trade unions

Economic Nonsense: 48. Labour Unions are essential to improve wages and conditions for workers

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It is actually improved productivity, not labour unions, that has improved the rewards of labour.  People earned less money in former times because productivity was low.  People were paid according to the worth of their input into the production process.  When each worker contributed little, they were low paid.  As technology and production methods improved, so did the worth of each worker's input, and wages increased accordingly.

Employers compete for labour to produce goods and services and to make profits.  They have to pay wages that attract enough workers, and compete with other employers to do so.  It is true that unions can use coercive methods to impose higher costs on employers, but this limits total employment in those sectors, and thus opportunities for employment to non-unionized labour.  The US auto industry features somewhat higher wages in unionized car plants, but there are far fewer of them than there are non-union plants.

Although it is improved productivity that brings higher wages, the effect of unions is often to lower productivity through restrictive work agreements that spread work out among more employees.  More employees equals more members paying union dues.

In post war Britain, one group that received among the highest reward increases was the completely non-unionized sector of people who clean homes – the ones who used to be called char-ladies.  The demand for their services from businessmen and women who did not have the time to do it themselves, coupled with declining numbers available to do it, led to huge pay increases.

The fundamental truth is that unions do not increase pay for workers generally.  They can increase pay for their own members, but at the expense of non-members rather than at the expense of employers.  Declining union membership in both the UK and the US has been the result in changes in the type of work being done.  Mass manufacturing has become more automated, meaning higher wages for fewer workers, leaving others to seek non-unionized work elsewhere.  Some goods once produced domestically are now bought more cheaply from countries with non-unionized workforces.  The result is fewer union jobs.  In the UK unionization has increasingly become a feature of public sector workers rather than private industry.

In support of unions

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Over in The Guardian Ellie Mae O'Hagan has a piece telling us all that we don't really understand how wonderful unions are. We can argue about her specific examples but that's not our point here. Which is to point out that yes, unions really are pretty wonderful things. Although not for the reasons usually given. Unions are the result of the freedom of association. This is a freedom as essential to any civilised society as the freedom of speech and, if we add the rule of law the three are the cornerstone of any decent society. Rather more important that representative democracy in fact.

But of course the existence of unions is not the only thing that freedom of association allows. That also allows the London Library, the Women's Institute, the RNLI and RSPCA, companies, co ops, the Kennel Club, Arsenal Football Club and yes, even, sadly, the Simon Cowell Fan Club.

It's said that the French had to ask permission of Paris for any organisation that contained more than 25 French men well up into the 1950s. Apart from our own diversion into  repression of unions before 1824 we've not done that at all. To our great benefit of course.

The existence of unions is thus to be applauded: not because the existence of unions is in itself a wondrous thing but because it's a symbol, and a symptom, of that larger freedom that we all enjoy, that freedom of association.

There is only one thing that we might want to change though. We might want to remove any legal privileges that unions have over other forms of voluntary association, like, you know, the London Library, the Women's Institute, the RNLI and RSPCA, companies, co ops, the Kennel Club, Arsenal Football Club and yes, even, sadly, the Simon Cowell Fan Club.