The Wisconsin debacle
Oh, union drama and Wisconsin: how quickly you have caused conservatives to demonize unions, liberals to saint them, and libertarians to choose a side under threat of irrelevance and bi-partisan hatred. As a result of visiting D.C. Thursday-Sunday for the ISFLC and scrambling to balance classwork, I haven’t had time to follow the events, but I’d like to offer a couple broad insights on some aspects of the controversy.
- Unions are not inherently evil. Collective bargaining is a legitimate method for voluntary associations to obtain employment contracts. That being said, it is hard to justify collective bargaining laws when they provide a union with monopoly privilege on bargaining power for all unions and non-union workers. Collective bargaining laws should only protect the rights of workers to voluntarily enter unions; however, employers do not have to recognize the union or hire any union members if they so desire. If a business owner believes he or she performs better without union labor, so be it: the market will determine whether such a policy is beneficial or harmful. Laws should not benefit labor over business or business over labor. Closed-shop arrangements are also legitimate, lacking coercion or threat to a union or business. Individuals may voluntarily enter a union (or decline), and business owners may voluntarily choose to run a closed shop (or not recognize unions at all). In conclusion, any legal immunity arranged by legislation that, when committed by an individual would land that individual in jail, is illegitimate to bestow upon a union or business.
- Unions do not increase wages and employment uniformly. From a strictly economic perspective, unionization is great for union members, but harmful to non-union members. Unions artificially increase wage rates for union members, but, as a result of higher wage rates for members, lead to a decrease of employment for non-union members. Unions effectively limit entry into the labor market, increasing labor costs. The union wage works as a minimum wage in that business or industry: increasing labor costs above the market rate decreases the level of employment (to read an excellent analysis of the minimum wage, read Morgan Polotan’s blog post). As Ludwig von Mises eloquently explains in Planning for Freedom, essay X, “what makes wages rise and renders the material conditions of the wage earners more satisfactory is improvement in the technological equipment. American wages are higher than wages in other countries because the capital invested per head of the worker is greater and the plants are thereby in the position to use the most efficient tools and machines…there is only one way that leads to an improvement of the standard of living for the wage-earning masses, viz., the increase in the amount of capital invested.” This is not to condemn unions as an institution; unions are valuable beyond their purely market effects. To defend unions on the basis that they increase economic efficiency or improve wage rates for all workers, however, is incorrect. “There are no solutions…only trade-offs,” as Thomas Sowell said, and the case to defend unions must rest on their non-economic benefits, or why union workers should have the privilege of higher wage rates at the expense of lower overall employment and efficiency, for example.
A strong case exists for tying government pension plans and insurance coverage to comparable market pension plans and insurance coverage when possible. It appears hard to justify why government employees should not have to pay into their pension plans and insurance coverage at comparable rates to market employees. Or, at least, I have failed to find the argument, which is entirely possible. At any rate, a fact sheet released 10 days ago by the Wisconsin governor’s office illustrates stark differences between the government and market sector. As always, “fatcat unions” or “greedy businessmen” should not be blamed for the issue, but rather government policy that promises unfunded (and economically unjustifiable) benefits to government employees with reckless disregard of market rates and over-optimistic predictions about the economic future (for example, state spending increased 81 percent between 2002 and 2007, adjusted for inflation).
Instead of blaming the Koch brothers and evil, stupid government employees, a re-evaluation of economic reality, along with the legal status and privileges of unions, will prove fruitful.