Labor Unions: Thoughts

Capitalism functions because of exploitation. You can’t make profit without a level of exploitation, i.e. labor must be compensated less than the value that the work produced to yield profits. The degree of profits yielded in proportion to the value produced is a good indication of whether exploitation is occurring. If you look at profits, productivity, and real wages, you’ll see that severe inequalities exist.

I use the word “exploitation” because it doesn’t sugar coat the reality of what’s going on: unequal bargaining power leads to income, wealth, and opportunity inequalities. Unions exist to restore bargaining power from the management/ absentee ownership. It’s when unions possess greater bargaining power than their employers that inefficiencies arise.  The decline in unions is a major reason why inequalities have risen over the years.

The US works more than any other country. We have the least vacation days of any other industrialized/ OECD nation. We have the least paid vacation days. I don’t think it’s fair to compare inequalities between developed and undeveloped nation. It’s all relative. So you think we have it pretty good in the US, that $7,25 isn’t too bad? You are forgetting that $7.25 is meaningless without a context, i.e. the cost of living, CPI/ inflation has continued rising despite stagnating wages making it increasingly difficult to save and live comfortably, especially for those in the lowest income brackets. Poverty levels are artificially low due to the credit boom– which, since its bust, has led to increasing poverty levels. The Gini coefficient has rising consistently since the 70’s, which I attribute to the coinage act of 72/ introduction of fiat currency which instituted federal monetary policy.

Also, the vast majority of worker representation has been the direct result of union organization. People should appreciate the value of unions and why they’ve been vital to our progress. You can thank unions for: the 40-hour work week, overtime pay, vacation pay, sick days, workers compensation and a living wage. Union decline is mostly do to corporations becoming increasingly ideologically opposed to them: It’s all about shareholder profits.

As resources become monetized and increasingly scarce through the process of capital accumulation, concentration, and centralization, there will be an inevitable rise in exploitation and inequality. US economic data points to this trend. After looking at history, throughout all civilizations, you’ll see that man’s natural tendency is to exploit as a consequence of his natural will to power/ dominate. I do not think any nation, especially the US, is immune to this tendency. Slavery is very real. We might not have chattel slavery, but with increasing debt levels and the passing of recent laws preventing the option of bankruptcy, I would argue that we are experiencing the rise of a certain “bonded slavery”. Choosing your wage contract is just an illusion of freedom if someone still owns your labor income. Allowing workers to choose which job they’re best at allows for the efficient allocation of labor. (Recent legislation just made it legal to deduct outstanding debt from paychecks before you receive it)

All I’m saying is that, contrary to what a few politicians spout off, unions are actually a good thing for democracy, equality, and economic progress. Maybe they don’t make us as competitive abroad, but we’re importers, not exporters anyway (International current account imbalances is a separate issue). Ensuring that our labor force is receiving equal and fair distributions of income/ wealth maintains consumption, drives domestic demand, and fuels economic progress. Income inequality and disparate levels of capital accumulation increases financialization, decreases real asset investment, and hampers long term economic growth– and could potentially lead to economic stagflation, which many argue we are seeing the beginnings of.

If you are ideologically opposed to unions, I would like to ask that you explore how unions have been instrumental in improving our economic development and our standard of living as a nation and consider reevaluating your position. They are incredibly important for our long term economic growth. This is a nice read from a non-partisan think tank: Why Unions are Good for the American Economy

You must understand the real utility of unions. Yes, work conditions have improved, I agree. That’s not why I believe they’re so important nowadays (after all, if I worked as a slave making nothing, but the conditions of my job were exquisite, I would still argue there were serious problems). I’m discussing why unions are important for ensuring that increases in income distribution mirror increases in productivity. One of the most important roles of unions is ensuring fair wages. This is why I believe they are important: restoring and equalizing bargaining power.

Yes, there have been massive changes within the labor markets from industrial to technology, but that doesn’t explain why wage inequalities have risen, and why it’s not due to decreases in unions (decreases in collective bargaining power) and increases in corporate/ management bargaining power. Federal monetary policy is a major reason for contributing to this bargaining power inequality. By establishing an arbitrary target inflation rate (NAIRU is bull and the Taylor rule is empirically bogus) and avoiding full employment, they create a surplus of labor which in turn decreases employee wage contract bargaining power that would otherwise increase their wage compensation to fair levels (and eliminate wage stagflation).

Why are individuals leaving unions? I would ask myself, why would they leave when they have better pay and benefits? This doesn’t seem rational. As I mentioned before, corporations make it incredibly difficult to join a union. They’ll import labor from somewhere else in the country before they’ll accede to union demands. It’s simply not advantageous to join a union when you could risk losing your job (especially when unemployment is high/ artificially inflated– they could simply hire someone else).

Politics (and the role of lobbying) play a very significant role for this decline.

Another article detailing how politics have reverses the role of collective bargaining, and how that has negatively impacted income distributions and growth.

Here is a study showing that decreases in unionization are responsible for a third to a fifth of all increases in inequality.

This study shows that unions have a direct positive impact on labor’s share of income, with the decline of unions responsible for about 29% of decreased wages.

Why have wage inequalities has risen over the past decades?

There can be serious problems with unions. I’m not arguing dysfunction can arise. Teacher unions have grown so large and powerful that no realistic progress can be made. It’s silly. I watched Waiting for Superman and it was appalling, but it’s a system that serious serious overhaul. But collective bargaining power is an important feature for preserving equity within the US.