Why Do We Need Unions?

John C. Goodman

12/15/2012 12:01:00 AM - John C. Goodman

Michigan has now become the 24th state to give workers the right to work without having to join a union. The event provoked more than vigorous debate. State police had to be on duty to guarantee the safety and the ability of Michigan legislators to actually go vote on the measure.

So what is the controversy all about? I agree with folks on the left about the real issue. It's not about right to work. It's about unions themselves. Why do we have them? Why do we need them? What public purpose do they serve?

There's no mystery here. A union is an attempt to monopolize the supply of labor to an employer or group of employers. Like all monopolies, unions try to restrict supply and get a price (in this case a wage) above the free market level.

How is that possible? It's not possible without coercion ? both private and public. Faced with demands for above-market wages, employers will try to hire workers who aren't in the union. These are the laborers who the union is trying to keep out of the market. Although the unions call these workers "scabs," in the past they have disproportionately included minorities and women.

That's where coercion comes in. Professor Donald Dewey, my teacher at Columbia University, used to tell students, "There's no such thing as a peaceful picket line; a picket line has no other purpose than to intimidate." It's not an accident that the history of the labor movement is strewn with violence. Without the threat of coercion, competition in the marketplace will produce market level wages, just like competition for other goods and services produce market level prices.

Then there is the government. Although an attempt to restrain trade through monopoly agreement is actually a crime in this country, the law not only exempts labor unions, it includes provisions that encourage them. And although freedom of association is supposed to be enshrined in the First Amendment, the law creates a path for unions to force both employer and employees into a union monopoly contractual arrangement, whether they want to or not.

Let's put aside one widely believed myth: that unions somehow lift the wages of people who aren't in unions. Actually, the reverse is true. By restricting the supply of labor in the unionized sectors of the economy, unions artificially increase the supply (and therefore suppress the market clearing wage) in the non-unionized sectors.

Ironically, union activity may even lower the wages of union members themselves. All too often union-negotiated work rules make entire companies and industries considerably less productive than they would have been. And one thing cannot happen in any company: wages cannot exceed productivity or the company goes out of business.

At one point, more than a third of the private sector workforce was in a union. Today it's 6.6%.There is no reason to think anyone is worse off because of the decline of the union movement. In fact, we're all better off. Without unions in the way there is more labor market mobility. Companies can meet their manpower needs based on the economics of production, not based on coercive powers exercised at the bargaining table. The entire economy is more productive than it would have been. Therefore, real incomes are higher today than they would have been.

As a Wall Street Journal editorial noted the other day:

According to the West Michigan Policy Forum, of the 10 states with the highest rate of personal income growth, eight have right-to-work laws. Those numbers are driving a net migration from forced union states: Between 2000 and 2010, five million people moved to right-to-work states from compulsory union states.

Also, union dues come out of workers' paychecks, so their take-home pay is lower. Hundreds of dollars a year. Unions are profit centers for union bosses, who pay themselves fat salaries out of the union dues.

In the public sector, however, union strength has been growing rather than retreating. This is worrisome because in this sector union members get to vote for their employers. Of course that would be true even if there were no union, but union organizations provide public sector workers with a powerful vehicle to punish politicians who do not accede to their demands.

We have all seen the results of this: organized teacher opposition to almost any reform that promises to improve the education of our children, post-retirement benefits that are unfunded and are threatening to bankrupt cites, and even entire states and a general opposition to needed restructuring in every public sector from the U.S. Postal Service to city hall.