The ugly truth about ‘collective’ bargaining

One way unions inhibit productivity is through what most of us would consider to be ridiculous work rules. That is, they look ridiculous to us; but within the context of the models we have examined here, these rules make perfect sense — to the union. A union, remember, does not represent all the workers in its craft or industry; it represents the most senior members of the bargaining unit. Since unionization always increases labor costs in a unionized firm, the managers of the firm naturally will try to find ways to cut costs. Although we talked about a single “wage” in our models, in reality unions negotiate a schedule of wages that differ by craft line and seniority. One of the ways managers try to cut costs is by using the lower wage workers, those with the least seniority or in the least-skilled crafts, to do work that otherwise would be done by more highly compensated workers. The union, always on the lookout for the interests of its most senior members, imposes work rules to prevent this. I once witnessed a printers union shop steward upbraiding a typesetter for plugging a simple electronic typesetting computer into an ordinary electrical outlet. Plugging things in was a job reserved for those holding a machinist’s card.

Trade unions put firms that are unionized at a disadvantage relative to their non-unionized competitors, and this explains a lot of what unions do in the political arena. It is not altruism that impels unions to support high minimum wages, child labor laws, unemployment insurance and Obamacare (and then seek exemptions from it for their own Cadillac health insurance plans). All of these have the effect of increasing the cost of doing business for non-unionized companies and make it less likely that unionized employers will lose business to them. Unions also have opposed free trade and immigration — anything, in fact, that threatens their monopoly. And, when they can, they use the power of government against individual non-union firms. For example, around here they have been using the zoning laws to to try to prevent non-union retailers like Walmart and Wegmans from opening stores. In fact, most union political activism is aimed at denying work to non-union workers. Relying as they do on the police power of the state to get what they want, unions naturally support the Democratic Party, the more statist of the two major political parties.

Since the mid-1950s the percentage of the private sector workforce that is unionized has shrunk from more than 30 percent to under seven percent. One only needs to look at the industrial landscape to see why. Once-great heavily unionized industries — steel, textiles, shipbuilding, automobiles, civilian aircraft, electronics — are practically gone. The number of daily newspapers, crippled by absurd work rules that locked them into obsolete technologies, started falling long before the advent of cable news and the internet. The railroads are but a fraction of their former size, devastated by over-regulation and union work rules that required them to carry firemen on train crews long after diesel motive power had made them unnecessary. The American merchant marine is about one-fourth of its size in the late 1940s, sustained only by laws that require that shipments between U. S. ports be carried in American-flagged vessels. And the port of Baltimore, Maryland, the port where I grew up and worked as a teenager, once the 2nd largest U. S. port in terms of foreign tonnage, now ranks 17th thanks to a contract with the longshoremen’s union that guarantees an annual income to its senior members, even if they don’t work a single day.

Private sector union jobs have disappeared by the millions; they’ve either gone overseas or just simply vanished, not because of union-busting, but because the unions made the goods and services their employers were producing too expensive. Public sector union jobs haven’t disappeared — in fact, they just seem to keep multiplying — but they have driven states and municipalities to the brink of bankruptcy. In public education, expenditures per pupil, adjusted for inflation, increased fourfold between the 1961-62 school year and 2006-07,. Yet the results, as measured by test scores, have been dismal. The teachers unions, in league with liberal politicians, have obtained for their members pay and benefits packages far more generous than anything available in the private sector; they have imposed work rules that make it impossible to fire incompetent teachers or reward good teachers; and they have blocked tuition vouchers and charter schools that would give parents a choice in the education of their children.

I will concede that there have been times when someone had to push back against the companies that were making the lives of their employees and their families a living hell. I lived for a time on the edge of Appalachian coal country (and even spent a day deep inside a coal mine!). I am familiar with the history of the industry in that region, and I’m not unsympathetic to the plight of the miners and their families. There was a time when they worked 12-hour shifts under extremely dangerous and unhealthy conditions, lived in houses owned by the company and from which they could be evicted on a moment’s notice, and were paid in company scrip that could be spent only at the company store. When the demand for coal dried up and coal prices fell, the companies tried to make up their losses by forcing the miners to work harder for less money. And when the miners succumbed to pneumoconiosis, or black lung, the companies turned them out. I can hardly blame the miners who were living and working under these conditions for wanting to unionize.

As I indicated above, working conditions are brutal in all countries in the early stages of industrialization. But we are looking at those conditions from the viewpoint of our own comfortable modern-day existence. Seen from the viewpoint of those who were actually experiencing those conditions, they could not have been that bad. If those who actually worked in the factories and mines thought conditions at their places of work were so bad, then why did they want to work there? Could it be because, as bad as the conditions seem to us, they were still a vast improvement over what they had known before? (In this regard, a good source book is Hayek, et. al., Capitalism and the Historians.) Most of the labor unrest of the late 19th and early 20th centuries occurred during periods of falling prices or the introduction of new machinery. In both cases, what drove workers to organize was not the tough working conditions so much as fear of losing their livelihoods. Even in the Appalachian coal fields, most of the miners had come from hardscrabble mountain farms where they had barely eked out an existence. For them, working in the mines was a vast improvement over what they had known before.

Wages and working conditions improve when workers become more productive. Workers become more productive when they have more capital to work with. And more capital comes from more savings, not from collective bargaining.

One thought on “The ugly truth about ‘collective’ bargaining”

  1. I disagree with the assertion that “…public employees’ unions are bankrupting the country…” Whether in the private sector or the public sector, management has always taken care of themselves first. In the private sector, the ratio of management compensation to worker compensation has grown from 40X to approximately 400X. In the public sector, well, the compensation the city council of Bell, California voted itself comes to mind. No, it’s not the public employees’ unions that are bankrupting this country, it’s the politicians; they have a far greater impact on government expenditures than public employees’ unions ever will.

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