Tuesday, September 08, 2009

Libertarians against markets?

The Cato Institute's Daniel Griswold, writing in the Orange County Register:

From their zenith in the 1950s, labor unions have witnessed a relentless decline among non-governmental workers. Fifty years ago, about one in three Americans working in the private sector belonged to a labor union. Since then, "union density" in the private sector has declined steadily to less than 8 percent today.

Labor leaders blame the decline on union-busting corporations, years of hostile Republican rule in Washington, and a flood of imports from low-wage countries such as China, but the main reason behind the decline of private sector labor unions in recent decades is the anti-competitive nature of unions themselves.

Yes, there's an anti-competitive aspect to the labor market as currently regulated. That anti-competitive aspect was codified into law in the National Labor Relations Act, also known as the Wagner Act, in 1935, and amended with the Taft-Hartley Act in 1947.

Apart from a) actions which would be criminal regardless of who committed them, and b) government intervention into the labor market, unions are not only far from "anti-competitive" but in fact represent exactly the kind of competition one would expect to see in a free labor market.

Labor, rightly understood, is just another commodity. It's something that people create/possess and either use themselves or sell to others. Like all commodities, it is subject to the laws of supply and demand, and susceptible to cartelization, cornering, and other attempts to manipulate supply/demand to one's benefit.

Most self-described libertarians rail against the "anti-trust" laws, which purport to prevent companies from colluding, price-fixing, cornering markets, etc. Yet when workers form an organization to offer labor en bloc at a premium price through negotiated contract (as opposed to a la carte by the single worker under "at will" conditions), all of sudden they're "anti-competitive." Hogwash.

Yes, a union work force will generally demand (and get) higher wages under contract than a single worker would be able to negotiate on his own in "at will" employment. Yes, a union work force may well demand (and get) a "closed shop" agreement under which the employer will agree to hire only workers provided by the union.

By the same token, a company with a factory at which it manufactures CPUs in large quantity and of known quality will generally be able to demand (and get) a higher price for those CPUs from a computer manufacturer than will some guy who pulls up at the front gate with a trunk full of chips and a good story. As a matter of fact, there's a very good chance that the company with the factory will be able to negotiate an exclusivity deal on the provision of CPUs for that other company's computers.

In both cases, going with the larger, more reliable provider can be a good thing for the buyer.

Yes, unions demand a higher wage -- and that wage tends to keep the worker on the job for longer. Turnover in union shops is a small fraction of that in non-union shops. This means that the company isn't constantly fronting money to train new workers who aren't yet able to produce at a level which turns a profit for the company. In some cases, unions actually pre-train workers so that they have a good grasp of the job before they show up for their first day of work.

When the union shop I worked in first opened up (decades before I worked there), the company's first question was not "union or non-union?" but "which union?" They wanted their first crop of new employees to pick a union and get the contract negotiations in process ASAP. This was in a substantially non-union town, but the company was willing to pay the premium wage in order to get the benefits of low turnover, a waiting list to work there instead of having to hope it could find the workers it needed when it needed them, and contractually set workplace disciplinary terms that left neither employee nor employer in the dark and at the mercy of arbitrary and capricious middle management decisions.

The problem with organized labor in America is: Government involvement. Period. Full stop. That's it. That's all.

Wagner and Taft-Hartley, as well as various state laws, take the labor market off the market in specific ways. They require both employers and labor organizations to "bargain in good faith" when neither should be required to bargain at all ("take it or leave it" should be an acceptable position). They automatically unionize workplaces on the basis of majority elections rather than on the basis of free negotiations between employer and union. In some cases, they dictate "closed shops" in which, by law, only union workers may be employed. In other cases (the misnamed "right to work" laws) they require (again by law) that an employer may not run a "closed shop" -- but require that employer to pay union wages, give union benefits and apply union workplace disciplinary provisions to workers who don't join the union.

The state has always been involved in the labor market, and always on the anti-market side.

In the 19th century, government police and troops brutally suppressed strikes and murdered striking employers so that employers with friends in government could avoid paying market labor rates.

In the 20th century, a dog's breakfast of regulation benefited unions in some areas and aided their suppression in others -- distorting the labor market in both cases.

In areas where the political establishment favored (and was supported by) organized labor, unions ran amok, bleeding companies dry with unsupportable demands for higher wages and more benefits. The police and troops who had once shot down striking workers now stood idly by, looking the other way as union muscle broke windows, set fires and beat up "scabs" to get what they wanted. The law held the employer down while the union worked him over.

In areas where the political establishment opposed organized labor, that establishment was supported by employers who loathed the idea of paying market rates and wanted unions suppressed. Since doing so by the direct route -- call out the National Guard and crank up the machine guns -- had become socially unacceptable, they turned instead to "right to work" laws which ensured that even employers who thought a union was offering them a good deal were forbidden to negotiate exclusive contracts, and which required unions to represent, protect, and negotiate on behalf of workers who decided they didn't care to pay for that representation.

Absent government intervention on either side, unions are nothing more or less than a market phenomenon which allows workers to drive the hardest bargain for their product. Rail against Wagner and Taft-Hartley all day long, and I'm with you, brother. I don't think that either workers or employers should be regulated in the conduct of their voluntary transactions. But if you're anti-union per se, then you're also anti-market and anti-freedom. It's as simple as that.

[GMTA Update: Just noticed that Roderick Long hit substantially the same topic from substantially the same direction yesterday. His choice of foil was a short rant by Thomas DiLorenzo at LewRockwell.Com. I find it interesting that for all their feuding, which often escalates to the level of pro wrestling or Jerry Springer fare on LRC's part while the Cato folks tend to a more composed -- snobbish and dismissive, in other words -- demeanor, Cato and LRC stand united in their opposition to a free market in labor]

[Egg On Face Update: You know, I was just wrong to say that "Cato and LRC stand united in their opposition to a free market in labor." Some writers -- Skip Oliva, for example -- who publish with one or the other of those sites have at the very least acknowledged, and in some cases personally made, market arguments for the legitimacy of unions or other voluntary labor organizations. I do stand by my estimation of Griswold's claim vis a vis the "anti-competitive nature of unions themselves" as false. And it drives me up the wall to see some self-described libertarians -- at Cato, at LRC and elsewhere -- defend the valiant underdog corporations' right to collude, cartelize, etc. one day, and whine about those mean, ungrateful workers doing the same thing the day after]

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