Tom Knapp: ‘Libertarians against markets?’

Posted by Tom Knapp at Kn@ppster:

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]

12 thoughts on “Tom Knapp: ‘Libertarians against markets?’

  1. Brian Holtz

    There isn’t a single sentence in either the Cato paragraph quoted above, or the DiLorenzo paragraph linked above, that constitutes “opposition to a free market in labor”.

  2. libertariangirl

    here in Vegas , the Unions are out of control . try being a business that doesnt want the union , try crossing a picket line , try being a small business who cant afford union demands,

    I seriously have a bad opinion of Unions . they represent force and i thought using force to achieve a goal was wrong?
    i know my opinion of unions is biased because where i live

  3. Michael Seebeck

    When I did my lone school board campaign (2001), I was asked by the local teacher screecher creature union to appear at a candidates forum. At the time the rural district had the worst testing scores in the state and they were pushing a $46M bond issue that was really a blank check based on numbers the school board president admitted to my wife were pulled out of their asses. I was the only candidate opposing the bond while the union and the other 4 candidates running for the 3 spots supported it. The union with their invitation also sent out a questionnaire. I declined the invitation and I sent back the questionnaire.

    Here’s what I told them:

    “I do not seek a union endorsement because I see the union as a major roadblock in fixing the problems of the district, which start with the abysmal test scores that under the current broken system of school funding, puts all our children at risk for a further federal and state takeover of what should be a local district. I see the union as a roadblock because of their collective bargaining agreement that penalizes good teachers for doing good work by capping their wages even though the deserve more, and that rewards bad teachers for doing bad work by preventing their termination and maintaining a minimal salary when they haven’t earned it. In the meantime, our children suffer because the good teachers leave for higher pay at other districts and the bad teachers remain to poorly educate our children, causing the expenses for the district to increase over what they should be while the education quality decreases. I see no reason to seek the endorsement of an organization that rewards mediocrity and punishes exceptionalism all at the expense of the education of our children. If anything, the lack of your endorsement, considering the current situation in the district, is a far better campaign tool, since parents in the district are not happy with the district right now.

    “The task before this district now is to educate the children and improve the metrics that the public sees that measure that success. That is not done by teaching to a test, nor is it done by letting bad teachers slide. It certainly is not done with a bond issue based on no plan and no real idea of how to improve the district infrastructure. However, it is done by teaching the base skills needed for our children to function in society, to allow them to properly socialize, think critically and logically, and to create an environment of developing knowledge and wisdom beyond a bell-to-bell subject block. That is accomplished by quality planning and a team effort between the school faculty and staff and the community it serves, starting with the parents and families of the students. I know in my own area of the district I have yet to see any such effort.

    “Therefore I decline your invitation but encourage you to give serious thought to my words here and develop a quality, long-term plan for the district to properly educate our children. I oppose the bond issue and I campaign against it, and will continue to do so.”

    Then that night I went out to the local LP meeting instead.

    I came in 4th in the race, garnering 34% of the total votes, but the bond went down, due to my campaigning against it. The following year the test scores had improved dramatically to middle-of-the-pack and they came back with another bond for half the cost with actual plans attached to it, and that one passed.

    Out here in CA the unions are also out of control, specifically the public employees unions, the teacher unions, and the prison unions. They are one of the main reasons CA is broke.

    Unions killed the US steel industry as well.

    I would be much happier with unions if they worked with businesses to improve worker conditions while not being adversarial against those same businesses when dealing with bad employees. but they don’t seem to want to work towards that win-win situation, and that’s disappointing.

    I for one do not oppose unions, but I do wish they would get their priorities straight.

  4. Michael Seebeck

    Whoops, forgot to close the italic again after the third italicized paragraph. Gotta check myself better.

  5. Michael H. Wilson

    @ 4 Michael wrote: “Unions killed the US steel industry as well.”

    Just a comment regarding the Vietnam War. During the late 1960s agents for ships carrying war materials to Vietnam started calling on nations in Asia looking for material that the ships could pick up while in that part of the world. It costs big bucks to take a ship across the ocea empty so why not bring something back. A number of those ships came back to the states with steel products as cargo, especially rebar. We might say that the war contributed to the decline of the U.S. steel industry as well as other factors.

    Kinda funny when you consider that many of the workers in that industry supported the war and sometimes took to the streets to conter the protest of those opposing the war.

  6. Michael Seebeck

    Thanks, paulie!

    Michael, both of my folks worked in the steel mills in Indiana in the 1960s, as well as my grandfather back in the 40s and 50s, and they were doing fine back then, Vietnam or not. What killed the mills was the late 1970s and early 1980s when steel import tariffs were lifted, and the unions refused to budge on their wages to adjust to the market demands, with the result being a slow and steady decline to death of the domestic steel production. By refusing to budge on their labor stance, they guaranteed their own death, and if they had given some to ensure survival, it would have been a different world in the steel industry.

  7. Danny S

    I think the argument by that guy from CATO above is very sound. I have supported that position myself, and I think it is a great position for libertarians to take that helps them appeal to the left.

  8. Michael H. Wilson

    Michael @ 8, yup I know the story which is why I wrote “We might say that the war contributed to the decline of the U.S. steel industry as well as other factors”. Its the “other factors” that I need to put a line under.

    I just think it is ironic that the steel workers were out supporting the government against the anti-war protesters when the government’s own action were undercutting their jobs.

  9. Michael H. Wilson

    On a related point. We have a number of labor cartels, or perhaps it is better to call them guilds in the U.S. and while lots of Libertarians get their panties in a twist over the unions that bluecollar people work for they have little, or nothing to say about these guilds.

    Let’s take the bar association and I don’t mean Hooters, or the Playboy Club type bar association. The bar association is made up of lawyers. Lawyers have twisted the laws of this country into a mess. They have stripped the Constitution of any meaning.

    Some of them have worked overtime to put some of our fellow citizens in prison simply because of their personal habits. They have made a mockery of justice. They have voted to send Americans to fight in foreign wars in nations of which they had little knowledge. They have condemned good people to prison for crimes they did not commit. Many of them labored long and hard to support the Bush Administrations violations of the Constitution. They have found ways to suck tax dollars from the hard working class of American. They have justified the banking robbery of America. And if you need a will drawn up they charge you an arm and a leg to have their secretary do the work on a computer which is loaded with the software designed elswhere.

    And in all of this tragedy few of their fellow lawyers have had the courage to stand up a say this is wrong. The profession is without morals and ethics and they labor long and hard to make and keep it that way.

  10. JT

    My initial reading of this Cato commentary was that Griswold is talking about unions *within the present legal system*. I don’t think he’s making a theoretical point about the nature of organized labor, voluntary or otherwise. I think he’s saying given the fact that government compulsion is involved in organized labor today, unions are anti-competitive, harming the good workers and helping the poor ones.

    In general, Cato scholars call for legal changes in each of today’s major policy areas that would increase liberty and peace. Most don’t approach politics from a totally different paradigm.

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