Employment Options, Not Labor Unions, are the Real Source of Bargaining Power for Workers

Source: American Institute for Economic Research.

The indefatigable economist Don Bourdreaux takes on a notion that comes up here in Tidewater Forum quite often: “Do workers in market economies need labor unions to ensure that they are paid fairly – that is, to ensure that they’re paid wages that reflect the market value of what they produce?”

The notion takes many forms in our venue. For example:

  • So-called “essential” workers don’t earn what they are worth (based on being “essential”).
  • Unions created the American middle class by enabling blue-collar workers to be paid enough to pursue the American Dream.
  • Minimum-wage laws are necessary because you can’t raise a family (and afford health care) on market wages.

And the like. All are variations on the Marxian trope that labor — being a necessary input to production — tends to be exploited by business owners who seek to maximize profits.

23 thoughts on “Employment Options, Not Labor Unions, are the Real Source of Bargaining Power for Workers

  1. I would add that the only beneficiaries of union representation are the inferior workers.

    To use the easiest example. look at the teacher’s union. Teacher pay and advancement are rigidly tied to seniority and advanced degrees, and totally divorced from merit. The union vigorously opposes any measure of teacher success, and just as vigorously protects the worst teachers.

    Absent the unions, there would be a bidding war for the best teachers, who would be fairly compensated for their talent.

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    1. There are unions and there are unions.

      The history of unions in the US is sordid, bloody and contentious. And it has not changed much except for the shooting. It is a very, very adversarial relationship with management.

      It need not be like that. Having labor on a board of directors is a good start.

      There should be minimums in safety, hours, wages, etc. After all, humans are not disposable resources. But there also needs to be fair rules and laws that don’t hamstring management. And at the same time, will hold management accountable when workers have legitimate grievances.

      So long as management and labor see each other as the enemy, we will have a problem.

      As an addendum, the burgeoning rise of digital and robotics is going to create an issue that classical economics may have to deal with in creative ways.

      Liked by 2 people

      1. One of the issues with unions today is that they have gotten away from their initial “charters”. The minimums fought for by early unions were necessary to protect and defend workers from unfair practices.

        If they would focus more on that and get away from the political side of the house, things might be in a better state.

        My father and step-mother are members of three unions that have mostly stuck to fair labor practices within their industries.

        Liked by 1 person

        1. I don’t dispute that unions can be corrupt and detrimental to a good workforce in some cases.

          I think this evolves from the adversarial system we have. There is no “buy in” for a worker through a union with regards to the running of the corporation. So it is a matter of getting all you can while the company tries to give as little as they can.

          Yet there is a common goal and that is to make the company prosper so jobs are well paid, safe and plentiful.

          This is where seats on the board for labor is really important.

          Liked by 1 person

          1. Virginia is a curious place (in a lot of ways, but…).

            I worked for one of the local private shipyards. The day of my orientation, there was one other new hire. He was going to one of the shops and I was going to the Planning Department. His shop is union, the offices are not. He was NOT joining the union but would be getting the benefits of being in it. I find it odd that you can have union benefits without joining the unuin.

            Yes, I know. Virginia is a “right-to-work” state. But it just seems to me that non-union members of a union shop should not benefit from being NOT being a member of the union.

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  2. “ All are variations on the Marxian trope that labor — being a necessary input to production — tends to be exploited by business owners who seek to maximize profits.”

    Businesses do try to maximize profits. That’s the nature of free markets.

    Part of that is the paring of costs when and where possible. That means overhead, materials, taxes, and labor.

    Why do you think we are so dependent upon illegal immigrants for many facets of our economy? Because they are compliant, hard working and relatively cheap to hire. More importantly, illegal workers bypass the market value of labor It is an artificial construct for wage depression.

    That is a prime example of exploitation.

    Liked by 1 person

    1. RE: “Businesses do try to maximize profits. That’s the nature of free markets.”

      The point of the article is that markets maximize wages.

      RE: “Why do you think we are so dependent upon illegal immigrants for many facets of our economy?”

      Define dependent. You are confusing the comparatively weak bargaining position of illegal workers with the bargaining position of legal workers. Why do you think illegals come here tp work instead of staying home?

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      1. Why is there confusion. A worker is a worker. The reason they come here is for jobs that pay better than home. But that does not mean they get good wages for our country.

        Why do we have illegals here? Because the businesses want the cheap and compliant labor and they have political clout. That’s why Republicans speak with forked tongue. Nativist populism gets votes, but businesses supply the campaign money.

        Liked by 1 person

        1. “Nativist populism gets votes, but businesses supply the campaign money.” As if most politicians aren’t guilty of this. That’s why they sicken me regardless of party.

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          1. And this is why we can’t get comprehensive immigration reform. We, as a nation, love cheap, hard working compliant labor and the undocumented workers are the ticket.

            We need to face the reality of immigrant labor and then deal with it.

            Liked by 1 person

        2. RE: “The reason they come here is for jobs that pay better than home.”

          Why do the jobs here pay better than the ones at home?

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          1. RE: “For the same reason it costs a few dollars a day to pay shirt factory workers in Bangladesh.”

            And what is that reason?

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          2. RE: “Perhaps we can stop the ‘0 questions’ and you can answer that question.”

            OK, but you could get the same answer by reading the posted article.

            Workers in Bangladesh take jobs, or don’t take them, as a matter of personal choice. It doesn’t matter what the wage rates for comparable jobs might be in other economies, because those jobs are not on offer to the workers in Bangladesh.

            Employers in Bangladesh necessarily compete with one another for available workers. So, while it may be in any one employer’s self-interest to offer low wages, any other employer who offers the same job at a higher wage will get the workers. As a result, no one employer controls wage rates either unilaterally or universally.

            Just as there’s a limitation on how low wages can be (that being the point at which no workers are attracted to the job), there’s a limitation on how high wages can be (that being the point at which no business can remain in operation).

            These factors in combination are sufficient to explain the wage rates that exist in any economy. It is not necessary to assume that other factors are present.

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  3. In the new version of the law of supply and demand, jobs are so cheap — as measured by the pay — that a worker is encouraged to take on as many of them as she possibly can. -Barbara Ehrenreich, journalist and author (b. 26 Aug 1941)

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    1. Given the wording of your quotation, I feel compelled to point out there is no such thing as “the law of supply and demand.”

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      1. “What Is the Law of Supply and Demand?
        The law of supply and demand is a theory that explains the interaction between the sellers of a resource and the buyers for that resource. The theory defines what effect the relationship between the availability of a particular product and the desire (or demand) for that product has on its price.” – investopedia.com

        Your semantics notwithstanding, it is an economic “law” and not one in the legal sense.

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      2. Your Investopedia definition uses two different words for the same thing. First it is a law, then it is a theory.

        My point is that people — especially like Nancy’s journalist — believe all sorts of crazy ideas about economics.

        To an economist, there is a “law of supply,” which has a specific definition, and there is “law of demand,” which also has a specific definition. People often put the two together in ways they shouldn’t.

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        1. In actuality the THEORY is described as “The Law of Supply and Demand”

          Semantic away, Todd. It is Hump Day.

          “My point is that people — especially like Nancy’s journalist — believe all sorts of crazy ideas about economics.”

          Oh, but YOU are immune form such craziness? Got it. It isn’t Len that is superior, it is YOU! I am so relieved to know that now.

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          1. If you jump from a tall building, the Law of Gravity will kill you.

            The Theory of Gravity will explain to your family why.

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        2. RE: “Oh, but YOU are immune form such craziness?”

          In this case, yes. It has nothing to do with semantics. The concepts of supply and demand are meaningful. They deserve to be better understood.

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          1. Yet your complaint is the use of the word “law”, which is used regularly, vs theory, which is probably more accurate.

            I don’t believe you are immune to any craziness. (I know that I am not) By saying you are is to ignore your own human fallacies.

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