The Impact of Unionism
FEBRUARY 01, 1981 by CLARENCE B. CARSON
Dr. Carson has written and taught extensively, specializing in American Intellectual history. He is a frequent contributor to The Freeman.
Unionism is not a theory of economics, nor does it have one. It is, as I have said, an ethical theory, buttressed by a religion-like ideology. Its theory is that individual workers cannot get their just deserts in an open market, that they must combine and use coercion to get their due. Yet the primary impact of unionism is on the economy, though it extends outward to have effects on all social relations. Underlying the thrust of unionism, then, there must be at least an implicit economic theory.
So there is. It is a theory that is uncovered by positing what it is necessary to believe in order to explain doing what unions do. What unions do is to act to reduce the supply of workers available. They organize some of the workers against the other workers and attempt to monopolize the available jobs. Now it is sometimes supposed that the labor theory of value provides the unionist contact with economics. But the labor theory of value does not provide an economic explanation for the unionist effort to reduce the supply of labor.
If labor were the source of all value, it still would not follow that it would be socially desirable to reduce the supply of labor. On the contrary, it would appear that it would be socially desirable to use every smidgeon of labor to the fullest extent possible. It is doubtful, however, that the labor theory of value should be considered as an economic theory; it makes much more sense as a partisan, or sectarian, ethical theory. In short, it is best understood as a claim that labor should have all the product of industry. In any case, it does not explain actual union behavior which aims to monopolize jobs rather than to take the whole proceeds of industrial activity.
Economic Goods Are Scarce
The economic theory necessary to unionism comes into view when we turn the major premise of economics upside down. The major premise of economics is that all economic goods are scarce. (Not all economists acknowledge this, but it is nonetheless the premise required for their study.) They are economic goods because they command a price, and they command a price because they are scarce. The minor premise which follows from this, in syllogistic form, is that labor commands a price in the market. Therefore, it is an economic good which is scarce. The scarcity of labor is axiomatic, then, and it is this that makes it a subject of concern for economics.
The major premise of unionism is that there is a surplus of labor. Looked at more broadly, the major premise of unionism is a conclusion derived from a major premise of socialism or interventionist economics, namely, that there is a surplus of goods generally. This statement is not made as a universal by its advocates, that is, they do not claim that there has always been a surplus of goods or that it is everywhere the case. Rather, it is described as an historical condition and attributed to industrialization. (Not, it should be noted, as a worthy development, but as a problem, because the goods are not evenly distributed.)
This major premise of socialism—that there is a surplus of goods produced, or producible in highly industrialized countries—was stated dramatically by Karl Marx and Friedrich Engels in 1848. They said, “In these crises there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity—the epidemic of over-production . . . . Because there is too much civilization, too much means of subsistence, too much industry, too much commerce.”
Over-Production a Problem
This concept of a surplus of goods has had vigorous proponents among Americans of the historical school of economics, usually called institutionalists. The leaders of this school have included John R. Commons, Stuart Chase, Thorstein Veblen, and John Kenneth Galbraith. Stuart Chase, for example, declared that the United States turned the corner and achieved a condition of abundance in 1902. “Abundance,” he said, “is self-defined, and means an economic condition where an abundance of material goods can be produced for the entire population of a given community.” Rexford G. Tugwell maintained, in the 1930s, that “there is no scarcity of production. There is, in fact, a present capacity for more production than is consumable, at least under a system which shortens purchasing power while it is lengthening capacity to produce.” Chase offered documentary evidence for what he conceived of as the capacity for over-production (written in 1931, note, when they may have been more convincing):
American oil wells are capable of producing 5,950,000 barrels a day, against a market demand of 4,000,000 barrels, according to the figures of the Standard Oil Company of New Jersey.
The real problem [in coal] is excess capacity. The mines of the country can produce at least 750,000,000 tons a year, while the market can absorb but 500,000,000 tons.
American shoe factories are equipped to turn out almost 900,000,000 pairs of shoes a year. At present we buy about 300,000,000 pairs . . . . Yet if we doubled shoe consumption . . . one-third of the present shoe factory equipment would still lie idle . . . .
Three decades later, in different conditions, Vance Packard stated the position of the surplus of goods succinctly:
Man throughout recorded history has struggled—often against appalling odds—to cope with material scarcity. Today, there has been a massive breakthrough. The great challenge in the United States-and soon in Western Europe-is to cope with a threatened overabundance of the staples and amenities and frills of life.
If there were a surplus of goods generally, it would follow that there is a surplus of labor. As early as 1893, John R. Commons held that there was a “chronic excess of labourers beyond the opportunities for employment.” Stuart Chase spelled out the position in the 1930s:
What threatens to continue unabated, in good times and bad, is technological unemployment . . . . In four years oil refineries increased output 84 per cent, and laid off 5 per cent of their men while doing it. Tobacco manufacturing output climbed 53 per cent in the same period, with 13 per cent fewer men at the end . . . .
It can mean only one thing. An equivalent tonnage of goods can be produced by a declining number of workers, and men must lose their jobs by the thousands—presently by the millions.
Emphasis on Consumption
The general premise of a surplus of goods leads to consumer or consumption economics, i.e., to measures promoting the consumption of goods. The premise of a surplus of labor provides the basis of an implicit economic theory for unionism which is nowhere spelled out but which is everywhere practiced by unionists. It is the theory undergirding the practices of reducing the available supply of labor.
The unionist theory of a labor surplus is a self-fulfilling prophecy when it is put into practice. That is, labor unions tend to create the very conditions they posit, namely, labor surplus, or, more precisely, unemployment, underemployment, and low-paid work for non-union workers. But before explaining why, it needs to be made clear that labor is scarce. This has been affirmed al ready in terms of economics, but there is a more basic axiom than the one cited. It is this. Human wants are insatiable, but the means for satisfying them are limited (scarce). Human labor can be used in innumerable ways to satisfy human wants. Therefore, labor is scarce—essentially and permanently.
I can make the same point in a much more homely fashion, one which brings us in the vicinity of everyman’s experience, and one which will get us much closer to the effects of labor unions. There is more work to be done than there is ever time or energy to do. It is certainly true around my house, and from all I have ever learned it is true for others as well. As I write this, there are dozens of tasks I can think of that need doing. The roadway to my house needs some repair; the lawn needs mowing; the lawn needs fill in places, reseeding, and fertilizer generally; the trees will need pruning when the time comes. The place where the water pipe enters the house from the well needs blocking up, because it freezes in very cold weather. I have been intending for more than two years to paint the exposed concrete blocks in the foundation of my house. Several rooms inside the house need a new coat of paint. It is time to spread lime on my garden in preparation for next year. My car would benefit greatly not only from being cleaned and washed but also from a good waxing. And this list only scratches the surface of all the work awaiting either my own attention or that of someone whom I could afford to employ. More broadly, there are numerous goods I would like to have for myself or my family—ranging from a yacht and swimming pool to clothing and exotic foods—if I only had the means to pay for them. And every one of my wants would require more or less labor to satisfy it.
In short, I have a surplus of wants and a scarcity of means for satisfying them. That condition is sufficiently near universal that no one has ever bothered to make a survey to determine if it is unanimous.
Price a Crucial Factor in Satisfying Wants
Equally important, we do not feet all our wants with equal intensity. We have priorities as to which of them we would satisfy with what outlay of our limited means. For example, my desire for a yacht is of such low intensity that I am by no means certain that I would rush to buy one if 50-foot yachts were selling for $100. On the other hand, if new automobiles were selling for $25 each, I would stop what I am doing and lay in a stock of them immediately. Price, then, is a crucial factor in my decisions about satisfying my wants. And, the price of labor is a factor in the price of virtually all the goods I want.
What this means, practically, is that all who can work so as to satisfy some human want can find employment—somewhere, at some price. The full employment of all who are willing to work is the norm for human societies. Price is the crucial variable, however, for full employment. This is so both because of the great range in intensity of wants and the range of human capacity, ability, and skill in satisfying wants. Indeed, individuals differ from one another and vary as to the extent to which they can perform all the tasks which have an effect on the quantity and quality of their output. That is, they differ in temperament, power of concentration, intellectual penetration, endurance, strength, skill, and so on. The basic means for making adjustments for differences in intensities of wants and different individual abilities are in price and working arrangements (not “working conditions,” for as that phrase is ordinarily used it is simply an aspect of price).
The thrust of unionism is to establish downward price (wage) inflexibility and to raise ever higher the level below which wages cannot go. This means that wages cannot be adjusted to changing demand (intensity of want) or to the lower productivity or different work patterns of some workers. More directly, it means that unions cause unemployment, and the more widely they are established the greater the unemployment. They price workers out of the market, thus causing endemic unemployment.
It might be supposed that the connection between labor unions and unemployment could be easily demonstrated empirically. All that should be necessary would be to match the figures of increasing union membership and recognition with unemployment figures. That it is not so simple will become apparent by examining an instance, and the reasons for its complexity will lead us to the broad and sustained impact of unionism.
Unions and Unemployment
Perhaps the best period for an historical case study of the effect of unions on unemployment was 1935-1939. The Wagner Act was passed in 1935. In 1936, there was a 10.1 per cent increase in union membership over the preceding year. In 1937, the greatest jump in membership for a single year in the twentieth century occurred; it was a whopping percentage increase of 53.9. The main thrust for this increase came from the CIO under the leadership of John L. Lewis. As one writer describes this surge: “At the end of two years of activity, in December, 1937, the C.I.O. boasted a membership of 3,700,000—composed of 600,000 miners, 400,000 automobile workers, 375,000 steel workers, 250,000 ladies’ garment workers, 175,000 clothing workers, 100,000 agricultural and packing house workers, 80,000 rubber workers. The day of labor giants had dawned.”
There followed a drastic increase in unemployment. According to one compilation, unemployment stood at about 7½ million in 1937. In 1938, it rose to 11 million, and in 1939 was still lingering around 9½ million. A stock market crash of considerable dimensions occurred be ginning in the middle of 1937. One economic historian explains these events in this way. There had been an increase of aggregate labor income at the expense of profit income. This had resulted primarily from the unionization which increased wages of manufacturing laborers rapidly. “A main factor,” he says, “on the industrial side in bringing the revival of 1935-1937 to a close was this startling increase in wages, due . . . to a tremendous burst of activity by trade unions under the Wagner Act—a rise in wages unmatched by a corresponding rise in the productivity of labor.” Or, technically, in terms of marginal utility theory, the higher union wages made many workers marginal who had been employed, and they lost their jobs.
Described in this way, there appears to be very nearly a prima facie case that unions caused the unemployment. Unfortunately, there were other developments during the same period which may have contributed to the unemployment and which certainly muddy the waters of causation. Many were leaving the farms seeking industrial employment, such as, from the Dust Bowl, and some of these added to the rolls of the unemployed. There were changes in governmental fiscal policies which probably had some effect. Here is a succinct summary by an historian: “In June, 1937, Roosevelt . . . slashed spending sharply. He cut WPA rolls drastically and turned off WPA pump- priming. At the very same time, Washington collected two billions in new social security taxes. The government had not only stopped priming the pump but was even ‘taking some water out of the spout.’” Benjamin Anderson has challenged this explanation, but it is plausible that the higher wages combined with a slacking off of inflation would have contributed to the unemployment.
Minimum Wage Laws
Government further aggravated the situation in 1938 by the passage of the Fair Labor Standards Act. This established minimum wages and maximum hours in many industries, resulting in higher wages and shorter hours for some workers. The effect of the minimum wage is the same in kind as a union wage. So far as it works to raise wages above the market level it will result in unemployment.
These latter developments illustrate the point that now needs to be made. Unions are not simply era-powered by government, they are aided and abetted by a host of government programs which, on the one hand, conceal or confuse the effects of unionism and, on the other, aggravate them. Union contracts, plus government enactments, would—in fact, do, when viewed from the angle of potential employment—cause massive unemployment, but most of these effects are concealed from public view by a host of other programs. Most, if not all, of this should be attributed to unionism, for governments generally act on unionist premises and the public at large tends to accept union goals, even when they may deplore certain union tactics.
To grasp the full impact of unionism, it may be helpful to view it in the light of the Greek fable of Procrustes. It is said that the countryside was inhabited by assorted petty tyrants and marauders. “One of these evil-doers was called Procrustes, or the Stretcher. He had an iron bed stead, on which he used to tie all travellers who fell into his hands. If they were shorter than the bed, he stretched their limbs to make them fit it; if they were longer than the bed, he lopped off a portion.”
The Cost of Fringe Benefits
The thrust of unionism is to make a Procrustean bed, into the confines of which all who would work must fit. The most obvious of the confines is price. By making prices of labor (wages) downwardly inflexible, only those who can produce at a level that would make it worthwhile for an employer are likely to find work. This price inflexibility extends much beyond what is ordinarily called wages. It includes employer contributions to retirement plans, Social Security, unemployment compensation, hospitalization plans, workmen’s compensation, and so on. In deed, these “fringe benefits” have become so expensive that many employers find it less expensive to pay overtime to those already employed than to take on new people. (This is so because there may be little or no fringe benefit payments for the overtime work.) “Overtime” has become a way of life for many industrial workers. Indeed, it is sometimes considered one of the “perks” of the job, and some workers make obligations based on the expectation of it. The supreme irony of this is to be seen in all the verbiage that historians have lavished on the supposedly horrible conditions of work in earlier times when people worked long hours and six- and seven-day weeks.
The thrust of unionism to make a Procrustean bed in which all who would work must fit is much broader than is suggested by downward price inflexibility. Unions and government exert pressure for uniform pay scales, for raises in pay according to seniority, and for objective job definitions. Indeed, the pressure of unionism is to have work as highly structured as possible, to have it done under managerial supervision and control, to have payment based on time worked, to have it performed within factories or factory-like surroundings, to require of every worker within a job classification that he do as much, or as little, as all others, in short, to have it done under conditions that are optimal for unionization.
Home Workshops Opposed
This pressure may best be illustrated, perhaps, by unionist opposition to work being done in the home. Unionists and their sympathizers attached odium to such arrangements by characterizing it as a “Sweating System.” In the argot of Americans, a “sweat shop” is a factory where intolerable working conditions prevail. That is not at all the origin of the idea of”sweated labor.” It originated as a term of derogation, or was so used by unionists, for work done in the home.
The Encyclopedia Britannica describes the “Sweating System” as being closely “associated with contracting. Individual workers or groups of workers contract to do a certain job for a certain price.” The work is then performed in the home, home workshops, and the like. The same source says that the “sweating system grew in the United States during the Civil War, when soldiers’ wives were employed to make uniforms with the relatively newly developed sewing machines.” Unionists attacked the system with all the energy they could muster. The Britannica says that “In the United States most of the pressure to eliminate sweating was applied by organized labor.”
Industrial homework has long since been virtually eliminated in the United States by a combination of union and government effort. Unions had considerable success in getting it eliminated in such undertakings as clothing making and cigar making. It became virtually illegal in some states, for Jack Barbash notes that when the New York legislature considered a bill for “partial legalization of industrial homework,” it was vigorously opposed by the New York Federation of Labor. At any rate, much homework was made impractical by minimum wage prescriptions (based on an hourly rate, as they were, employers would be unwilling to pay when they could not check), prescriptions as to working conditions, by zoning laws, and such like.
Problems of Organizing
The unionist motives for opposition to home work are not difficult to surmise. It would probably be nearly impossible to organize such workers. The conditions of proximity and association would not exist for developing class consciousness among them. They could do the work less expensively than it could be done in the factories; thus making it difficult to organize factory’ workers engaged in similar pursuits. Thus, unionists stigmatized such work ar rangements as inhumane and oppressive.
Though there are many other aspects of it, the above examples suggest the outline, at least, of the Procrustean bed made by unionism. It is a bed far short of the size that could accommodate the potential work force of the country.
Those workers who do not fit within its confines are lopped off. For one thing, most workers who cannot fit into factory-like requirements as to hours of work are largely eliminated from consideration for employment. Many who have small children to attend to and household tasks to perform would undoubtedly like part-time employment in the home. An employer who sometimes had large numbers of letters to be individually addressed told me that the first time he advertised for such help applicants tied up his office telephones for days. The next time he had occasion to advertise, he gave only a box number, but he still received hundreds of written applications from people wishing to do work in the home.
Governments have assisted in numerous ways in lopping off potential willing workers. Compulsory school attendance and child labor laws largely eliminate children from most employment. Prolonged schooling much beyond the ages of 16 to 18 has kept many young people off the labor market. States subsidize technical and college education on a vast scale. The community and junior colleges founded in unprecedented numbers in the 1950s and 1960s were the most dramatic instances of such an effort. The G.I. Bill of Rights was the largest of the Federal efforts along this line, but it has in more recent times been supplemented by both Federal and state scholarship and loan programs.
Social Security and other retirement programs enable many at the other end of the age scale to stay off the labor market. Aid to dependent children and other welfare programs provide support for many mothers and older children without their holding jobs. Social Security provides such support, too, in cases where a covered mate has been disabled or died. Unemployment compensation relieves some of the pressure from union- and government-induced unemployment. Indeed, ingenious workers can cut their work time by perhaps as much as one-half or more by working from time to time, getting laid off or having the job discontinued, and drawing un employment compensation. Some do, but in the nature of the programs there is no way to determine how much of it is deliberate.
My concern is not with the motives which led legislators to enact these and other such programs. The effects are the same whatever the motives, and the effects are the reduction of the available labor supply. And there is bountiful evidence that both unions and governments act upon the premise that there is a surplus of labor.
Even all the efforts that are made at reducing the labor supply by lopping it off do not succeed in reducing the supply so that it will fit into the Procrustean bed for jobs. There are usually still millions looking for employment, or claim that they are. There is a major effort, then, to “stretch” the jobs to fit the available labor supply. Unions are famous, or infamous, for job stretching. It is sometimes called “featherbedding.” The way this is usually done is in work rules in union contracts. Here are some examples:
1. Limitations on supervisory personnel performing production work—for example, a Rubber Workers’s union provision: “Members of factory management shall not perform work which is nor-really assigned to direct workers . . . .”
2. Limitations on assigning work outside of an employee’s classification, as for example a Meat Cutters’ union provision that weighers and wrappers may not “platter” meat cuts in self- service counters.
3. Requirement for minimum number of employees on a job: for example, the Motion Picture operators demand for two men in projection booth.
4. Rules regulating the use of laborsaving methods and machinery . . . .
5. Rules protecting union’s jurisdiction: in New York theatres “Carpenters will build a platform, but the covering is prop man’s. A hat (worn) is costume but the same hat (unworn) is a prop. A table is moved by prop men, but the lamp on it is sacred to electricians . . . .”
Governments, too, have made efforts to “stretch” jobs, provide temporary jobs, and “stretch” the money supply to fit the Procrustean bed they have helped to create. The most general effort by the United States government to “stretch” jobs has been the mandated 8-hour day, 40-hour week. That effort has met with mixed success, however, as already noted, because overtime pay is often not a sufficient penalty to prevent longer hours, in view of the effective penalties involved in hiring other workers. Thus, government programs are often initiated with the idea of providing more jobs. The role of the unions in this is suggested in the following:
Unions seek to enlist the aid of government in providing more jobs in the industries in which their members are employed; or to protect job opportunities from being impaired in their industries . . . . [Among these] are the interests of the building trades unions, which have been among the most energetic supporters of government action for a major low-cost housing program; and the metal trades unions for a shipbuilding program.”
Inflation to Offset Impact of High Wages on Employment
The most prolonged effort at “stretching” has been in stretching the money supply—i.e., inflation, to offset the impact of high union wages on employment. It is doubtful that most unions could survive for long without progressive increases in the money supply. The continually higher monetary wages on which their success depends would produce such levels of unemployment (even if all other programs to reduce labor supply were in effect) that union workers would no longer be employed.
Further, Friedrich A. Hayek has pointed out that if government is committed to full employment, “current union policies must lead to continuous and progressive inflation . . . . If labor insists on a level of money wages too high to allow of full employment, the supply of money must be so increased as to raise prices to a level where the real value of the prevailing money wages is no longer greater than the productivity of the workers seeking employment. In practice, this necessarily means that each separate union . . . will never cease to insist on further increases in money wages and that the aggregate effort of the unions will thus bring about progressive inflation.” He has ably described the process of “stretching” that goes on.
Unionist policies flow from a misconception of reality. Labor is essentially scarce in reality. Unionists operate on the premise that there is a surplus of labor. The result is an apparent contradiction. Unionism produces both a labor shortage and unemployment (a labor surplus?). The reason for this is before us. Many potential employers cannot find workers to do the work they would hire done at a price they are willing to pay. (It is commonly observed today, “You can’t find workers to do this, that or the other.”) Wages are too high to pay for low-priority and low- productivity work. On the other hand, many people cannot find employment at the artificially established high wages.
Institutional Unemployment Plus a Shortage of Labor
The impact of unionism is as broad as the economy over which it holds sway, and even broader than that. It leads to institutional (or structural) unemployment and an endemic labor shortage. It requires massive government intervention to conceal the worst of its ravages. Unionism—labor unions plus accommodative government action—intervenes in the market at its most sensitive point. It makes rigid what needs to be most flexible to meet continually changing conditions. It causes unemployment, labor shortages, promotes inflation, higher prices, less productivity, and leads to fewer goods and services for everyone.
Who are labor unions organized against? They are organized against all who work, and all who benefit from work. They are organized against non-union workers most obviously, for these are often turned away from the gates, may not be able to find employment, and, if they do, may have to accept lower wages. In some respects, unions are organized against their own members, some of whom may be compelled to join or pay dues, the most industrious of whom may be held back to the level of the less productive, and some of whom lose their jobs when the union wage prices them out of the market. They are organized against employers. They are organized against consumers. Above all, they are organized against the weakest members of society, those who cannot fit into the structure of employment—the young, the old, the lame, the halt, and the blind. 
1. Marxists, however, are not necessarily being inconsistent in promoting unionism. They are making warfare on capitalism by obstructing production generally. Once in power in a country, they regularly subdue the labor unions.
11. Irving Bernstein, “The Growth of American Unions,” Readings in United States Economic and Business History, Ross M. Robertson and James L. Pate, eds. (Providence: Brown University Press, 1965), p. 363.
18. There is a factory near where I live in which many of the workers work 7 days one week and 6 days the next by regular alternation. In another factory, it is not unusual to work 12 or 16 hours (called “working a double”) some days. It would be an error either to suppose that workers resent the long hours or that the decision to work overtime is voluntary. Often enough, the willingness to do so is a condition of continued employment.
Unemployment and Unionism
In its tendency toward mass action and indifference to the interest and choice of the individual, trade unionism gives its leaders tyrannical authority over members and nonmembers alike.
Modern trade unionism, by the use of force, not only distorts the wage market, causing unemployment or inflation, but also interferes with the liberty to work, to trade, and to associate. Such action frequently makes it impossible to enter a wage contract voluntarily; the right to abstain from working becomes the obligation to take part in strikes against one’s will; and the right to associate becomes the obligation to join this or that union. Coercive force, instead of being reserved exclusively to the government for the protection of the life, liberty, and property of the citizens, is employed by these organized groups to attack many of those same fundamental individual rights.
Alberto Benegas Lynch, Jr