Sunday, March 13, 2011

The "need" for unions isn't put into proper economic context

Published in The Tennessean, Sunday, March 13, 2011

The "need" for unions isn't put into proper economic context

by Richard J. Grant

Some decades ago I went to work for a company that turned out to be a closed union shop. That meant that all non-management workers had to either join the union or not work for the company.

The existence of a closed shop was not a manifestation of the exercise of workers’ natural rights: It was an outcome encouraged by the imposition of various labor laws upon workers and owners. The effect of these labor laws was to reduce the rights of both workers and owners while increasing the powers of those who wished to organize and lead trade unions.

The effect of the closed-shop rules was not to empower individual workers but to grant monopoly powers to the union. Individual workers were denied the right to negotiate separately with the company owners. This meant that both the owners and individual workers had their individual rights to negotiate taken away from them by the labor law.

Monopoly power is not a persistent natural phenomenon. Freedom of choice overwhelms those who expect us to stand still rather than innovate. Historical examples of the existence of monopolies invariably have resulted from the imposition of government charters or regulations. The East India Company is an example that should be vividly imprinted in our memories. The Declaration of Independence was in no small part a reaction to such statist encumbrances, and the Constitution that followed should have protected us from their reappearance in modern times.

History is full of legislatures and kings granting monopoly powers under the guise of charters, licenses, guilds, and closed-shop union laws. As is the case for all such laws, the first victim is freedom of choice. The real purpose is to limit the supply of labor and to limit competition. This is why such laws invariably promote conflict and limit our ability to provide for ourselves.

This is also why many critics of present-day union practices feel the need to preface their remarks with some lame version of “There was a time when unions were needed...” followed by some vague reference to Dickens. These critics mean well, but they fail to put the perceived need for unions into proper economic context.

The agitations and statist interventions that supported the rise of the trade union movement were not a reaction to the evils of what so many like to imagine were “unfettered free markets.” Lobbyists for special interests have existed as long as there have been governments. Work conditions have always reflected the political realities as much as the physical realities of the time. The trade unions were merely the latest interest group to learn how to use state regulatory power to protect their members from competition.

Until the Great Depression, the legality of union activity was ill-defined. But then a succession of legislative actions freed unions from antitrust scrutiny, imposed minimum wages on government contractors, and weakened the federal courts on union matters. Also, the Social Security Act contained provisions for unemployment compensation that served to reduce the cost to workers of strike action.

Over time, this legislated right to strike became confused with a natural right. But it was really nothing more than the granting of monopoly power to a union over an employer. The employer's right to freedom of association was taken away. Ignorance of this explains the self-righteous indignation of Wisconsin teachers’ union activists.


Richard J. Grant is a professor of finance and economics at Lipscomb University and a scholar at the Tennessee Center for Policy Research. His column appears on Sundays. E-mail: rjg@richardjgrant.com

Copyright © Richard J Grant 2007-2011