Unions Vs. Competition

I’m reading an intriguing study on the decline in the labor movement over the last 50 years. The author says it is not because of the change from an industrial economy to a services economy. Nor is it the result of a better educated workforce, management opposition or government regulations. Rather, the decline is the result of competition.

The union heyday, between 1945 and 1955, was the result of “corporatist” policies. This title describes the combination of policies in three areas.

  • Above-market price controls (limiting competition between companies)
  • Pro-labor policies (limiting wage competition by mandating above market wages)
  • Suspension of anti-trust laws (necessary to legalize the above two policies)

The original corporatist policy passed by Congress was ruled unconstitutional and, a few years later, the National Labor Relations Act (NLRA) was passed to replace it.

Free Enterprise

But, the author argues, while generally pro-labor, the NLRA was actually the beginning of the decline of Big Labor. Why? Because the NLRA only included the labor prong of the original corporatist policies. It abandoned the price controls and limitations on anti-trust laws.The resulting competition into the consumer market sparked the beginning of the end of Big Labor’s influence. Corporations now had to compete for profit and all expenses were scrutinized for potential savings, including labor costs.

Now don’t buy the rhetoric against profit (Oil companies anybody?). A free market will automatically adjust wages and prices (a global market complicates the equation, but it remains a truism). Why? Because:

  • On one hand, companies must keep wages low enough to attract customers.
  • On the other hand, companies must pay employees enough to maintain a competent and stable workforce.

Although it may take time, these two forces will balance out (Take the effect that the increase in gas prices and the government mandates for ethanol has had on the food market. Wages are increasing accordingly as the cost of cost of living increases and workers demand more.)

The conclusion: so long as the purpose of unions is to mandate wages above the market rate, unions will continue to decline because:

  • Employers will become less efficient and
  • Increased wages will decrease the number of employees an employer can hire with an available pool of money, reducing the number of potential union members.

3 thoughts on “Unions Vs. Competition”

  1. Great post. The left doesn’t like the market because it can’t be directly controlled. They don’t like the choices of countless people dictating things, they would prefer one person (or better yet a collective of “progressives”) directing each of us how we should act.

  2. Funny how closely that statement coincides with the vision and reality of communism. Communisms vision was of the proletariat working selflessly together to achieve mutual satisfaction, the actual application usually involves a very strong central government controlling/dictating all meaningful industry.

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