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PowerLine Celebrates Return Of Serfdom

May 31, 2012

In Labor’s Armageddon, Steven Hayward boasts that Public-employee unions in Wisconsin have experienced a dramatic drop in membership—by more than half for the second-biggest union—since a law championed by Republican Gov. Scott Walker sharply curtailed their ability to bargain over wages and working conditions.

I’ve written before about how the middle class is losing the class war. I contend the demise of American unions has played a large role in this. Most people seem to believe that unions are unnecessary since we have so many worker protection laws today. But there are also at least two other major functions that unions serve:

1. They negotiate better wages.
Most employees don’t have the time, knowledge or power to effectively negotiate better pay. Management has a big incentive to keep workers wages low. When there isn’t significant push-back from workers, they tend to get their way. Of course, then they reward themselves with huge bonuses for increasing the company’s profits!

2. Unions help to balance the influence of corporations on government policy.
Look at our relationship with China, for example. They have unilaterally set their currency significantly below where it should be to ensure a competitive advantage over American manufacturers. They also don’t have many of those pesky worker or environmental protection laws – yet we engage in free trade with them? Why? Of course corporations love it, it increases their profits and gives them justification for keeping American worker’s pay low. After all, we have to be “competitive”! But imagine if unions had as much influence over policy as corporations do. Would we be engaging in “free trade” with China? I don’t think so.

The engine of our economy is the middle class – they are the true job creators. As successful venture capitalist Nick Hanauer put it:

Even so, I’ve never been a “job creator.” I can start a business based on a great idea, and initially hire dozens or hundreds of people. But if no one can afford to buy what I have to sell, my business will soon fail and all those jobs will evaporate.

That’s why I can say with confidence that rich people don’t create jobs, nor do businesses, large or small. What does lead to more employment is the feedback loop between customers and businesses. And only consumers can set in motion a virtuous cycle that allows companies to survive and thrive and business owners to hire. An ordinary middle-class consumer is far more of a job creator than I ever have been or ever will be.

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4 Comments
  1. Lawman153 permalink

    Sure, regular folks need disposable income in order to buy things to provide an economic base for business to flourish. However, without goods or services being provided by businesses, there is nothing to buy. So what came first, the product or the customer? You can argue either way, but the reality is that some form of free enterprise has to come first in order that a consumer has something to spend in the first place. A person can only be a consumer by providing a good or service (labor) themselves. Even considering our entitlement state in which a person can theoretically be a consumer without having produced any good or service, there had to be some previous economic activity in order for the Government to steal a portion of it to “redistribute.”

    I agree that dumping millions into a company and hiring hundreds of employees is not the way to “create” jobs, but the majority of businesses don’t start that way. They start with an individual or small group who risk their own money to build an enterprise that provides a good or service at a price that people are voluntarily willing to pay for. The local pizza joint, dry cleaner, gas station, grocery store, attorney’s office, accounting firm, construction company, etc. is what drives this economy, not the fortune 500 mega-corp or internet startup with their angel investors.

    I disagree with your notion of unions. Assuming you are in favor of a free market, it is interesting that you insist that the labor that supports it is not bound by the same free market principals. What unions actually do is artificially increase wages beyond what the market would normally pay for a given unit of labor. Paying $100,000 in salary and benefits to an auto-worker who’s only skill is to glue in a windshield or turn lug nuts on a wheel is not a sustainable business model, particularly if the product is undesireable in the first place. GM and Chrysler are excellent examples of how that doesn’t work. More importantly, unions (and minimun wage laws) force businesses to learn how to use less labor, rather than pay for more of it at a higher cost. This is doubly negative for our economy since that not only decreases the tax base, it potentially increases government expenditures for social programs like welfare, food stamps and unemployment.

    With regard to unions somehow balancing “the influence of corporations on Government policy,” I again argue that if the Federal government wasn’t un-necessarily inserting itself into every facet of our economy, there wouldn’t be a need for corporations to try to influence it, nevermind a need for unions to “balance” it. Wouldn’t that be better? Additionally, which do you think would really have a greater impact on stemming the tide of jobs exported overseas, more union influence over Government or reducing the world’s highest corporate tax rate? Minimum wage laws (I know, your head is going to explode), over-regulation, high corporate taxes, unions (particularly the public sector ones), un-sustainable social programs and a completely ineffective government are what has this country in an economic death spiral, not tax rates for the top 1%.

    The irony with the implosion of the unions in Wisconsin is that now that paying into the union is voluntary, most members realized that the union was not providing a good or service that they were willing to voluntarily pay for. So it wasn’t Scott Walker that killed the unions, the free market did!

    • Michael permalink

      It’s very easy to determine if there is a shortage of consumers (lack of demand) or a shortage of businesses (lack of supply). If there was a lack of supply, it would result in things like empty store shelves, overcrowded restaurants, fully booked hotels, etc. This is definitely not the case today.

      I am in favor of a free market! I just believe that they operate best when there is a healthy balance of power between workers and employers, which doesn’t appear to be possible without unions. Skilled workers in high-demand fields have plenty of bargaining power, but most others don’t. The proof that employers are holding all the cards right now can be seen in the income statistics. Those at the top are doing incredibly well, while the average worker is barely keeping up. That wasn’t the case in the 1950’s and 60’s when union membership was much higher – everyone shared in economic growth back then.

      I agree that sometimes unions get greedy and end up hurting companies, and I think that union abuses are just as bad as corporate abuses. But remember that union contracts come from negotiations between unions and employers – bad contracts are the fault of both parties. The thing unions need to remember is that the company’s success is the most important thing for their own success.

      The other points you bring up would take a long time to adequately address. I’ll try to comment when I have more time.

  2. My own dad used to be a union shop steward in the factory in which he worked (that’s before he retired). I worked in the private sector all my life myself.

    So I don’t see how empowering public-employee unions helps *private sector workers* one bit. This becomes most evident in times of slow or no economic growth.

    When the economy isn’t growing faster than the rate of population increase, it becomes a zero sum game: Public-employee unions will keep agitating for more and more money to be spent on them–even at everybody else’s expense.

    The Wisconsin public employees had health care benefits which they didn’t have to pay for (unlike many of us in the private sector). And public employees were much harder to fire or lay off than us private sector workers. And yet here they were, demanding that we support them and be willing to pay taxes to provide them with benefits that we private sector workers ourselves don’t have.

    • Michael permalink

      Public unions don’t help private sector workers directly. But, since both the public and private sectors are competing for the same workers, there can be an indirect benefit.

      The fact that Wisconsin public employees had better benefits than many in the private sector could be an indication that they have it too good. Then again, it could mean that the private sector workers are getting the shaft. From the looks of executive compensation in the private sector, I would say the latter explanation is more likely.

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