Friday, August 6

Explaining the harm of labor unions

When the New York Times recommends ways to help low-wage workers rise in status, it’s a good thing we have rational people like George Reisman to explain the errors and fallacies advanced by Eduardo Porter in his story Unionizing the Bottom of the Pay Scale.

What do unions want? Porter reports: “Labor unions are hoping that the unusual tactics, often in collaboration with social justice activists and other community groups, will offer them a new opportunity to get back on the offensive, helping to raise the floor for wages and working conditions in the harsh, ultracompetitive economy of the 21st century.”

Reisman explains the harm of unions:

[Porter] is totally ignorant of the fact that increases in money wage rates obtained by labor unions reduce the quantity of labor demanded and thereby cause unemployment, less production, higher prices, and an added burden of supporting the unemployed. He is ignorant of the fact that what serves to increase money wages without causing additional unemployment is merely the increase in the quantity of money and consequent increase in the volume of spending in the economic system. But this phenomenon serves equally to raise prices and thus does not improve the standard of living of wage earners.

Reisman also explains what so many policymakers either don’t know or don’t want to know:

What does improve the standard of living of wage earners is increases in the productivity of labor, i.e., the output per unit of labor. … I must point out that an essential foundation of a rising productivity of labor is a sufficiently high degree of spending to produce capital goods rather than consumers’ goods. This outcome too is supported by reductions in government spending accompanied by equivalent reductions in taxes that are paid out of funds that would otherwise be heavily saved and invested.

Turning attention to the California Federation of Teachers, that state’s teachers union:

It should almost go without saying that in addition to teaching the same kind of pro-union ideas that Porter propounds, the CFT and its members also teach much of the rest of the Marxist body of doctrine, above all, the exploitation theory. This is the belief that capitalists and the rich (in today’s jargon, “the 1 percent”) systematically steal from and impoverish the great mass of the people (i.e., “the 99 percent”).

The vacuum-filled heads of the Marxist “teachers” contain absolutely no awareness of the fact that under capitalism the wealth of the rich is accumulated through the repeated introduction of new and improved, more efficiently produced products that serve to raise the standard of living of everyone. And that as that wealth is accumulated, it does not stand as a giant pile of food on the plates of gluttonous capitalists but as capital, i.e., as means of production that produce the products that everyone – capitalists and non-capitalists alike — buys and that provide the foundation of the demand for the labor of all those who are wage earners. The wealth of the capitalists — the “rich” — in other words, is the source of the supply of goods that non-capitalists buy and of the demand for the labor that the non-capitalists sell. Everything that reduces this wealth, reduces the demand for labor and the supply of products. In both ways, it reduces real wages and the general standard of living.

Thus, contrary to the beliefs of the ignoramuses of the CFT, taxing the wealth of the rich does not serve to transfer food from the plate of a glutton to the plate of a starving person, or to provide benefits of any kind to the poor that in any sense are free. On the contrary, it serves to make people poorer, by reducing the demand for their labor and the supply of products available for them to buy.

There’s much more from Reisman at Labor Unions, Thugs, And Storm Troopers.