WASHINGTON, Sept. 7, 2015 — Our annual Labor Day holiday is a time to reflect on the rights of workers. These rights would not have been possible without the American labor movement.
Framed by some as socialists and communists during the Cold War, members of the labor movement overcame a great deal of opposition. But the belief that unions are socialist and communist organizations persists.
But is it true?
For those who believe unions only add costs to doing business, unions are a hindrance to free markets. This perspective assumes that employers will serve employee interests by offering employees viable wages and reasonable working conditions instead of suppressing wages.
For executives and people with uncommon and vital skills or wealth, the power of employers to set terms isn’t binding. They have the leverage to negotiate salaries and sometimes benefits as well as individuals. But unskilled workers have no such leverage. In many cases, they can easily be replaced. Collective bargaining, however, gives them leverage over employers who might otherwise treat them as disposable and replaceable.
Markets work most efficiently when fundamental forces like supply and demand can interact to properly price goods and services. Example: if drivers could simply dictate what they want to pay for a gallon of gasoline, the price of gasoline would fall too low for drillers and refiners to produce and sell it at a profit, leading to a shortage of fuel for all.
The same is true of employers, i.e., the consumers of labor. When the job market is poor, workers competing against each other push wages dramatically downward, a situation that favors employers and disfavors current or prospective employees.
An absence of collective bargaining agreements also helps drive overall payroll costs down. Easily replaceable workers ensure lower pay, lower standards of living, smaller tax bases and less consumer spending over time. In other words, absent bargaining power, the ultimate result, if widespread enough, is a third-world economy where workers have almost no leverage in the job market.
When workers can unite to fight for their interests, however, they can improve their prospects and the outlook for the economy.
Ironically, American business owners constantly speak of free enterprise in glowing terms. Yet at the same time, they then use their influence over government as an instrument to undermine the collective bargaining rights of U.S. workers. By extension, many Americans believe that open and active trading on stock exchanges “democratizes” the pricing of commodities and the ownership of corporations. Yet at the same time, these same Americans justify actions taken against collective bargaining because they see unions as only increasing the cost of goods.
Whereas unions help sustain middle-class incomes and standards of living for a broad range of employees, wealthy business elites looking to earn substantial capital gains when stock prices peak — often due to high-frequency trading algorithms (HFTs) or even collaborative speculation — frequently exploit stock exchanges and trading mechanisms in potentially illegal ways in order to unfairly push up prices and benefit their own accounts, often at the expense of smaller investors and worker 401(k) plans and IRAs..
Due to political pressure applied by big business, the federal government has implemented policies such as its so-called “free trade deals” — treaties and agreements that have often hurt the U.S. economy and workers in particular. In so doing, American public officials have intentionally undermined a key segment of free enterprise system despite their professed devotion to it. Such attacks on collective bargaining power are clear examples of government overreach as well as collusion with moneyed interests.
An unexpected downside to the now-waning union influence over American labor and trade policy could also be a lack of competitiveness in this country, the results of which are lower workplace productivity and poor employee discipline. This is a scenario more effectively addressed by healthier employer-employee relations in a strong economy.
Historically, relationships between employers and unions have often been hostile. This is due in part to the fact that the free enterprise solution to unhealthy, abusive business practices was born in an era of violent corporate reprisals against America’s fledgling unions.
The ultimate solution to these issues today is not a regression to the violent era during which the American labor movement was born; nor is it to mount a new effort to eliminate collective bargaining entirely in this century. Rather, the most effective and potentially long-lasting solution is to improve communications between managers and union workers for the betterment of business as a whole.
Unions and other collective bargaining organizations have their faults, faults that must mainly be addressed internally. On the other hand, unions and collective bargaining are also a key part of any healthy economy. Consequently, unions are, in effect, genuinely capitalist institutions that help regulate the labor markets.