Observed on the first Monday of each September, Labor Day is a U.S. Federal holiday which recognizes trade and labor organizations and marks the unofficial end of Summer.
This Labor Day, over 15 million American workers were without jobs and over two million of the jobless were Californians. That’s an official unemployment rate of 9.5% and 12.3% respectively. Official underemployment, which includes those who’ve given up searching for a job and those who work part-time but want full-time work, is much higher.
But on a day that is appointed to celebrate the strength and contributions of organized labor, it may be worth considering the role that organized labor has played in shaping the present state of our economy.
While it is taken for granted that unions are “pro-labor” a different picture emerges when we stop to think more economically about the consequences of union behavior.
Believe it or not, unions actually exist specifically for the purpose of keeping unemployment high. This idea was articulated best by Nobel Prize winning economist Milton Friedman. According to the Law of Demand, consumers purchase more of a good when its price decreases and less of the good when its price increases.
In the case of labor markets, labor is the good and employers are the consumers. When the price of labor is pushed artificially higher and higher through collective bargaining and even by law in many cases, the consumer purchases less of the good, i.e. employers hire fewer workers.
The result is that union members make more money at the expense of the millions of workers who cannot find a job. With wages and benefits pushed ever higher and many companies relocating overseas to non-unionized countries, there can be no wonder that the unemployment rate is so high.
Thinking of unions as “representing labor” is no more accurate than thinking of Walmart as representing all retailers. Ask the many small business owners who have lost all their business to big retailers whether they think Walmart represents them, and you will have an idea of the actual relationship between organized labor and many laborers- specifically the ones without jobs.
Unions don’t represent labor as a whole. Instead, they are simply a cartel- or monopoly- within the market for labor, which exists to push out competing labor and reap the benefits of monopolistic pricing at the cost of high unemployment.
Perhaps the worst part of this is that the results are extremely regressive- harming the poorest and least-skilled workers for the benefit of the more highly-paid, well-connected, and most-skilled workers. Employers can more easily replace unskilled workers in a strike than they can more skilled workers, so the benefits of union behavior are distributed regressively even within the union itself.
But by forcing wages and benefits to above-market levels, unions also make it unprofitable for employers to hire anyone who produces less than their now artificially high cost per hour, meaning that those with the least experience and training cannot ever find a job and learn the skills they need to climb the economic ladder and improve their lives.
This is what creates the permament cycle of unemployment among the poor, disproportionately affecting black workers and teenagers trying to get work experience for the first time.
Is this fair or just? Is it very liberal or progressive? Can it honestly be called “pro-labor?” With so many millions out of work on Labor Day, it’s a conversation we at least have to have. We owe it to unemployed workers everywhere, struggling desperately for their chance to make an honest wage doing honest labor.