The Necessity and Benefits of Unions in Capitalism

Responding to my Unions and Wage - Productivity Increases post, James Schipper notes:

You are quite right in arguing that no capitalist will increase wages as long as he can hire more workers at the going wage. That's why it's important to restrict the supply of labor within a country by immigration controls and by convincing workers to limit their offspring.

One 19th French economist was once asked what advice he had for the proletariat, and he answered: "Faites moins d'enfants" = make fewer babies. Not bad advice. As long as the proletarians keep increasing their numbers, their chances of prospering are so much smaller.

With open borders, the very large number of unskilled workers in the Third World are a huge reserve army of the unemployed.

And then some people still wonder why so many capitalists like immigration.

I quite agree with you that unions can be very beneficial for their members. However, it is very doubtful that unions can do much for the wage-earning class as a whole.

Suppose that the entire workforce of Peru became unionized, then workers in that country would still receive very low wages simply because average Peruvian productivity is very low. People can't consume more than they produce, unless they are subsidized from abroad.

A good case can even be made that the gains of unionized workers often comes at the expense of non-unionized workers. Suppose that in a country there are two sectors, A and B. Neither sector is unionized and in both sectors the hourly wage is 10 dollars. Now sector A becomes unionized and the union drives up the wages in that sector to 15 per hour.

As a result, sector A may employ fewer workers, and the laid-off workers then enter sector B, where they drive down wages to for instance 8 dollars.

What also may happen is that the products of sector A become more expensive, thereby reducing the purchasing power of workers in sector B, who also consume those products.

I'm certainly not a union basher, but there are limits to what unions can accomplish. If the economy is growing fast, then it becomes so much easier for unions to get wage increases. That's what happened in Western Europe after WWII.

In Canada, some of the strongest unions are now in the public sector, which makes them rather unpopular because the high wages of their members will translate into tax increases. Everybody understands that, if teachers get big wage increases, this will mean higher taxes for the general public.

I respond:

James, your comments about restricting the labor supply as a necessity for the working class are spot on. I personally never met a labor shortage I could not love. Labor surpluses cannot ever be good for any workers, but it's the capitalists' dream.

That's why they speak solemnly of such things as "the reserve army of surplus labor" - this entity, capitalist economics classes will ponderously intone, is necessary for the proper working of the capitalist system. Getting rid of this reserve army will be a disaster for the capitalist system.

I believe that we could easily have full employment in the US via public sector jobs at the minimum wage. I should be quite affordable, but the capitalist class would scream bloody murder at the tightening of the labor supply and the drying up of their "reserve army of surplus labor".

In general, those countries that are the most unionized have the highest wages and best working conditions for their workers, along with the best social democratic societies for everyone as a whole. I point out that the Swedish workforce is about 90% unionized.

Also, the US labor force was 43% unionized during the 1950's. During this period, all economic classes in the US were getting a fairly equivalent share of the economic pie. That means that if the top 20% gained an ~18% rise in income, the bottom 20% also gained about a ~18% rise in income.

It does not mean that the top 20% and the bottom 20% had anywhere near equivalent incomes. It only means that as the economic pie grew, each income sector was accorded a democratic slice of the pie.

Around 1973, this started to collapse, and things have been falling apart ever since. I pointed out in an earlier post that the bottom 80% of US workers have actually suffered a wage decline in the past 28 years, a time of good economic growth and great increases in productivity.

This can be attributed, more than anything else, to declines in the % of the US workforce that is unionized. We can practically match these two lines on a chart.

It is true that Latin America is not a paradise for workers. Nevertheless, many workers are in unions, and the unions are often very, very militant. They call strikes all the time, and the strikes are often violent street actions that bring out the police and even army.

It's clear that Latin American workers benefit from their unions, but I'm not sure how unionized they are. Clearly they would be much worse off if they were not unionized.

Your comments about unions lowering wages are somewhat theoretical and that is not necessarily the way things work in the real world.

In the real world, when Sector A of an industry goes union, non-union companies, while still fighting off the unions ferociously, will often up wages and benefits to near the levels of the unionized sector just to compete for workers. In this way, unionizing even a part of an industry can benefit the whole industry, even the non-union sectors.

Any sensible union will work with management to get a fair share for the workers while still enabling the business to remain profitable and stay in business. If the company goes out of business, no one will have a job and the union will be superfluous, with no members.

Sensible unions have demanded that management open their books and in some cases, have even taken pay and benefit cuts in order to keep their jobs. A pay-benefit cut with a job is still better than no job and no benefits at all.

Without unions, the management - union power ratio is 100-0. Management has all the power and workers have zero. With the union, ideally it is now 50-50. Each side has the power that they ought to have. If for no other reason, unions are good only in that they guarantee the proper and moral democratic rights of workers in an enterprise.

With a growing economy, a raise in teacher pay does not necessarily result in a tax increase as long as tax revenues are increasing in tandem with economic growth.

In comments to the same post, huy, a bright commenter from the UK, notes:

To increase productivity, workers need decent pay in order to work at their most productive, and sometimes unions are needed for this.

So capitalism actually needs unions to an extent, as sometimes a rich entrepreneur may forget that in order for his workers to work best, they need decent pay.

I respond:

Unions are *always* needed in capitalism. Otherwise the workers pretty much get zero, or less than zero. The capitalists automatically have all the power. Unions are just the way for workers to have power too. It equalizes the score.

Productivity increases are certainly possible during a period of declining wages and these increases are also caused by technology, not only workers themselves. So it is not really necessary for capitalists to pay workers more to get productivity increases. There are many other ways - speedup, technology, overwork.

Without a union, a capitalist is free to brutalize workers to get more per hour out of them. If they complain, he can fire them and there will be someone ready to take their place. In the past 28 years, wages for 80% of the US workforce declined while productivity had major increases. This shows you that capitalists need not pay workers more to get more productivity out of them.

The rich entrepreneur will not "sometimes" forget this, he will always forget this. Wages are a cost to the capitalist, and all costs are to be kept to a minimum using whatever means are possible. If you get an MBA these days at a business school, they will hammer this into your head until you have a headache.

Capitalism only works for workers, in general, to the extent that they are organized in unions. In the US, office workers have always resented unionization, due to class sensibilities. They tend to come from a bourgeois background, and they feel superior on cultural grounds to the working classes.

It's the old white collar versus blue collar thing. Office workers associate unions with the blue collar workers they feel superior to. Joining a union would be like putting on overalls and a cap and bringing a lunch pail to work. It's humiliating, and this is why they do not join unions.

Teachers and nurses are an exception to that trend. These are some of the last of the powerful unions in the US, and this is why there is so much rage directed against them in the corporate media and rightwing culture that is now equivalent to American culture.

Note: Readers should carefully read the Commenting Rules before commenting to avoid having their comments edited or deleted and to avoid being banned from the site.