Mr. Moderate

The economic Law of Supply & Demand applies with equal force to the market for workers (labor). The main difference is that, in this case, businesses are doing the purchasing while the people who wish to be hired are doing the selling. Accordingly, a higher availability of qualified workers will tend to drive the price (wages) down, while a lower availability will tend to drive the price (wages) up.

Naturally, since wages are a cost of doing business, any business will seek to minimize wages paid. This contrasts with the natural desire of each individual to be compensated as highly as possible for the work they perform. As businesses are generally larger and more-powerful entities than are individual people, wages will tend to remain fairly low, if everything else is equal. But there are two possible sources that might drive wages higher. Either the government or a union may impact wages and cause them to be higher for some group(s) of workers.

The most obvious direct action by a government on the setting of wages is when a government enacts a minimum wage law or enacts some other sort of wage controls. Such a thing is clearly an artificial distortion of the market, and in my view, it should only be done when morally justified. For more on this topic, please read item 07 - Wage Controls.

A union is, to some degree or another, a monopoly on the sale of labor in return for wages. The power of unions to control wages and other benefits for workers may be limited by so-called “right to work” laws. In the absence of such laws, it is possible for a union to negotiate a “union shop” agreement with an employer which gives the union an effective monopoly on providing that type of labor to that particular employer. Depending upon the type of labor and the size of the employer, the value of the monopoly can be large or small.

The formation of unions was a good remedy for greedy employers of the past, particularly when the employers themselves had a monopoly or near-monopoly on the goods and/or services that the business was selling. However, as unions are labor monopolies, the bad characteristics of monopolies can easily appear within union activities.

However, when the business in question has the option of moving its production facilities to an area outside of the reach of the union, then aggressive demands by union workers will have the obvious effect of eventually terminating the employment by closing the production facilities within the reach of the unions. It is only natural that any “buyer” (employer) will seek to avoid the payment of any “monopoly pricing penalty” if that penalty grows too large to bear. Every economic choice which might be made comes with a cost-benefit analysis that can be performed. At some point, the greed of an overzealous union will cause the business to move or fail and, at that point, all of the workers for that employer will be out of a job.

My view is that the government should neither encourage nor discourage union membership, but should allow the market to determine the level of union membership desired. In the best possible world, the government would seek to educate all workers impartially about the advantages and disadvantages of union membership. Workers would then tend to avoid costly union membership so long as the employers treated the workers fairly. But if the employers got too greedy, then the workers would eventually conclude that it would be in their benefit to form or join a union and gain back some relative economic power.

Finally, I believe it is wrong to allow or encourage unions to exercise monopoly power over workers. If it would be unlawful for the “big three” automakers to combine into a monopoly business, why then is it permitted that the United Auto Workers (UAW) can exercise monopoly power over all of the workers at all of the “big three” automakers? In my view, the UAW should be broken up into a different union for each major manufacturer and the expiration dates of the labor contracts should be staggared so that neither business nor labor gets an unfair advantage over each other, and so that a strike against one manufacturer cannot be effectively a strike against all (no “industry lockdown” ability). At the end of the day, a monopoly on the selling of labor is just as bad as any monopoly on the selling of goods or services.