Workers Are Better Off With Fewer Unions
George Mason University Economics Professor Russell Roberts challenges the conventional wisdom that workers are better off when there are more labor unions:
When more than 90% of the private-sector labor force isn’t unionized, why do 97% of us earn above the minimum wage? If our bargaining power is so pitiful, why don’t greedy employers exploit us and drive wages down to the legal minimum?
The simple answer is that bargaining power comes from having alternatives. Even in the absence of unions, employers have to treat workers well to attract and keep them. In a workplace as dynamic as that of the United States, where millions of jobs are destroyed and created every quarter, a company’s ability to exploit workers is greatly limited by how easy it is to find another job.
Ultimately, it is competition among employers that protects us from exploitation. Even those who would seem to be the most vulnerable â€” immigrants who struggle to speak English, for example â€” can earn much more than the minimum wage simply because of competition for their skills. Cleaning people routinely earn $20 an hour, more than most cities’ so-called living wage.
Look at workers’ share of the nation’s income. In 1950, employee compensation was 53% of gross domestic income. In 2005, that number was 57%. Somehow, as unions’ strength dwindled over the decades, employees’ share actually grew. And it’s a share of a dramatically larger pie, the result of the incredible economic boom of the last half a century.
The reason that happened, as Roberts points out, is that the real reason wages increase is because worker productivity increases, and productivity is increased by a better-educated workforce and technology that saves workers time in doing their jobs. Handing over more authority to institutions that are a relic of the Industrial Age won’t accomplish anything.
H/T: Club For Growth