Unions

These labor orgs clearly help someone, but do they have unseen costs?

*This post was written in collaboration with

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The past few months have seen protracted negotiations and protests over the unionization of Amazon, Uber, Google, and many other barons of 21st century industry. Over ten percent of the American workforce is unionized, and although the nation is at a historical low point in the popularity of unions, they play an important part in our past and modern day economy. Because of their economic and cultural significance in our society, there is a high degree of political polarization present in discussions about unions that leads to misguided and inconsistent policy conclusions. 

In this piece, we explore some basic concepts that are necessary for understanding unions. Before we can say what ought or ought not to be done in terms of union policy, we must answer the following questions:

How do unions work and what are their effects? 

Who do they help and who do they hurt?

How did unions operate in the past and have they changed?

The unionizing Amazon workers will benefit greatly from membership. The average union worker earns about 20% more than nonunion workers, even after adjusting for factors such as years of work experience and education level. Importantly, these benefits come without requiring an increase in working hours or productivity, resulting in an unqualified improvement to union members’ quality of life. This is the reason unions are popular. Workers and political movements that sympathize with them believe that labor deserves a bigger share of the revenue from businesses, and unions give it to them. The benefits that unions afford to their members cannot be ignored.

So that’s one question answered. Unions help their members by getting them more pay for the same work. That’s really good for those workers, but businesses never do anything for free. If unions don’t offer their employer more productivity, then how do they negotiate for higher wages? The answer lies in the process of competition: To understand this, let’s take the mining business as an example. 

Each additional worker that a business hires helps them produce more goods. Adding an extra miner lets the mine produce $20 of extra ore every hour. If a greedy business tried to cut the wages of their workers to $15, then a competing mine could profitably expand their operation by poaching these workers at a wage >$15, and selling their extra ore for $20. Similarly, if a unionized group of workers received $25 per hour, workers from other mines could profit by replacing the unionized workers at a wage <$25. So as long as businesses can hire more workers and workers can switch employers, any wage not equal to the value of what workers produce will eventually be competed away. 

In other words, if a business has a choice between union and non-union workers, they will always choose the non-union workers, because unionized workers demand higher wages without increasing the value of what they produce. In some cases, most of the workers in a particular labor pool are unionized, leaving the profit maximizing employers no choice but to hire union workers at higher wages. This is not sustainable, however. Inflated wages attract workers from other places and industries into the labor pool.  These workers switch jobs or move to the union dominated area which gives the businesses a choice between union and non-union labor and pushes wages closer to the value of the extra goods that each extra worker produces. 

So in order to keep wages above productivity, unions must avoid this competition. Given that firms are profit maximizing, and that unions need to increase wages without increasing productivity in order to be of any benefit to their members, the money for those increased wages has to come from stopping competitors from entering the labor market. This means that in order to continue getting good deals for their members, unions must resort to excluding workers who are willing to work for less than the union set wages. Effective unions ultimately derive their power from exclusion of others, and unions that don’t, can’t keep wages high enough for members to benefit.

Unions that are unable to prevent non-union workers from entering the labor market can’t keep wages high. So how do they prevent this competition? First, unions have to offer existing workers some benefits. Higher wages, better insurance, shorter hours, etc. Unions become popular because they improve the lives of existing Longshoremen, TSA agents, or Amazon workers. But these benefits can only last if other workers are prevented from negotiating their own pay. 

This is where the history of union tactics gets dark. Take, for example, UMW: the United Mine Workers union. After gathering support from a large number of miners in Illinois, they were able to recruit a majority of the mining labor force by convincing workers that they could extract benefits from the mine owners based on the threat of a huge strike and replacing a large number of mine workers. Once the agreement between the UMW and the mine owners expired, the UMW went on strike to build up leverage for negotiating. To protect their monopoly power, they violently prevented non-union workers, who were predominantly African American, from accepting the jobs that they were striking from. 

“The union had the full support of Illinois Governor John R. Tanner, who swore that he would use the state militia to “shoot to pieces with Gatling guns” any train bringing in black workers. The militia captain in Pana, Illinois, pledged his support. “If any Negroes are brought into Pana while I am in charge, and they refuse to retreat when ordered to do so, I will order my men to fire,” he pledged. “If I lose every man under my command no Negroes shall land in Pana.” Several black miners were murdered in the ensuing weeks. The AFL passed a resolution praising Governor Tanner and “Remember Pana” became a UMW slogan.”

Unions have to exclude some workers to benefit their unionized group. It is much easier to organize this exclusion along easily identifiable and pre-existing cultural, racial, and economic divides; perpetuating racism and prejudice in our society. The historical record is full of unions using this strategy. 

“South Africa’s Mines and Works (Colour Bar) Act of 1911 was passed to appease white union members’ demand to abate black competition. When the owners continued to employ black miners, the “Rand Rebellion” of 1922 ensued, “one of the bloodiest labor disputes ever to occur anywhere in the world,” followed by more restrictive legislation to reserve jobs for white unionists in 1924 (Sowell 1990: 27).”

Samuel Gompers, the most famous leader of the American Federation of Labor said “The Caucasians are not going to let their standard of living be destroyed by Negroes, Chinamen, Japs, or any other” Unions are the mechanism by which the standard of living of Caucasians (unionized) is threatened by ‘negroes, chinamen, japs, or any other’ (non-unionized).

The exclusionary tactics of unions are not limited to black workers either: anti-Chinese union agitation in California culminated in the Exclusion Law of 1882 which effectively banned immigration from Asia. Additionally, Unions promoted maximum-hour laws for women, which had the effect of increasing unemployment and lowering the income of immigrant women workers (Landes 1980).”

“The worst recorded incident of labor-related racial violence occurred in St. Louis in 1917. When the Aluminum Ore Company brought in African American workers to break a strike, 3,000 white union members marched in protest. The marchers morphed into a mob, attacking random black residents on the street. The following day, shots were exchanged between whites and black in the black part of town; two plainclothes police officers were killed. When the news got out, roving white mobs rampaged through black East St. Louis, burning homes and businesses, and assaulting men, women and children. Between 100 and 200 black working people died and 6,000 were left homeless. It foreshadowed things to come.” (Labor Commission on Racial and Economic Justice)

The dark history of unions doesn’t end in the past. It changes shape and form to fit the time. Famously, Jimmy Hoffa used his Mob connections to corrupt city officials to help the Teamsters land contracts, in exchange for access to Union pension funds. In a 2017 operation, the FBI arrested 19 people on charges related to paying off the bosses of New York construction unions as well as colluding with unions in price fixing. Modern unions still must exclude non-union entrants into labor markets if they want to keep wages above productivity. Their methods for achieving this are less directly violent, but the indirectness of their exclusion makes it more insidious. Rather than openly excluding marginalized groups, modern unions hide the costs of their exclusion across borders. 

For example, rather than compete fairly against workers in Mexico or Japan, American workers fund the campaigns of protectionist candidates that allow unions to offshore their exclusionary tactics. In 2004, the National Institute for Labor Relations Research estimated that the total union political expenditure reached 925 million dollars, a number that grows every year. In 2020, the NILRR showed that more than 1.4 billion of the total 14 billion in political spending was sourced from labor groups. Unions oppose guest worker programs, and while some support “immigration reform” as part of the democratic party line, this really means amnesty for existing illegal immigrants in a bid to gain their membership, not an increase in the number of immigrants accepted into the country.

Public unions like the Fraternal Order of Police participate heavily in regulatory capture, with employees having huge incentives to help lobby their employer, who, because they are the government, lack a proper “profit maximizing” drive. This costs taxpayers incalculable sums of money every year, and leads to horrible outcomes for the general public. For example, the Department of Justice has been continually foiled by police unions in efforts to reform and improve the American justice system. Unions serve only to protect their members interests, and this results in bad police officers on our streets, ballooning budgets, and the degradation of justice. 

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Unions work to secure benefits such as higher wages or better working conditions for their members through collective bargaining and the threat of labor scarcity.

Unions help the workers who are in them, but because they necessarily must control the pool of labor in order to negotiate for improvements, they resort to excluding outside workers from their labor markets by constructing tight borders around them.

The past history of unions is plagued by a legacy of racism and exclusion. In the past, and when labor was more geographically dependent, this resulted in violence and discriminatory laws at home. Today, unions operate by much the same means, but target workers and labor outside of the country or ingroup by lobbying for tighter immigration control, more protectionist trade policy, and heavier occupational licensure. 

When it comes to government and the market, we want one that pursues the interests of freedom and well-being, for everyone. Not just citizens, not just special corporate interests, and not just union members. The borders not only of our nation, but of our workplaces, and of our communities should be as open and free as possible, so that together, we might all grow richer. The impact of unions is more hidden today than it has been in the past, but the consequences are the same. People all over the world and at home unjustly suffer from a system of exclusion and corruption that only benefits a select group of individuals. 

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