ARC's 1st Law: As a "progressive" online discussion grows longer, the probability of a nefarious reference to Karl Rove approaches one

Friday, June 08, 2007

Labor Unions - What are they good for?

Interesting post over at Cafe Hayek regarding increasing labor wages in China:

Wages in China
Don Boudreaux

Today's New York Times reports
that "wages [are] rising 10 percent or more a year in many Chinese cities."

If true -- and, for the reason that follows, I find this stat to be believable -- such a rise in wages is no surprise. Such a rise in wages is the natural result of more market-driven investment, greater commerce, and economic growth.

And if true, this stat is difficult to reconcile with those pundits and politicians who argue that strong, independent labor unions are necessary to ensure that workers enjoy the benefits of economic growth. In China, independent labor unions are illegal. I confess to being no expert on the realities of the operations of labor unions in China, but I suspect that this reality is not remotely close to the model that the Robert Kuttners, Harold Meyersons, Paul Krugmans, John Edwardses -- and John Sweeneys -- among us believe should be adopted in the U.S. so that American workers can prosper.

Wages generally rise -- and wages rise generally -- because of market forces that improve worker productivity and encourage economic change and growth. Labor unions are not the source of a general rise in real wages.

Don Boudreaux links to this article from 1956, which is very instructive. Here's an excerpt:
[...]The belief that unions cause wages to rise seems to be borne out by simple observation: In repeated instances it is observed that a labor union demands a rise in wages for its members. An argument ensues between the union and management; there may even be a strike. Sooner or later a wage rise is granted—if not for the full amount requested, at least for a major part of it. Other firms then have to meet this new rate or lose workers. So it appears, ipso facto, that wages in general are raised by union activity.

Such a close-up observation, however, may lead one to see things that are not so, as the proverbial fly on the chariot wheel believed that it propelled the vehicle. One must stand off a bit from the publicized union activities if he is to gain a true perspective on whether they cause average wage rates to rise. One needs, for this purpose, a telescopic view by which to compare the long-time trends of wage rates with changes in union membership.
So the trend in wage rates and in the proportion of workers who are union members have each had three distinctive periods during the past century. But if we compare the two lines carefully, no noticeable relationship between the two is to be found. Neither wage rates nor union membership could be predicted from the other, with any accuracy whatsoever. Try it. After covering the lower line, try to draw one to represent union membership based only on this evidence about wage trends, and vice versa. By comparing your estimate with the facts, I’m sure you will agree that changes in wage rates are quite unrelated to changes in union membership.

Of course, this argument assumes that the purpose of unions is to increase wages and not to:
  1. create a group of people who are tethered to and dependent on the union for their livelihood, which
  2. consolidates power in the heads of the unions, which
  3. provides political capital for those of a particular political party.
Wooops... I think Edwards, Obama, Clinton, Kennedy, and Bernie Sanders expected me to sing the praises of Mom, Apple Pie, and Unions. Unfortunately, facts tend to have a powerful effect on me.

On a related note, isn't it great that Chinese wages are increasing? I mean, at some point, the idiot protectionists and isolationists won't be able to bitch & moan about jobs going to China b/c of the cheap labor. Of course, as long as our confiscatory tax rates stay in effect, companies will continue to look other places to anchor their operations.

Your Co-Conspirator,
ARC: St Wendeler

Comments (2)
George said...

My grandfather was a union man; his sons were business men and hard over against unions. Grandpa worked for the MoPac, among other railroads, and he was certain that the unions were a Godsend to the oppressed masses. Maybe they were once, but that was long ago.

BTW, Grandpa read the St Louis Post-Dispatch religiously.

St Wendeler said...

BTW, Grandpa read the St Louis Post-Dispatch religiously.

Thanks for that...

Unions are great, especially if you have no confidence in your abilities or willingness to find an employer who's willing to pay you a wage commensurate with your skills. Oh, and if you like getting paid the same amount as the worst worker in the company.