Labor Unions

The first unions in the United States were formed in the late 18th century, and they’ve always been socialist at their core, explicitly or implicitly.

The principle that most people — union people in particular — do not understand about wages is this:

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 (source).

Contrary to what they’ve informed you, labor unions aren’t responsible for the increase in wages and living standards in this country. Advances in technology are.

“Historically, real wages (wages adjusted for the effects of inflation) rose at about 2 percent per year before the advent of unions, and at a similar rate afterward” (Morgan Reynolds, Power and Privilege: Labor Unions in America, 1984).

Quoting Thomas Dilorezo:

If labor unions were responsible for the historical rise in wages, then the solution to world poverty would be self-evident: unionize all the poorest nations on earth. [And yet] private-sector unions reached their peak in terms of membership in the 1950s, when they accounted for about a third of the workforce. Today, they represent barely 10 percent of the private-sector workforce. All during this time of declining union memberships, influence, and power, wages and living standards have risen substantially. All of the ‘declining industries’ in America from the 1970s on tended to be the highly unionized ones, whereas the growing industries, especially in the high-technology fields, are almost exclusively nonunion. At best, unions can improve the standards of living of some of their members, but only at the expense of other, nonunion workers, consumers, and others. When unions use their power to go on strike, or threaten to strike, and succeed in increasing their members’ wages above what they could earn on the free market, they inevitably cause some union members to lose their jobs.

What is the reason for this? The answer is deceptively simple: When wages rise, it makes labor more costly; therefore, to keep turning a profit, employers simply cannot employ as many workers.

In the well-spoken words of economist Jim Cox:

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 picket 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 nonunionized sector, thereby depressing the wages for the nonunion workers. Unions do not raise wages, they increase wages for one group of (unionized) workers at the expense of lowering wages for the remaining (nonunionized) workers.

The long and undistinguished history of labor unions is a history of protectionism and violence. And that trend continues to this day — in the following, for instance:

And from the New Hampshire Journal: “Time to get bloody”

A Democratic Congressman from Massachusetts is raising the stakes in the nation’s fight over the future of public employee unions, saying emails aren’t enough to show support and that it is time to “get a little bloody.”

“I’m proud to be here with people who understand that it’s more than just sending an email to get you going. Every once and awhile you need to get out on the streets and get a little bloody when necessary,” Rep. Mike Capuano (D-Ma.) told a crowd in Boston on Tuesday rallying in solidarity for Wisconsin union members. …

This is not Capuano’s first brush with violent rhetoric. Last month Capuano said, “Politicians, I think are too bland today. I don’t know what they believe in. Nothing wrong with throwing a coffee cup at someone if you’re doing it for human rights.”


  • Dale

    February 26, 2011

    Great post, Ray. I have a couple questions for you.

    In the spirit of equal protections, do you think state union “workers” should have the same “rights” to collective bargaining as federal “workers”?

    Unions are actually a form of corporation. In states like WI, these corporations have a monopoly on specific labor pools. For example, to be a teacher in the state, each person is forced to join the union and pay dues. Can you help me understand how this corporate monopoly can be construed as a worker right?

  • Ray

    February 26, 2011

    Hi Dale. Thank you for your comment. I’m afraid I can’t help you understand how a corporate monopoly can be construed as a worker right — for the simple reason that being forced to join a union in the first place is a negation of the concept.

  • Ray

    February 26, 2011

    Good article here, in response to your first question. From the article:

    In the private sector, the capitalist knows that when he negotiates with the union, if he gives away the store, he loses his shirt. In the public sector, the politicians who approve any deal have none of their own money at stake. On the contrary, the more favorably they dispose of union demands, the more likely they are to be the beneficiary of union largess in the next election. It’s the perfect cozy setup.

  • Dale

    February 26, 2011

    Thank you, Ray, for either sharing my insanity, or verifying my basic logical facilities.
    I simply cannot equate a corporate monopoly to a human or worker right, and I’m relieved to find you agree.

    As to your second response, this caught my eye: “The Wall Street Journal’s Kimberley Strassel writes that ‘President Obama is the boss of a civil work force that numbers up to two million … those federal workers cannot bargain for wages or benefits.’ So the only thing the federal union can do is negotiate personnel matters.”

    Compared to the federal law, aren’t Gov. Walker’s constraints minor?

    Isn’t the uinion-politician “cozy setup” a legal conflict of interest?

  • Ray

    February 27, 2011

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