Just a quick follow up about topic that came up during our Discussion Group on Labor Unions. Right now, AMR (aka American Airlines) is in bankruptcy court negotiating with the union reps on how to keep their company afloat.
Everyone has an opinion about Labor Unions, and it can usually be categories into 1 of 3 categories —
- you love them because you or someone you care about are in a union,
- you don’t know anyone in a union and you hate and blame them for everything wrong in capitalism, or
- you believe they’re a necessary evil because they are the guardians of justice in the workplace.
I’ll admit that I was in the second group prior to reading “Economics in One Lesson” by Henry Hazlitt. He covers one chapter entitled “Do Unions Really Raise Wages?” which made me look at them differently.
So, when you think about the history of unions, most people get these pictures of the industrial revolution, child slave labor, horrible working conditions and the big, fat, greedy bourgeois capitalists getting rich while sending the proletariat, working man to the hospitals or the grave. But are unions really performing this public service today? ‘Of course’, you may say. Immediately, people then think about places today like China or Bangladesh and the ‘sweat shops’ used to make our jeans. But I’m talking about in the United States. We’ll get to China.
Hazlitt argues that there is a right and morally justified place for Labor Unions. The pre-industrial farmers were attracted to the cities to earn a steady, guaranteed wage vs. having to wait and hope that they would have a successful harvest. Thus, you saw a huge surplus of labor coming in. Producers, on the other hand, had no incentive to improve worker safety, negotiate with individuals, or pay more than the absolute lowest wages possible. (Again, not too dissimilar to what we’re seeing in China today.)
So free men came together, organized, protested and negotiated better working conditions. The employer had a choice — either to negotiate with the group or to fire them all and go seek new labor. Hazlitt would argue that this is the proper and just use of collective bargaining to balance the imbalance of surplus labor / limited demand.
Here’s where the labor unions, however, have gone overboard.
Most often, union leaders will not “allow” non-union members to be employed in the same company. They force management to only hire unionized labor. They accomplish this through threats – verbal, physical and otherwise – in order to maintain their privilege and protected status. THAT is an abuse of power and will ensure corruption.
If labor unions truly were interested in improving working conditions, employee rights, and “fair” wages, they need to allow participation in their league to be a choice, not a requirement, of employment. And management should be allowed the choice to hire non-union individuals or negotiate with the collective whenever they want. Otherwise, unions turn into nothing more than a gang of thugs interested not in promoting fairness but elitism. A rose by any other name . . .
Now what about China?
The problem with our western view of China is we are superimposing our standard of living, rights, and legal precedents on a country that is just starting to emerge from the strict communist controls that have been around for decades. It makes absolutely no sense to say people (for example, not necessarily China) in countries with no roads, utilities or commerce infrastructure should expect the same conditions of living and pay that we expect in the US. That’s not to say that they can’t get there eventually.
But think about the cost of living differences between Beverly Hills and small town Nebraska. Would it make sense to argue that employees in Nebraska should be paid the same wages as those in 90210? Why are prices in the same state so vastly different from town to town?
Unions may become necessary someday in parts of China or India if employers are not willing to meet the wage demands of the workers. But hopefully they will not follow the pattern of US Labor Unions intimidation and exploitation to create protected classes of workers or industries at the expense of creating new or better jobs.