EIGHTEEN: LABOR UNIONS AND EMPLOYMENT
1 Freedom of Association
Over the past century, public policy on labor unions has shifted dramatically. Initially, unions faced severe restrictions, but now they enjoy unique privileges not granted to other organizations. This change has led to a situation where unions can act with coercion and violence, undermining the government's role in preventing such actions. Support for unions, often framed as support for "freedom of association," has become misleading, as many believe the main issue is workers’ right to join or not join unions. In reality, unions often use force to compel membership. Significant legislation has further strengthened unions, particularly in Britain and the U.S., allowing them to operate without accountability for certain wrongdoings. This has resulted in a perception that unions promote public good rather than pursuing their own interests. Although there is growing public concern about union abuses, many remain unaware of the serious threats these powers pose to a free society. The argument presented focuses on the legitimate powers unions possess and challenges the notion that these powers are sacred rights.
2 Union Coercion and Wages
Unions have the power to coerce fellow workers, which affects their ability to pressure employers for better wages. This coercion can lead to unions exerting control over workers, making it difficult for those not part of the union to find jobs. While unions can negotiate higher wages, they achieve this by limiting labor supply, which can leave some workers without jobs or in lower-paying positions. As a result, the wage increases from unions often serve the interests of a specific group of workers, rather than benefiting all workers equally.
Although unions may create the impression of raising general wage levels, evidence suggests that real wages—what workers can actually buy—do not increase significantly above what would exist in a free market. Unions can raise money wages through practices that exclude less-skilled workers from job opportunities, creating wage disparities among workers. These practices, including heavy fees for joining or using violence to keep out competition, may elevate wages for some but contribute to inequalities in the labor market.
In places with strong unions, the overall level of real wages might actually be lower due to these restrictive practices. While many believe that unions are directly responsible for rising wage levels, research shows that real wages often increase more swiftly when unions are less powerful, demonstrating that inflation plays a significant role in wage negotiations.
3 Limits of Union Power Over Wages
Unions have limits in how much they can influence wages, and this can be harmful to the economy. They often create set wage levels within their groups and cause unfair differences in pay between different jobs. This can lower productivity and creates job instability. By focusing on certain groups, unions can hold back important industries and make it harder to attract investment. Additionally, when unions control the supply of labor, they can weaken competition, which is necessary for fair resource distribution. If competition fails, it could lead to government control, which may give unions too much power, conflicting with their own best interests.
4 Methods of Union Coercion
Unions seek control over the labor supply to achieve their goals, but not all workers want to comply with this control. To encourage support, unions use psychological pressure, convincing workers that their efforts benefit everyone. By promoting the idea that unions have improved workers' living standards, they create a sense of responsibility among workers to support union actions. However, this pressure alone is not enough for unions to be powerful.
To increase their power, unions have developed stronger coercive methods, referred to as "organizational activities" or "union security." These methods often involve forcing dissenting workers to conform to union demands. Public opinion and government support have helped unions legitimize complete unionization, leading to the belief that unions can use any necessary means to achieve their goals, including strikes.
The current power of unions relies heavily on coercive tactics that would not be accepted in other contexts. Picketing, even when deemed "peaceful," can intimidate individuals and compel them to join unions. Additionally, laws supporting closed or union shops restrict workers' freedom of association by making it mandatory to join unions. Other coercive tactics, such as secondary strikes or boycotts, also pressure individuals to conform to union policies. Overall, unions can exert this influence because laws grant them exemptions from standard responsibilities that apply to other organizations.
5 Legitimate Functions of Unions
Unions play important roles beyond just raising wages, even though that is a major goal. In a free society, while some actions may be problematic, banning unions is not justified. Unions can provide useful services without using coercive power. For example, they can help negotiate wage increases or alternative benefits that workers may prefer. They also ensure that wage structures and promotion rules are seen as fair among employees, which is important in any organization.
Furthermore, unions help manage working conditions collectively, ensuring that employees’ desires are considered in rule-making. This participation can lead to better agreements between employers and employees. Additionally, unions historically provide support for their members against trade-related risks, which is a form of self-help.
However, the concept of unions participating directly in business management raises concerns. It can create conflicts of interest between workers and consumers, and union leaders typically avoid these responsibilities to focus on their roles representing employees. Overall, unions are essential for advocating workers' rights and improving workplace conditions without coercion.
6 Constraining Coercion
To limit union coercion, some changes in laws and jurisdiction are needed to make unions follow the same legal principles as everyone else. The idea is to take away special privileges that unions currently have, which contribute to their coercive power. True freedom of association should be ensured, treating coercion as wrong regardless of who uses it, be it employers or employees. Specifically, picketing in groups should be banned because it often leads to violence and serves as a means of pressure. Unions should not prevent non-members from getting jobs, and contracts that require union membership should be seen as unlawful restraints on trade. These changes would limit powerful strikes and boycotts by removing the main targets for such actions. It's important that the responsibility for any illegal actions rests with those who organized them. While it seems that laws restricting certain contracts might go against freedom of contract principles, they would ensure fairness. Overall, although unions may resist these changes, the necessity for them will become clear, suggesting that adhering to non-coercive principles will benefit unions in the long run.
7 the Role of Monetary Policy
Monetary policy plays a significant role in shaping the impact of labor unions on wages and employment. Unions tend to push for higher money wages, which can lead to inflation if the monetary authorities increase the money supply to maintain full employment. The idea behind this full-employment policy comes from the observation that high real wages can cause unemployment. Instead of lowering money wages directly, it is suggested that real wages should decrease through inflation. This means that unions continuously demand higher money wages to keep up with inflation, leading to a wage-price spiral.
While wage increases do not directly cause inflation, they can lead to it when the money supply is expanded. Attempts to control inflation after it has escalated can result in significant unemployment, creating a cycle where the demand for inflation pressures monetary authority responses. If unchecked, union pressures might lead to calls for government intervention in wage setting or even the abolition of unions. This situation highlights the tension between maintaining union demands for higher wages and the need to control inflation and unemployment.
8 the Long-Run Prospects
Eliminating the market's role in the labor sector would require replacing it with a centralized administrative system to manage the economy. This could mean a single authority would control labor allocation and wages, leading to a fully planned society with significant economic and political effects. In countries with inflation, there are increasing calls for a unified wage policy, where the government would set wages instead of the market. Labor unions, seeking wages based on "justice," risk economic chaos if all groups act independently. As the government takes over wage setting, unions might either become part of the government machinery or face abolishment. Ultimately, the current labor union system cannot survive without the framework of a market economy, which they are striving to change.
9 the Choice Before Us
The issue of labor unions serves as a crucial test of principles and demonstrates the consequences of ignoring them. Governments, failing to prevent coercion by unions, now must use excessive power to fix the problems created, leading to a decline in the rule of law. The solution lies in returning to the principles of the rule of law and applying them consistently. The argument that we cannot change past mistakes reflects a denial of our ability to learn. Union leaders may realize the need to restore freedom and the rule of law by abandoning past illusions. A shift in economic policy is necessary to avoid further arbitrary controls and ensure a free society, emphasizing the importance of preventing coercion uniformly for everyone.
1 Freedom of Association
Over the past century, public policy on labor unions has shifted dramatically. Initially, unions faced severe restrictions, but now they enjoy unique privileges not granted to other organizations. This change has led to a situation where unions can act with coercion and violence, undermining the government's role in preventing such actions. Support for unions, often framed as support for "freedom of association," has become misleading, as many believe the main issue is workers’ right to join or not join unions. In reality, unions often use force to compel membership. Significant legislation has further strengthened unions, particularly in Britain and the U.S., allowing them to operate without accountability for certain wrongdoings. This has resulted in a perception that unions promote public good rather than pursuing their own interests. Although there is growing public concern about union abuses, many remain unaware of the serious threats these powers pose to a free society. The argument presented focuses on the legitimate powers unions possess and challenges the notion that these powers are sacred rights.
2 Union Coercion and Wages
Unions have the power to coerce fellow workers, which affects their ability to pressure employers for better wages. This coercion can lead to unions exerting control over workers, making it difficult for those not part of the union to find jobs. While unions can negotiate higher wages, they achieve this by limiting labor supply, which can leave some workers without jobs or in lower-paying positions. As a result, the wage increases from unions often serve the interests of a specific group of workers, rather than benefiting all workers equally.
Although unions may create the impression of raising general wage levels, evidence suggests that real wages—what workers can actually buy—do not increase significantly above what would exist in a free market. Unions can raise money wages through practices that exclude less-skilled workers from job opportunities, creating wage disparities among workers. These practices, including heavy fees for joining or using violence to keep out competition, may elevate wages for some but contribute to inequalities in the labor market.
In places with strong unions, the overall level of real wages might actually be lower due to these restrictive practices. While many believe that unions are directly responsible for rising wage levels, research shows that real wages often increase more swiftly when unions are less powerful, demonstrating that inflation plays a significant role in wage negotiations.
3 Limits of Union Power Over Wages
Unions have limits in how much they can influence wages, and this can be harmful to the economy. They often create set wage levels within their groups and cause unfair differences in pay between different jobs. This can lower productivity and creates job instability. By focusing on certain groups, unions can hold back important industries and make it harder to attract investment. Additionally, when unions control the supply of labor, they can weaken competition, which is necessary for fair resource distribution. If competition fails, it could lead to government control, which may give unions too much power, conflicting with their own best interests.
4 Methods of Union Coercion
Unions seek control over the labor supply to achieve their goals, but not all workers want to comply with this control. To encourage support, unions use psychological pressure, convincing workers that their efforts benefit everyone. By promoting the idea that unions have improved workers' living standards, they create a sense of responsibility among workers to support union actions. However, this pressure alone is not enough for unions to be powerful.
To increase their power, unions have developed stronger coercive methods, referred to as "organizational activities" or "union security." These methods often involve forcing dissenting workers to conform to union demands. Public opinion and government support have helped unions legitimize complete unionization, leading to the belief that unions can use any necessary means to achieve their goals, including strikes.
The current power of unions relies heavily on coercive tactics that would not be accepted in other contexts. Picketing, even when deemed "peaceful," can intimidate individuals and compel them to join unions. Additionally, laws supporting closed or union shops restrict workers' freedom of association by making it mandatory to join unions. Other coercive tactics, such as secondary strikes or boycotts, also pressure individuals to conform to union policies. Overall, unions can exert this influence because laws grant them exemptions from standard responsibilities that apply to other organizations.
5 Legitimate Functions of Unions
Unions play important roles beyond just raising wages, even though that is a major goal. In a free society, while some actions may be problematic, banning unions is not justified. Unions can provide useful services without using coercive power. For example, they can help negotiate wage increases or alternative benefits that workers may prefer. They also ensure that wage structures and promotion rules are seen as fair among employees, which is important in any organization.
Furthermore, unions help manage working conditions collectively, ensuring that employees’ desires are considered in rule-making. This participation can lead to better agreements between employers and employees. Additionally, unions historically provide support for their members against trade-related risks, which is a form of self-help.
However, the concept of unions participating directly in business management raises concerns. It can create conflicts of interest between workers and consumers, and union leaders typically avoid these responsibilities to focus on their roles representing employees. Overall, unions are essential for advocating workers' rights and improving workplace conditions without coercion.
6 Constraining Coercion
To limit union coercion, some changes in laws and jurisdiction are needed to make unions follow the same legal principles as everyone else. The idea is to take away special privileges that unions currently have, which contribute to their coercive power. True freedom of association should be ensured, treating coercion as wrong regardless of who uses it, be it employers or employees. Specifically, picketing in groups should be banned because it often leads to violence and serves as a means of pressure. Unions should not prevent non-members from getting jobs, and contracts that require union membership should be seen as unlawful restraints on trade. These changes would limit powerful strikes and boycotts by removing the main targets for such actions. It's important that the responsibility for any illegal actions rests with those who organized them. While it seems that laws restricting certain contracts might go against freedom of contract principles, they would ensure fairness. Overall, although unions may resist these changes, the necessity for them will become clear, suggesting that adhering to non-coercive principles will benefit unions in the long run.
7 the Role of Monetary Policy
Monetary policy plays a significant role in shaping the impact of labor unions on wages and employment. Unions tend to push for higher money wages, which can lead to inflation if the monetary authorities increase the money supply to maintain full employment. The idea behind this full-employment policy comes from the observation that high real wages can cause unemployment. Instead of lowering money wages directly, it is suggested that real wages should decrease through inflation. This means that unions continuously demand higher money wages to keep up with inflation, leading to a wage-price spiral.
While wage increases do not directly cause inflation, they can lead to it when the money supply is expanded. Attempts to control inflation after it has escalated can result in significant unemployment, creating a cycle where the demand for inflation pressures monetary authority responses. If unchecked, union pressures might lead to calls for government intervention in wage setting or even the abolition of unions. This situation highlights the tension between maintaining union demands for higher wages and the need to control inflation and unemployment.
8 the Long-Run Prospects
Eliminating the market's role in the labor sector would require replacing it with a centralized administrative system to manage the economy. This could mean a single authority would control labor allocation and wages, leading to a fully planned society with significant economic and political effects. In countries with inflation, there are increasing calls for a unified wage policy, where the government would set wages instead of the market. Labor unions, seeking wages based on "justice," risk economic chaos if all groups act independently. As the government takes over wage setting, unions might either become part of the government machinery or face abolishment. Ultimately, the current labor union system cannot survive without the framework of a market economy, which they are striving to change.
9 the Choice Before Us
The issue of labor unions serves as a crucial test of principles and demonstrates the consequences of ignoring them. Governments, failing to prevent coercion by unions, now must use excessive power to fix the problems created, leading to a decline in the rule of law. The solution lies in returning to the principles of the rule of law and applying them consistently. The argument that we cannot change past mistakes reflects a denial of our ability to learn. Union leaders may realize the need to restore freedom and the rule of law by abandoning past illusions. A shift in economic policy is necessary to avoid further arbitrary controls and ensure a free society, emphasizing the importance of preventing coercion uniformly for everyone.