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Thursday, March 10, 2011

An Inquiry Concerning the Necessity of Unions

Before I say anything about unions I want to say a few things which are entirely unrelated to this discussion.

The first is that I cannot possibly care any more or any less about the discussion of unions. It is such a boring topic for me. It is like Israel. Israel is so unbelievably boring to me that I just cannot possibly care for it. If tomorrow I hear on the news how Israel got bombed out of existence I would probably not care. Israel is like ballet for me, something I have absolutely no interest it. So if I found out that all ballet dancers mysteriously died of AIDS tomorrow it would cause no interest for me. But I do not mean this in a bad way. That is, I am not saying I hate Israel. I just do not care about it. Nowhere do I hope for a destruction of Israel, for that would mean I have an interest in it, a negative interest, but an interest nonetheless. I genuinely have no interest in Israel. And maybe I am ignorant. That is possible, maybe Israel really is an important topic to know, but it was just so boring to me that I cannot make myself find any interest in reading about it. Same thing with unions. I genuinely have no interest in them. I am not anti-unions, I am not pro-unions, I have no interest. Boring topic that I never enjoy discussing. And again, maybe I am being really stupid right now, maybe I should care and take a position because it is so important. So I struggle to force myself to write this post because I a lot of people are talking about unions at this moment so I figured I should say what I think about them - since we all know I am the God the ideas, anything I say is 100% absolutely true forever until the end of time.

The second thing is that I am not anti-unions. If you are a proud hardcore Marxist I should be the least of your worries. Because I will not in any way try to stop you and the workers of the world uniting against the evil greedy Jewish capitalist factory owners. If the proletariat wants to unite, go ahead, have fun and enjoy yourself. I believe in the freedom of association and assemblies. Workers certainly have the right to form their own associations together. And I am fine with that if they think they can increase their wages that way. So if you want to live in your collectively operated world, go ahead, have a commune, also have the worst economy in the entire history of the world, but you get to at least enjoy yourselves. It is in this way that I am not your enemy as that I will not use any means to stop you. I will only tell you that you are being stupid in that you believe in central economic calculation. However, the ultimate decision is yours. What I am against are union legal monopolies that prevent labor through state intervention. That is a separate kind of a union. That is a legal monopoly enacted through the state. And that I would oppose as I oppose the state itself. Thus, it is not really my opposition to unions, as I am neutral about them, but rather my opposition of state monopolies.

There is only one thing that I want to say about unions. I think this is extremely important to keep in mind, and at the same time common sense. This is an idea that is very often overlooked in conversations about unions.

Let us assume that I propose a law to stop airplane accidents by suggesting to pass a law against gravity? People will find it really dumb of me to push for such a law. The law of gravity is a natural law of the universe, while any bill that is written is just a human made law that cannot override natural laws. Suppose for a moment that market forces in the economy are just as real natural laws as the law of gravity? I know most people do not believe in this, and if you are reading this you probably do not accept this, but for a moment accept it to see what that would imply. This would imply that any human made law, no matter how well intentioned, or thoughtful, or virtuous, can ever override the natural laws of the market. Such made laws will be doomed for failure.

Now I will resume my discussion about what I think is the single most important idea concerning the necessity of unions. Wages. Wages are determined not by the desire of the capitalist but by market forces. And so any laws trying to override such forces will be doomed to fail - hence showing that unions have very little importance. I will be more specific.

There are many factors that go into determining wages. The capitalist wants to give as little as possible for maximum work. The workers want to get as much as possible for the least amount of work (hence showing that workers are also "greedy", yes the capitalist is greedy, but so is the worker as well, of course, this obvious statement is hardly ever mentioned because workers are assumed to be immediately innocent). If there are more workers than usual then competition among them will drive wages down. If there are more capitalists than usual then competition among them will drive wages up. Some capitalists can be good people (yes, that can happen) and give their workers a "decent wage" (whatever that even means) out of his compassion - though this is more rare.

All of those are just some of the factors in determining the wages of labor. However, I purposely left out the most fundamental component to the wage of labor. And that is productivity. Productivity is the fundamental law that determines the wages of labor. Even if you are someone who is the biggest socialist in the entire world, and someone who rejects all the ideas of the market economy, and someone who thinks anyone in favor of free trade must be working for corporations, you must accept the proposition that productivity determines wages (as the main factor) for purely mathematical reasons. There is no economics at all in the statement that wages are determined by productivity. This is a purely mathematical statement.

Consider the following situation. Say that a worker produces 10 dollars per hour of value to the capitalist. The capitalist "exploits" the worker by "stealing" his labor when he earns profit on his labor. For illustrative purposes let us say that the capitalist earns 1 dollar for ever hour on the worker. This would mean that the wage of the worker would be 9 dollars per hour. Simple, right?

There is no way that the capitalist will pay a worker beyond 10 dollars an hour. As that would make the capitalist run on a loss. Why would a capitalist employ a person to loss money on him? The capitalist will not operate for any wage above 10 dollars. Even if the capitalist was the nicest, sweetest, and altruistic capitalist in the world, he will not pay a wage of anything above 10 dollars per hour. It is mathematically impossible. This is not even any kind of economics. As I said, this is nothing but common sense.

Therefore, it means that as the levels of productivity decreases then the wages of labor must decline. This is, as I said, essentially a law of nature. It would be foolish then to propose a law to change this wage decline from happening.

Now let us put all of this into perspective. Humans have for the most part lived terrible lives. They had to do a lot more work in the past than they had to do in the present. And so the workers of the past were much much poorer than today's workers. The reason why they were so poor was precisely because labor was unproductive. If you plow in a farm for 12 hours a day and only produce 10 dollars of wages in 1800 your wage must be lower that 10. However, if you want to earn 60 an hour it means you must be living in a world for which your labor is productive enough. Otherwise, it is purely impossible to be payed a higher wage.

This is precisely why I say that unions have little necessity to them. If workers are earning very little money then it does not mean that it is the fault of the capitalists, it simply means that their labor is incredibly unproductive. A law cannot change that from happening. If workers are earning only 2 dollars a day because they product 2.50 per hour then the maximum they can earn is only 2.50 per hour. Anything beyond that will make the capitalist shut down the work and these workers will lose jobs - which is even worse.

So why have wages raised? They raised because the productivity of workers has increased. This transitional period happened during the industrial revolution when the productivity of workers increased more than any time in history. As capital accumulation continued to take place the productivity of workers rose which in turned made it possible for them to have higher wages.

This is true not just for wages but for working hours and working conditions and benefits. Working conditions and benefits are added costs to the capitalist. If the security the capitalist must pay and the benefits he gives exceeds the productivity of working he will simply shut down the job as he is running on a loss. Working hours were determined by low wages. If people are earning extremely low wages (as it naturally happened with little productivity) then they must naturally work extremely long hours and days to maintain their own substinence.

When people talk about the important impact of unions they forget this simple point. They give an exaggerated story about how workers were exploited in low wages and terrible conditions, it was only the state and unions that stepped in to rescue them. The way way more accurate and honest story is that one hundred years ago capital was so weak that worker productivity was low - which must, for common sense reasons, lead to low wages, no benefits, bad working conditions, and long hours.

If you are someone who truly supports unions the only kind of argument you can say in favor of them is that they make the life of workers easier. But you cannot say how it was the unions that lead to increase in wages and conditions - because that simply rejects the fundamental connection between worker productivity and wages. You may argue that unions had a positive effect in increasing wages or conditions. That would be a completely separate argument from what I am saying. But you cannot say that it were unions alone that are accountable for the vast increases in wages. The increase for the repayment for workers was only possible as capital improved. Indeed, if it was really true that unions alone account for everything positive in work then it would mean that 200 years ago the unions were able to achieve this great standard of living through collective bargaining. Though that never happened, and for a simple reason, it was purely impossible for these changes to take place pre-industrial revolution as it is impossible to stop plane crashes by passing laws on gravity.


  1. Productivity sets a maximum sustainable wage, but the employer can pay much less if the workers are not unionized and there aren't a lot of job openings elsewhere that pay better.

    You seem to be assuming that employers are already paying close to the actual value, but that is quite often not the case.

  2. "but the employer can pay much less if the workers are not unionized and there aren't a lot of job openings elsewhere that pay better.":

    That is an obvious point - notice I said in the above post that the lower the productivity then the lower the wage. I did not say the inverse statement of that the higher the productivity then the higher th wage.

    The entire point of what I wrote was to shatter the myth of the unbelievable exaggerated virtue of unions. The legend and myth is that workers were terribly exploited by the greedy capitalists, it was only when they formed unions did they escape the terrible exploitation and were able to get a decent wage. My point was that the low wages, long hours, and low benefits were the result of production. Which in turn means the lack of capital.

    The increase in wages is determined by productivity levels. Therefore, the single most important factor in determining the wages of workers was, paradoxically, the evil capitalists accumulating even more capital - as counter-intuitive as it may seem. And not the formation of unions.

    You may have a separate arguement that unions allows workers to earn a higher return rate on their labor so that they can minimize their "exploitation" of the capitalist who is stealing their labor. But this unionization is only possible once capital is avaliable in the first place.

    I guess you agree with me. You do not really object to anything I am saying - you are just giving a separate argument in defense of unions. Which is not necessary in this post because I am not smashing unions, just saying why their greatness is hugely exaggerated by ignorant people who are unable to understand that production is key.

  3. My point was that the low wages, long hours, and low benefits were the result of production.

    But I don't agree with this. Unions were directly responsible for acquiring shorter hours, more benefits, and higher wages. It's true that increased production is also necessary, but increased production by itself is insufficient. If you look at the history of the (mostly) post-union era, production has increased much faster than wages have (except for rich people.)

    Look at this graph for example. Wages track productivity during the union era, but once Reagan got in, wages flatted off for the next three decades while productivity continued to rise at the same rate as always.

  4. "But I don't agree with this. Unions were directly responsible for acquiring shorter hours, more benefits, and higher wages.":

    So if production did not rise the unions would be able to get shorter hours and higher wages?

    "Look at this graph for example.":

    I do not know what that graph is. I do not know what is measures, and how it measures. I find the graph puzzling. In the beginning wages are higher than productivity. How is that even possible, it makes no sense at all. Unless, this graph is talking about public unions. Public unions are not bound to the same mathematical limitation on their productivity as they are not being paid for their value of their work. Public unions are capable of earning more wages than their actual productivity. So perhaps this is a graph of public unions, or a combination of both public union and union - but if those then it is a meaningless diagram.