by well over a hundred
times. The effect has not been the creation of a
ninety-nine percent plus unemployment rate. To the
contrary, the unemployment rate today is not very
different than it was a century or two ago; indeed,
vastly more workers are employed today than in the
past. What is different today is the enormously
increased quantity and variety of goods produced per
worker and which are readily available to the
average worker in his capacity as a consumer.
The effect
of improvements in the productivity of labor is thus
to increase the supply of consumers’ goods relative
to the supply of labor. Whether one considers
matters from the point of view of supply and demand
or from the point of view of cost of production, the
effect of improvements in the productivity of labor
is to raise real wages. In terms of supply and
demand, the effect of the increase in the supply of
consumers’ goods relative to the supply of labor is
that prices fall relative to wage rates. This, of
course, means that the buying power of the average
worker’s wages is increased and thus that he can buy
more, which is to say, that his real wages are
increased.
In terms of
cost of production, labor saving improvements, in
reducing the quantity of labor required to produce
goods, reduce their costs of production, and thus,
to the extent that prices are determined by costs,
reduce prices. But note, because the reductions in
costs and prices are the result of reductions in the
quantity of labor required to produce goods, they
take place without any necessity of a fall in wage
rates. Once again, the buying power of wages is
increased and the standard of living of the average
wage earner rises.
Union
leaders and their academic and political cohorts are
incredibly ignorant of how real wages actually
increase. Their focus is on raising money wage
rates, which, as shown, can only result in arbitrary
inequalities in wages rates and in mass
unemployment. Utterly unbeknownst to them, what
makes real wages actually rise are the progressive
improvements in the productivity of labor that they
fight at every turn in the irrational belief that
those improvements cause unemployment. Indeed, the
unions and their cohorts are not even aware that
when they prevent improvements in the productivity
of labor they are in fact holding down real wages.
That is because their mental horizon is narrowly
confined to the short-run interests of small
minorities of workers—the workers who comprise the
membership of their particular union.
Thus, a
printers union would oppose computerized typesetting
out of fear of its members losing their present
jobs. Its narrow mental horizon leaves no room for
recognizing that its members who become unemployed
as printers could be employed in other lines of
work. More than this, it leaves no room for
recognizing that in opposing computerized type
setting, which would serve to make the cost of
production and price of all printed matter less, it
actively combats the rise in the real wages of
workers throughout the economic system who buy
printed matter and other products whose cost and
price is determined in part by the price of printed
matter.
The unions
and their cohorts simply do not recognize the
essential, vital connection between real wages and
product prices and so actively strive to keep prices
up and real wages down. Whatever, their subjective
desire and intent may be, they are profoundly
anti-labor in the objective reality of their actual
practice and the economic theories they hold which
guide their practice.
Ms. Milkman
concludes her article with a reference to a time of
greater union membership, presumably the late 1940s
and the 1950s, “that saw remarkable gains in
prosperity for all Americans.” In her ignorance,
which already takes for granted the allegedly
positive effects of labor unions on the standard of
living of the average wage earner, despite the
diametrically opposite conclusion established by the
science of economics, she apparently believes that
such a passing reference to an historical
association is sufficient to make the case for a
labor union resurgence unanswerable.
Let us note
here that, apart from notable interruption by wars
and depressions, the whole of American history was a
period of “remarkable gains in prosperity for all
Americans.” (Negro slaves, of course, were an
unfortunate exception.) The gains of the late 1940s
and the 1950s were not the result of labor unions
but of the same forces that had brought about
economic improvement throughout our history, without
significant union membership. Those forces were, and
are, saving and capital accumulation, scientific and
technological progress, the profit motive,
competition, and the price system, and, more
fundamental even than any of these, protection of
property rights and economic freedom.
Labor
unions, then as now, were a force working against
the positive effects of these fundamentals. They had
greatly prolonged the mass unemployment of the
1930s, first by preventing reductions in money wage
rates and then from 1933 on actually increasing
money wages rates, in the midst of mass
unemployment. The unemployment came to an end in
World War II only as the result of a combination of
massive inflation of the money supply coupled with
the prohibition of union wage increases by
governmental wage controls. In the absence of wage
increases, the increases in the quantity of money
served to rapidly increase the quantity of labor
demanded and thus not only to eliminate mass
unemployment but to turn it into an actual labor
shortage by 1942.
In the
postwar period, just as at any other time, the
unions retarded the rise in the productivity of
labor and in real wages. They accomplished this in
part by the very success of their wage demands,
which served to an important extent to deprive
companies of funds they otherwise would have
invested in improved plant and equipment, which
would have raised the productivity of labor. To this
extent, the higher wages won by the unions were, in
effect, a case of eating the seed corn.
As foreign
competition increased, with the economic recovery of
Europe and Japan, the negative consequences of the
unions became more obvious. Major American
industries, such as automobiles and steel, became
unable to compete because of the power of their
labor unions. Their products came to be noted for
their inferior quality, such as "Monday morning" or
"Friday afternoon" automobiles, automobiles poorly
produced because the necessary workers were not
present to produce them or not in a proper condition
to produce them. These were workers who also could
not be fired because they were union workers.
Inferior products, artificially high wages, and low
productivity of labor. These were and are the
destructionist contributions of the labor unions to
the American standard of living.
And since
the 1960s, they have been joined by the additional
destructionist policies of the “Great Society,”
above all, Medicare and Medicaid and the hundreds of
billions of dollars in taxes required to finance
them. These, along with the war in Vietnam, were
accompanied by the acceleration of inflation and the
abandonment of the remnants of the gold standard.
And then, starting in 1970, came the EPA and OSHA,
government agencies imposing further hundreds of
billions of costs on business firms in vague quests
to “protect the environment” and achieve “safety.”
In 1971 came Nixon’s price and wage controls, with
the controls on oil lasting until 1980 and causing
the oil crisis of the time. Along the way, came the
Departments of Energy and Education, with still more
government interference and resulting paralysis.
[1]
Still
more recently have come first a stock market bubble
and now a housing bubble, both set in motion by the
inflationist policies of the Federal Reserve System
and both causing a massive malinvestment and waste
of capital. To this has been added huge government
budget deficits, causing the waste of still more
capital.
Real wages
and the standard of living of the average American
worker have been persistently and seriously
undermined by these destructionist economic policies
based on ignorance on the part of those the public
naively expects to know better. It is no wonder that
many American working families have grown poorer in
recent decades. What else should one expect in the
face of such an onslaught? The New York Times
and its numerous allies in academia and in
government are generally believed
to
know, and probably themselves believe they know,
what they are talking about. Nevertheless, they
simply do not. They are utterly and dangerously
ignorant, irrespective of all the pretensions to
knowledge they themselves may make or are foolishly
believed by others actually to possess.
And now,
only days ago, has come a Supreme Court decision
effectively abolishing private property rights and
effectively making governments, local, state, and
federal, the ultimate owners of all land, free to
use it for any “public purpose,” such as simply
collecting more tax revenue. The Supreme Court of
the United States has decided that the judgment of
government officials is ''entitled to our
deference.'' As for the individual rights of the
citizens whose property is forcibly taken by such
officials, and which, in words of The Declaration of
Independence it is the very purpose of government to
secure, the majority of the Court is silent
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