Nate Smith

Do Unions Play a Role in Economic Development?

11 posts in this topic

It is common to hear from the left that we have unions to thank for ending child labor, improving working conditions, shortening the work week, etc. I realize that none of these things are possible without first having productivity. The harsh lifestyle man once had to endure was ended by the production of capitalism, not unions. But it is also common to hear people reply that unions were once of value but have since served their purpose and aren't needed anymore.

Is this true? Did unions once serve a valuable purpose in improving people's quality of life?

Here's a plausible answer the union advocate might make. As capitalism was starting to have a significant economic impact, the result in the beginning was a relatively small number of rich people with many people still living with little wealth. In a free market, there will be competition between the capitalists for the good labor, and there will be a resulting net rise in wages. But there will be some lag time between the wealth production and the rise of average wages. It's during this relatively short period that unions step in, demand more, and the result is a net rise in wages. The unions then take the credit for rise in standard of living (similarly to how they and/or the government take credit for ending child labor).

But is this true? I don't know enough about the history to know if this is how it played out.

I can also imagine that it was the case that the competition among individuals alone (following increased productivity of course) was enough to result in the rise of wages and quality of working conditions.

So how much credit, if any, do unions deserve historically?

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Unions deserve some credit but when they legally force the wage rates above market value, they are excluding other non-union, productive people from contracting with employers to work at lower wages. So the apparent help they give to some comes at the expense of others.

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It is common to hear from the left that we have unions to thank for ending child labor, improving working conditions, shortening the work week, etc. I realize that none of these things are possible without first having productivity. The harsh lifestyle man once had to endure was ended by the production of capitalism, not unions. But it is also common to hear people reply that unions were once of value but have since served their purpose and aren't needed anymore.

Is this true? Did unions once serve a valuable purpose in improving people's quality of life?

Here's a plausible answer the union advocate might make. As capitalism was starting to have a significant economic impact, the result in the beginning was a relatively small number of rich people with many people still living with little wealth. In a free market, there will be competition between the capitalists for the good labor, and there will be a resulting net rise in wages. But there will be some lag time between the wealth production and the rise of average wages. It's during this relatively short period that unions step in, demand more, and the result is a net rise in wages. The unions then take the credit for rise in standard of living (similarly to how they and/or the government take credit for ending child labor).

But is this true? I don't know enough about the history to know if this is how it played out.

I can also imagine that it was the case that the competition among individuals alone (following increased productivity of course) was enough to result in the rise of wages and quality of working conditions.

So how much credit, if any, do unions deserve historically?

Not much. If individuals acted more selfishly and objectively, e.g. walking out of their workplace with dangerous conditions, then the labor supply would be effected, and wages would increase as a result.

The fact of the matter is that people generally act and choose relative to the choices of others. Hence, unions come about, and people are willing to make more rational choices because others are doing so.

That's just my $0.02.

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Unions deserve some credit but when they legally force the wage rates above market value, they are excluding other non-union, productive people from contracting with employers to work at lower wages. So the apparent help they give to some comes at the expense of others.

What specifically do you give them credit for? Economically speaking, I don't see that they increase the net productivity, even apart from the legal powers they unjustly acquire.

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Unions deserve some credit but when they legally force the wage rates above market value, they are excluding other non-union, productive people from contracting with employers to work at lower wages. So the apparent help they give to some comes at the expense of others.

What specifically do you give them credit for? Economically speaking, I don't see that they increase the net productivity, even apart from the legal powers they unjustly acquire.

They don't create productivity. They use coercion to achieve means that (usually) could be achieved rationally.

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Unions deserve some credit but when they legally force the wage rates above market value, they are excluding other non-union, productive people from contracting with employers to work at lower wages. So the apparent help they give to some comes at the expense of others.

What specifically do you give them credit for? Economically speaking, I don't see that they increase the net productivity, even apart from the legal powers they unjustly acquire.

Freedom of association is the criteria, both for the union and the employer. An unreasonable employer is more likely to pay market wages if his entire workforce is prepared to walk out. This implies that every replacement workforce would do the same, if the employer tried to replace them. If not, then the action still brings market forces to bear with a whole new workforce setting the standard.

As a group, the bargaining power is greater because the cost of replacement of all employees is costly. In the end, market forces will apply, but a union can bring these forces to bear more quickly than a lone employee can.

In a free market, production increases when all parties are content, and a free market voluntary union can help achieve that.

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Unions deserve some credit but when they legally force the wage rates above market value, they are excluding other non-union, productive people from contracting with employers to work at lower wages. So the apparent help they give to some comes at the expense of others.

What specifically do you give them credit for? Economically speaking, I don't see that they increase the net productivity, even apart from the legal powers they unjustly acquire.

Providing education about the value of the worker's market worth. There is nothing wrong with bargaining as a group with an employer as long as it is voluntary for both the employer and employee; there may be some advantage to doing so. Unions can also bring greater pressure on employers to improve safety conditions. Many employers are not good managers of people and workers in a group can bring more pressure on an employer to treat people better and improve working conditions.

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As a non-union worker my entire life, my employers would only give us benefits equal to or slightly better than the unions after the contract was negotiated and signed. Now, with the poor economy, my benefits are being sliced solely at the discretion of the employer while union employees' benefits cannot change until contract negotiations. For example: sick time was eliminated, annual pay increases are now on 18 month cycles, pay increases are no where near the inflation rate, vacation time for long time employees was cut by almost 20%, etc. There is no negotiation other than 'go find a better paying job.'

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To the extent that unions have enhanced and strengthened the rightful bargaining power of working folks they have performed a service. More money in the pockets of workers means more purchasing of produced goods which means more profits for the companies that make them. When Unions become abusive, extortionate and an impediment to technical progress they cease to become a productive factor in the economy. Rather, the impede and diminish overall prosperity.

Unions have played a useful role in promoting basic safety in the work place. We do not need any more Triangle Shirt Waist Factory fires complete with no emergency egress from the work areas and dead girls lying in the street.

ruveyn

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For a good economic history of the US covering the relevant period see Louis Hacker's The World of Andrew Carnegie 1865-1901.

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The main reason minimum wage comes up all the time is because many union contracts express base pay as as function of minimum wage. How's that for a role in economic development?

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