WEBVTT NOTE Labor and Unions 1 00:00:00.000 --> 00:00:15.000 Getting more specifically to labor, back in the 1890s, John Bates Clark, one of the great economists in the history of American thought, wrote a book called The Distribution of Wealth, which has been derided, which was very popular then, has been derided ever since. 2 00:00:15.000 --> 00:00:21.000 What he said basically was, this is a really pretty good thing, because this means everybody is getting his just desserts on the market. 3 00:00:21.000 --> 00:00:28.000 Every laborer is getting his marginal productivity, every landowner is getting his marginal productivity of the land, every capital goods owner, etc. 4 00:00:28.000 --> 00:00:38.000 The particularities applied to labor when you're dealing with personal income have hung heavy on many economists, like squirming around trying to deny this one way or the other. 5 00:00:38.000 --> 00:00:44.000 They said, well, it's not a value-free statement. Well, it's true, it's not a value-free statement. It still seems to be a pretty good statement. 6 00:00:44.000 --> 00:00:50.000 I see nothing wrong with the concept that the person is getting his margin of productivity, and this sounds pretty good. 7 00:00:50.000 --> 00:00:55.000 Ethically, it integrates into what we know of a good, rational individual with an ethical system. 8 00:00:55.000 --> 00:01:04.000 Clark didn't quite put it that way, but he wasn't really stressing the ethics, he would stand back and say, hey, this is really terrific, it's really pretty good, the way things work out, it's really just. 9 00:01:04.000 --> 00:01:12.000 This is very galling to many critics of the market, because they say everybody's getting his just desserts, everybody's getting his marginal product. 10 00:01:12.000 --> 00:01:19.000 This was very galling to egalitarians, for one thing, because obviously it's not exactly an equal distribution of income. 11 00:01:19.000 --> 00:01:37.000 Also, there's a certain aesthetic critique. Why should Sophia Loren, or whoever, get a million dollars a picture, earn a few million dollars a year, while I, Joe Blow, the critic, obviously genius intelligence, especially compared to Sophia Loren, why am I only scraping along a six grand a year? 12 00:01:37.000 --> 00:01:38.000 of the Year. 13 00:01:38.000 --> 00:01:39.000 It's obviously unjust. 14 00:01:39.000 --> 00:01:43.320 This is sort of the inner core, I would say, of the critical argument. 15 00:01:43.320 --> 00:01:47.320 The attackers, of course, on capitalism, which is somehow corrupting the system, and so that 16 00:01:47.320 --> 00:01:51.480 people like Sophia Loren are getting several million a year, whereas the good guys like 17 00:01:51.480 --> 00:01:54.040 Joe Blow are only getting six thousand. 18 00:01:54.040 --> 00:01:57.840 If we're going to make any criticism of this at all, the answer is we have to say that 19 00:01:57.840 --> 00:02:01.440 Sophia Loren is earning her marginal revenue product, and Joe Blow is earning his marginal 20 00:02:01.440 --> 00:02:02.440 revenue product. 21 00:02:02.440 --> 00:02:13.440 And if you don't like that, you either try to improve Joe Blow's marginal product in some way, or else you can make an aesthetic critique, or even an ethical critique if you want to, of a consumer's values. 22 00:02:13.440 --> 00:02:24.440 You can say the consumers really are dumbclocks and they don't really know what's good for them, because they shouldn't be watching these movies, they should be paying all this money to Joe Blow because he's a great philosopher or something like that. 23 00:02:24.440 --> 00:02:29.440 Well, you can go out there and try to argue with the consumers on that. I mean, I wish him luck, I suppose. 24 00:02:29.440 --> 00:02:32.440 I don't think he's going to get very far for pretty obvious reasons. 25 00:02:32.440 --> 00:02:35.440 That, you see, is an ethical critique which we're not going to deal with here. 26 00:02:35.440 --> 00:02:39.440 We're only dealing with ethics when it overlaps economics here. 27 00:02:39.440 --> 00:02:44.440 So, if Joe Blow were content to simply go out there and harangue the consumers, 28 00:02:44.440 --> 00:02:48.440 they shouldn't go to so many movies or whatever, and they should give him a lot of money, 29 00:02:48.440 --> 00:02:51.440 which is what the essence of the critical argument is, 30 00:02:51.440 --> 00:02:57.440 This, of course, is not the way it's usually put. 31 00:02:57.440 --> 00:03:02.440 In other charges, a very common charge now, is the market discriminates against... 32 00:03:02.440 --> 00:03:06.440 This is really equivalent to the Joe Blow thing, except instead of talking about Joe Blow, 33 00:03:06.440 --> 00:03:10.440 you're talking about groups of people, different groups of people discriminated against on the market. 34 00:03:10.440 --> 00:03:17.440 Almost always by employers, the argument is always put that evil capitalist employers are discriminating against various groups of employees 35 00:03:17.440 --> 00:03:31.440 The group that I always like to think of, I like to use as my model here, so as to eliminate emotional connotations, are redheads. 36 00:03:31.440 --> 00:03:35.440 Redheads, of course, might have a different reaction than this. 37 00:03:35.440 --> 00:03:41.080 If I pick on Redhead's model group here and say that the charges of the anti-market critics 38 00:03:41.080 --> 00:03:44.600 that Redheads are disseminated against because employers don't like Redheads and therefore 39 00:03:44.600 --> 00:03:48.440 their income is lower and they don't get promoted and that sort of stuff. 40 00:03:48.440 --> 00:03:53.720 The answer to that, everybody's getting his marginal product and not only that, from that 41 00:03:53.720 --> 00:03:56.680 you get a couple of things deriving from this. 42 00:03:56.680 --> 00:04:01.420 One is, if the employer deliberately pays less than the marginal product, he's sacrificing 43 00:04:01.420 --> 00:04:07.100 In order to indulge his anti-redhead whims, he's deliberately hiring fewer redheads than 44 00:04:07.100 --> 00:04:12.800 he would because he doesn't like them, but he's paying for it in the sense that he's 45 00:04:12.800 --> 00:04:13.800 stepping lower profits. 46 00:04:13.800 --> 00:04:16.980 Now I'm not saying this is impossible, it certainly could happen, but the point is that 47 00:04:16.980 --> 00:04:21.820 on the free market you have, in contrast to every other sphere of life, you pay for your 48 00:04:21.820 --> 00:04:23.300 own group discrimination. 49 00:04:23.300 --> 00:04:27.380 In other words, if you want to discriminate, if your consumer wants to discriminate, you 50 00:04:27.380 --> 00:04:30.220 can peg along for a long time without suffering at all. 51 00:04:30.220 --> 00:05:00.220 in the government sphere. You don't have to suffer. But if you're an employer and you decide to discriminate, in other words, by discrimination, I can be very precise. It's not just a fuzzy willy had a term anymore. By discrimination, we mean a systematic of wages lower than the marginal revenue product. If you're going to do that, you're going to lose profits and you're paying for it. Now usually, the least thing we can say is that if you're going to discriminate and you have to pay for it, this will induce less discrimination than you would have if you don't have to pay for it. So in other words, the free market 52 00:05:00.220 --> 00:05:04.780 will induce less discrimination given people's values, which are really not a market problem, 53 00:05:04.780 --> 00:05:09.980 they're really a value question, given people's values, there'll be less embodiment, less 54 00:05:09.980 --> 00:05:12.940 discrimination than there would be in any other system. 55 00:05:12.940 --> 00:05:15.620 Because if you're, for example, working for the government, let's say you're a government, 56 00:05:15.620 --> 00:05:20.940 let's say you have socialism, and the government hires everybody, and in that case, you see, 57 00:05:20.940 --> 00:05:24.620 the government bureaucrats can indulge their anti-redhead discrimination fairly well. 58 00:05:24.620 --> 00:05:25.620 There's nothing to stop them. 59 00:05:25.620 --> 00:05:29.940 I mean, the taxpayer picks up the tab, or society as a whole picks up the tab, and so 60 00:05:29.940 --> 00:05:35.660 So they can go and assign redheads to Siberia, or whatever the moral equivalent of Siberia 61 00:05:35.660 --> 00:05:40.820 in this country, assign them to lower Slobovia, and nobody pays for it, except the bureaucrats 62 00:05:40.820 --> 00:05:42.380 don't pay for it, is the point. 63 00:05:42.380 --> 00:05:46.260 Whereas if an employer makes an equivalent decision, refuses to hire redheads, even if 64 00:05:46.260 --> 00:05:50.540 redheads' productivity is staring them in the face, then employers are suffering from 65 00:05:50.540 --> 00:05:51.540 it. 66 00:05:51.540 --> 00:05:54.500 So at least we can say that, but there's something even more we can say about it. 67 00:05:54.500 --> 00:05:59.020 And what we can say is, if this is going on systematically, if redheads are being paid 68 00:06:29.020 --> 00:06:30.020 System. 69 00:06:30.020 --> 00:06:33.600 You can't have, I think we can safely say, you can't have systematic discrimination 70 00:06:33.600 --> 00:06:38.600 going on for any length of time because these discriminated against groups will be hired 71 00:06:38.600 --> 00:06:42.320 by other entrepreneurs and will leap into the system and see this gloom opportunity 72 00:06:42.320 --> 00:06:46.320 lying around for laborers or discontent who are getting less than their product and therefore 73 00:06:46.320 --> 00:06:50.520 can be bid away from their current posts and use them to out-compete the, and still make 74 00:06:50.520 --> 00:06:54.760 a profit, and out-compete the existing employers. 75 00:06:54.760 --> 00:07:00.320 So the fact that this hasn't been done, presumably, in the cases that we hear about, of groups 76 00:07:00.320 --> 00:07:03.840 of people being oppressed and discriminated against, the fact that no entrepreneur has 77 00:07:03.840 --> 00:07:08.480 done this seems to indicate that this kind of systematic discrimination is not taking 78 00:07:08.480 --> 00:07:09.480 place. 79 00:07:09.480 --> 00:07:11.280 So this pushes the thing back. 80 00:07:11.280 --> 00:07:15.300 Let's say we look around at groups of people, for example, who might be getting less than 81 00:07:15.300 --> 00:07:17.420 other groups of people. 82 00:07:17.420 --> 00:07:23.480 One group of people, as far as I know, and there are no empirical studies of this question, 83 00:07:23.480 --> 00:07:31.480 The one oppressed minority group which I belong to, which I feel deeply for, as far as I know there has been no liberation front that has arisen. 84 00:07:31.480 --> 00:07:35.480 That's the night people, the night people liberation movement, which is so far non-existent. 85 00:07:35.480 --> 00:07:45.480 Night people are people who reach the peak of their productive activity sometime after midnight, and who during the morning hours and during the twilight hours are just totally zonked out. 86 00:07:45.480 --> 00:07:58.480 And we don't want that. Because of our culture, because of the society in which we live where everybody is supposed to work 9 to 5, night people are grievously discriminated against and always working on something where they have less than half their potential. 87 00:07:58.480 --> 00:08:07.480 We can say this and we can say we can push this forth as being an important problem, but it seems to be the only way that, well first of all you can hire night people, etc. 88 00:08:07.480 --> 00:08:37.480 In the existing system, until values are changed, until general outlook is changed, the existing system, there's no question about the fact that night people are earning less and being promoted less than day people, because night people can't function very well from nine to five, because they're zonked out, they're walking around as quasi-zombies most of the day, so naturally they'll be getting paid less, and their marginal productivity within our existing system is lower, no question about it. If any sociologist wants to go out and study night people versus day people, I'm sure he'll come out and tell you a priori without spending the 89 00:08:37.480 --> 00:08:40.480 $100,000 will be required for the study. 90 00:08:40.480 --> 00:08:44.480 Yes, it will find that the night people are getting less than the day people. 91 00:08:44.480 --> 00:08:47.480 And it's too bad, I suppose, but the point is, and I certainly feel for night people, 92 00:08:47.480 --> 00:08:51.480 especially being a night person myself, but the point is that there's nothing much going to be done about it 93 00:08:51.480 --> 00:08:55.480 because within the current structure of day work, et cetera, 94 00:08:55.480 --> 00:08:58.480 here there are marginal products, us night people's marginal product is lower. 95 00:08:58.480 --> 00:09:00.480 We're getting paid, I guess, what we deserve. 96 00:09:00.480 --> 00:09:05.480 However, someday we can try to convince the public that night people and night work and so forth 97 00:09:05.480 --> 00:09:09.040 and so forth is really just as good and we don't have to be confined to the old pre-industrial 98 00:09:09.040 --> 00:09:13.720 revolutions kind of schedule before electricity was invented, but that you see is a problem 99 00:09:13.720 --> 00:09:18.160 of changing general values and outlooks and it has nothing to do with current productivity 100 00:09:18.160 --> 00:09:21.360 of the market and so similarly it could very well be, let's take an old press group, let's 101 00:09:21.360 --> 00:09:25.320 take redheads, let's say the redheads have been taught from birth, I think it's a lot 102 00:09:25.320 --> 00:09:29.920 of nonsense, let's say they have, just for the purposes of this discussion, let's say 103 00:09:29.920 --> 00:09:33.400 they've been taught from birth that they can't work very hard and they're sort of temper 104 00:10:03.400 --> 00:10:20.400 The Eskimos, let's say, never work more than a half hour a day, the rest of the time they have to spend doing other things, obviously their productivity is going to be pretty low and they're not going to develop much. 105 00:10:20.400 --> 00:10:32.400 So if you can come to them and sort of convince them, no, no, or change their religion or something like that, and change their religion of hard work and imbue them with the idea of the Protestant ethic, no question about the fact that they're going to develop more. 106 00:10:32.400 --> 00:10:39.400 That's true, they might not want to develop more, they might prefer lying around in the snow, but that's their choice. They presented with that. 107 00:10:39.400 --> 00:10:49.400 So what we're dealing with here really is a problem with cultural values and the basic values of individuals or the groups involved, rather than the problem of the market. 108 00:10:49.400 --> 00:10:55.400 Because, say, given this hypothetical value system of the Eskimos, their wage rates can be pretty darn low, obviously, on the market. 109 00:10:55.400 --> 00:11:04.400 And, properly so, if they change and they become Calvinist instead of whatever it is, then they might work hard and they'll be in great shape and income will go up. 110 00:11:04.400 --> 00:11:07.400 They can have high-five stuff for the rest of us. 111 00:11:07.400 --> 00:11:11.400 Okay, so this is a so-called discrimination question. 112 00:11:11.400 --> 00:11:13.400 What happens if this person gets on the job? 113 00:11:13.400 --> 00:11:18.400 For example, get back to the redheads again, or even the Eskimos, the same thing applies to them. 114 00:11:18.400 --> 00:11:26.400 The employer wants to hire redheads and eskimos, but not because he's a great guy or an altruist, but because he wants to equate the wage rates to the marginal product. 115 00:11:26.400 --> 00:11:35.400 On the other hand, the other workers involved, let's say also the other people on the assembly line or in the shop, also hate redheads or hate eskimos or whatever. 116 00:11:35.400 --> 00:11:44.400 In their case, their hatred of redheads is more or less costless. In other words, they don't suffer the loss, except in a very indirect sense, certainly not directly. 117 00:11:44.400 --> 00:11:52.400 They can cause all sorts of trouble for the employer. They can tell the employer, if you hire this blankety blank redhead, we walk out, we quit, or we sabotage, or whatever. 118 00:11:52.400 --> 00:11:56.400 In order to keep peace in the plant, therefore, the employer decides not to hire redheads. 119 00:11:56.400 --> 00:12:06.400 In that case, the low marginal productivity of the redhead is low because it includes the disruption that will occur if the redhead is hired because the other employees don't like it. 120 00:12:06.400 --> 00:12:11.400 And there, the problem is, of course, the values of the other employees. 121 00:12:11.400 --> 00:12:18.400 The point here again is that if there's any discrimination going on in the market, it's not the employer who will discriminate, it's the employees, the fellow employees. 122 00:12:18.400 --> 00:12:28.400 And of course, I think it's pretty clear with anti-Negro discrimination in the South, it was almost always the fellow workers who didn't want the Negroes to be hired and not the employer. 123 00:12:28.400 --> 00:12:35.400 Because once again, the fellow workers lose nothing by not hiring Negroes, because the employer doesn't lose because its profits get lower. 124 00:12:35.400 --> 00:12:44.400 Getting back to the labor market in general, wage rates in general, what will tend to happen to wages over time in a free market society is this. 125 00:12:44.400 --> 00:12:50.400 If everything is going fairly smoothly and they'll be in the course of the free market, increase capital investment. 126 00:12:50.400 --> 00:12:53.400 As capital investment increases, productivity will increase. 127 00:12:53.400 --> 00:12:59.400 And as improved capital investment comes on the market with better technology, productivity will increase. 128 00:12:59.400 --> 00:13:03.520 and so what happens is with more investment coming on the market more 129 00:13:03.520 --> 00:13:09.440 capital piling up per worker what you have is a continually over time an 130 00:13:09.440 --> 00:13:13.680 increase demand curve for labor because the productivity goes up because capital 131 00:13:13.680 --> 00:13:17.200 investment is going up and as productivity is going up wage rates go 132 00:13:17.200 --> 00:13:21.720 up and employment goes up this is what tends to happen in a free market society 133 00:13:21.720 --> 00:13:26.720 over time as the decades go on their tendency is toward a continuing and 134 00:13:26.720 --> 00:13:31.040 Fairly smooth increase in productivity, which means an increase in real wage rates, real 135 00:13:31.040 --> 00:13:35.240 wage rates meaning wage rates per purchasing power, in other words, not just money wage 136 00:13:35.240 --> 00:13:38.640 rates where you can't buy what you've got, but wage rates in terms of actual goods and 137 00:13:38.640 --> 00:13:39.640 services. 138 00:13:39.640 --> 00:13:43.320 Real wage rates tend to go up and employment tends to go up, so everything is hunky-dory. 139 00:13:43.320 --> 00:13:48.240 This is essentially what's been happening since the Industrial Revolution. 140 00:13:48.240 --> 00:13:52.160 Usually productivity goes up something like 2 to 3 percent a year, this is a very vague 141 00:13:52.160 --> 00:13:56.700 figure and hunky measure, but looking at sort of an overall rough estimate, and wage rates 142 00:13:56.700 --> 00:14:02.700 The labor unions tend to go up 2 to 3% per year overall, which of course mounts up quite a bit over a 20 year or so period. 143 00:14:02.700 --> 00:14:13.700 They have this Nirvana situation, sort of everything looks great, everything is going great, and suddenly a new force enters into the picture, sort of a disruptive force, namely labor unions. 144 00:14:13.700 --> 00:14:22.700 Okay, what effect does a labor union have? One of the apologia for labor unions is they get everybody to cooperate instead of increasing the productivity of the worker. 145 00:14:22.700 --> 00:14:25.100 I think this is pretty obviously nonsense. 146 00:14:25.100 --> 00:14:27.820 If a union does anything, it disrupts the productivity 147 00:14:27.820 --> 00:14:29.620 by imposing all sorts of work rules. 148 00:14:29.620 --> 00:14:31.020 So you can't do this, you can't do that, 149 00:14:31.020 --> 00:14:32.740 and you have to be a senior guy to do this, 150 00:14:32.740 --> 00:14:35.060 and you have to be a plumber to turn a valve 151 00:14:35.060 --> 00:14:36.180 and all that sort of stuff. 152 00:14:36.180 --> 00:14:38.620 So if there's any effective work rules, 153 00:14:38.620 --> 00:14:41.020 to decrease enormously the productivity of labor 154 00:14:41.020 --> 00:14:43.260 through feather bedding and all that sort of stuff. 155 00:14:43.260 --> 00:14:44.980 Of course, we all know about the ghost firemen. 156 00:14:44.980 --> 00:14:46.700 This is just one example among many. 157 00:14:46.700 --> 00:14:48.860 The ghost firemen on railroad trains, 158 00:14:48.860 --> 00:14:50.940 you had to have, of course, a fireman to stope a coal 159 00:14:50.940 --> 00:14:52.580 and all that, and when a coal engine 160 00:14:52.580 --> 00:15:07.980 The Union now tries to push up wage rates beyond the non-union level. 161 00:15:07.980 --> 00:15:09.980 Let's assume they're successful. 162 00:15:09.980 --> 00:15:12.980 That's not by any means self-evident. 163 00:15:12.980 --> 00:15:15.980 The Union is going to be successful just because you form a Union. 164 00:15:15.980 --> 00:15:17.980 Let's assume for a minute they're successful and they push up wage rates. 165 00:15:17.980 --> 00:15:18.980 How do they do it? 166 00:15:18.980 --> 00:15:21.980 They have to go up the given demand curve. 167 00:15:21.980 --> 00:15:28.480 When they push to the higher level, what you're getting then is a higher wage rate, but at the expense of what? 168 00:15:28.480 --> 00:15:36.980 Well, the expense of diminishing employment, so what you then have, and unions can raise wage rates in particular occupations or particular industries, 169 00:15:36.980 --> 00:15:41.480 but they can only do it at the expense of disemploying or unemployed people. 170 00:15:41.480 --> 00:15:47.980 Also, another thing that happens, of course, is you tend to attract more people, even higher wage rates here in the plumbing business, 171 00:15:47.980 --> 00:15:51.980 try to become a plumber in which a pool of unemployment develops 172 00:15:51.980 --> 00:15:55.980 because there's no jobs available. On the contrary, there's less jobs than there were before. 173 00:15:55.980 --> 00:15:59.980 Usually, in a free market kind of situation, when wages are going up, 174 00:15:59.980 --> 00:16:03.980 this is a signal that there's more jobs available. People flock into that area. 175 00:16:03.980 --> 00:16:07.980 In this situation, we have this peculiar change in signals in the market 176 00:16:07.980 --> 00:16:11.980 where an increase in wage rate reflects not an increase in jobs available, 177 00:16:11.980 --> 00:16:15.980 but a decrease in jobs available. There's often a hiatus 178 00:16:15.980 --> 00:16:18.980 before the workers find out what's going on. 179 00:16:18.980 --> 00:16:20.980 The human wage rate has gone up. 180 00:16:20.980 --> 00:16:23.980 We see now what the real class struggle is all about, 181 00:16:23.980 --> 00:16:26.980 and we'll see it even more when we get to profits and interests and so forth. 182 00:16:26.980 --> 00:16:31.980 The real class struggle that unions are engaged in is not really a struggle against the employers, 183 00:16:31.980 --> 00:16:34.980 although disproportionately, the real class struggle is against other workers, 184 00:16:34.980 --> 00:16:38.980 against non-union workers, against workers with weaker unions. 185 00:16:38.980 --> 00:16:43.980 What you really have is a savage class struggle within the so-called working class, 186 00:16:43.980 --> 00:16:47.060 where strong unions are able to gain at the expense of 187 00:16:47.060 --> 00:16:49.260 disemploying non-union workers. 188 00:16:49.260 --> 00:16:51.180 What you really have, as a matter of fact, 189 00:16:51.180 --> 00:16:52.380 you raise the question immediately, 190 00:16:52.380 --> 00:16:53.820 what happens to these displaced workers? 191 00:16:53.820 --> 00:16:54.380 Why do they do it? 192 00:16:54.380 --> 00:16:57.020 Well, if the union is not spread over the whole country 193 00:16:57.020 --> 00:16:58.220 and over all the working force, 194 00:16:58.220 --> 00:17:00.220 which it almost always isn't, 195 00:17:00.220 --> 00:17:03.020 these people, A, B, go into some other occupation 196 00:17:03.020 --> 00:17:05.420 where either there's no union 197 00:17:05.420 --> 00:17:07.820 or the union doesn't have this economic power. 198 00:17:07.820 --> 00:17:09.260 They become clerks, let's say, 199 00:17:09.260 --> 00:17:11.100 instead of being electricians. 200 00:17:11.100 --> 00:17:12.300 Pushed out of the electrician business 201 00:17:12.300 --> 00:17:19.300 In the business of the plumbing business, they become clerks, they push the supply curve of clerks to the right, as a result, the wage rate of clerks fall. 202 00:17:19.300 --> 00:17:34.300 Now we see what unions actually do in the economic sense. What they do is they gain wage rates for certain workers, those who are in strong unions, at the expense of the displaced workers, the non-union workers, who get lower wage rates as a result. 203 00:17:34.300 --> 00:17:39.300 In other words, what you have is a class struggle within the so-called working class. 204 00:17:39.300 --> 00:17:42.300 Unfortunately, this place, workers don't know what hit them. 205 00:17:42.300 --> 00:17:44.300 They don't really understand this. 206 00:17:44.300 --> 00:17:48.300 And so what you have is, we'll get back in a minute, when a strike occurs, 207 00:17:48.300 --> 00:17:54.300 what I call the mystique, don't cross the picket line, which almost has a quasi-religious significance in American life. 208 00:17:54.300 --> 00:17:56.300 You mustn't cross the picket line. Set up any picket line at all. 209 00:17:56.300 --> 00:18:01.300 Mrs. Roosevelt, for example, had the fixed political philosophy of never crossing a picket line at all. 210 00:18:01.300 --> 00:18:07.300 The thing to do with them would be just to throw up a picket line wherever she was and she wouldn't be able to move. 211 00:18:07.300 --> 00:18:11.300 So the mystique of not crossing the picket line implies, of course, that there's some kind of working class solidarity. 212 00:18:11.300 --> 00:18:14.300 The unions are somehow fighting for the entire working class against the employer. 213 00:18:14.300 --> 00:18:17.300 This is the direct opposite of what's really going on. 214 00:18:17.300 --> 00:18:23.300 And what's really going on is that the unions benefit a certain group of people at the expense of another group of workers. 215 00:18:23.300 --> 00:18:35.300 Incidentally, empirically, overall, I don't know, the strong unions get something like the average of 15 to 20 percent gain at the expense of an equivalent drop of weaker union or non-union people. 216 00:18:35.300 --> 00:18:39.300 Which unions will be the strong unions? In other words, which unions will be the unions who can succeed in doing this? 217 00:18:39.300 --> 00:18:43.300 Just because you have a union doesn't mean you can succeed in pushing the wage rate up. 218 00:18:43.300 --> 00:18:48.300 We can look at the situation. There are two basic keys here. Again, we look at demand and supply. 219 00:18:48.300 --> 00:18:55.300 First place, if you take the demand curve for labor, the more inelastic the demand curve for labor, the easier it is to push up your wage rate. 220 00:18:55.300 --> 00:19:02.300 Say you have a very inelastic demand curve, you push up your wage rate a large amount, you only cause a small dropping off in employment. 221 00:19:02.300 --> 00:19:10.300 On the other hand, if you have a very elastic demand curve, you push up your wage rate by a wee bit and you're disemploying two-thirds of the labor force in that industry. 222 00:19:10.300 --> 00:19:15.300 So the more inelastic the demand curve, the easier it is to get your economic power, your union power. 223 00:19:15.300 --> 00:19:18.300 You have less disruption, you don't disappoint too many people. 224 00:19:18.300 --> 00:19:22.300 On the other hand, if you have a very elastic demand curve, it's almost impossible to raise your wages, 225 00:19:22.300 --> 00:19:25.300 because only two-thirds of the people are kicked out, are fired. 226 00:19:25.300 --> 00:19:29.300 And the union can't survive in that kind of a huge hassle. 227 00:19:29.300 --> 00:19:31.300 So one of the things is an inelastic demand curve. 228 00:19:31.300 --> 00:19:33.300 How do you get an inelastic demand curve for labor? 229 00:19:33.300 --> 00:19:34.300 Well, there are several conditions. 230 00:19:34.300 --> 00:19:37.300 One is, if the demand curve for the product is inelastic, 231 00:19:37.300 --> 00:19:41.300 The tendency would be to have an inelastic demand curve for the factors. 232 00:19:41.300 --> 00:19:43.300 That's one vector that goes into it. 233 00:19:43.300 --> 00:19:47.300 Another key thing is dealing with a small proportion of total cost. 234 00:19:47.300 --> 00:19:50.300 In other words, if this union is representing just a few people, 235 00:19:50.300 --> 00:19:54.300 then the whole thing doesn't matter a hill of beans as far as the employer goes. 236 00:19:54.300 --> 00:19:57.300 And also the third thing is, if it's difficult to substitute capital for labor, 237 00:19:57.300 --> 00:19:59.300 if it's difficult to mechanize this occupation, 238 00:19:59.300 --> 00:20:02.300 you're in better shape than if it's easy to mechanize. 239 00:20:02.300 --> 00:20:04.300 Well, if you take the second condition, 240 00:20:04.300 --> 00:20:15.300 It means if you have a small, highly skilled group of people, you're in better shape to raise your wage rates above the non-union level than if you're a large union or it makes a lot of noise, you can increase your wage rate. 241 00:20:15.300 --> 00:20:26.300 For example, if the United Automobile Workers Union, which, let's say, covers the whole industry in a big proportion of total cost, if they get a 10% wage increase, it means something like, I don't know, not a 10% cost, but almost. 242 00:20:26.300 --> 00:20:46.300 The General Motors is hiring three glassblowers, or all members of a glassblower union or something, which only includes overly Italians of over 70, or stonemasons, something like that, they can triple their wage rate, it doesn't mean a darn thing, it's peanuts for the cost of the firm. 243 00:20:46.300 --> 00:21:01.800 So therefore, the union which has the most power is not the ones we usually think of, not the ones with a lot of membership and a lot of publicity, but a small, highly sealed craft union that's in there, with low costs to the employer, therefore has an inelastic demand curve. 244 00:21:01.800 --> 00:21:12.300 The second thing which can give the union, we call economic power, the power to raise your wage rate above the non-union level, the second thing is controllable supply, that's the second key thing. 245 00:21:12.300 --> 00:21:17.300 In other words, if you can limit the supply, if you can push the supply curve up, then you can go up to the man curve, 246 00:21:17.300 --> 00:21:21.300 disemployed AB, and then raise your wage rates. 247 00:21:21.300 --> 00:21:25.300 So the key thing is to keep these AB people, the disemployed people, from entering the industry even. 248 00:21:25.300 --> 00:21:27.300 Kick them out, or else keep them from coming in. 249 00:21:27.300 --> 00:21:30.300 So in other words, have control over entry into the occupation. 250 00:21:30.300 --> 00:21:35.300 If you have control over entry, then you go a long way toward achieving your economic power to raise wage rates. 251 00:21:35.300 --> 00:21:39.300 We have examples of this in small, highly skilled craft unions. 252 00:21:39.300 --> 00:21:47.300 In order to be a member of the electrician's union, you have to be the son of an existing union member. 253 00:21:47.300 --> 00:21:49.300 There's a very tight control over supply. 254 00:21:49.300 --> 00:21:53.300 If you're a non-son, you can't get in, you can't enter the electrician's business. 255 00:21:53.300 --> 00:21:58.300 And if the electrician's union has control over the clothes shop, which they usually have, 256 00:21:58.300 --> 00:22:01.300 then what happens is a young kid growing up in Hoboken who liked to be an electrician, 257 00:22:01.300 --> 00:22:05.300 whose maybe the love of his life is to be an electrician, can't do it and he has to become something else, 258 00:22:05.300 --> 00:22:34.300 The Union has been accused of racial discrimination against all people who are not sons of existing members and this of course if you start with white Anglo-Saxon workers then you're not going to have too many Negroes sons of white Anglo-Saxon members. 259 00:22:34.300 --> 00:22:40.300 Discrimination against Negroes is really a subset of discrimination against all non-sons. 260 00:22:40.300 --> 00:22:44.300 As a matter of fact, if you're, for example, a nephew of an electrician or a plumber or something, 261 00:22:44.300 --> 00:22:48.300 you can get on a waiting list, but you're not really in there. You really should be a son of a member. 262 00:22:48.300 --> 00:22:53.300 If you're a nephew, it's sort of the second pool. If there are no sons left, you turn to the nephews. 263 00:22:53.300 --> 00:22:59.300 It's a very tightly structured kind of business, and so the union is able to push their wage rates up by keeping the non-sons out. 264 00:22:59.300 --> 00:23:03.740 and non-sons either were kicked out directly or else more of course subtly 265 00:23:03.740 --> 00:23:06.900 they're simply frozen out you can't just can't enter it you can't become a taxi 266 00:23:06.900 --> 00:23:09.980 owner in New York unless you can buy a license for the cab and a Danian for 267 00:23:09.980 --> 00:23:14.180 about 25,000 and these ways you're just everybody knows you're growing up you 268 00:23:14.180 --> 00:23:16.900 know well it's too bad I can't become an electrician I've become something else 269 00:23:16.900 --> 00:23:20.780 you're just frozen out of this noble occupation so therefore it's the craft 270 00:23:20.780 --> 00:23:24.900 unions the small highly organized I say preferably if you if you can keep out 271 00:23:24.900 --> 00:23:28.220 everybody except elderly Italians like the stonemason union unfortunately this is 272 00:23:28.220 --> 00:23:58.220 The Great The High Art of Stonemasonry is Dying Out 273 00:23:58.220 --> 00:24:04.220 The Unionized, a faculty which has been oppressed and exploited for many years. 274 00:24:04.220 --> 00:24:11.220 We had our industrial union, we all joined the AUP, and they started collective bargaining arrangements. 275 00:24:11.220 --> 00:24:17.220 And while this was going on, first of all, before the Unionized, we were getting a sort of a steady 7% a year increase, 276 00:24:17.220 --> 00:24:19.220 source of living or whatever it was. 277 00:24:19.220 --> 00:24:23.220 That was before the Union, it was a non-union situation, while we were being oppressed and exploited. 278 00:24:23.220 --> 00:24:28.220 As soon as the Union came in, they started monkeying around, they started a lengthy, permanent bargaining kind of hassle. 279 00:24:28.220 --> 00:24:34.220 And they bargained for three years before they could achieve the contract. During those three years, of course, we got no increase at all, because we couldn't get it. 280 00:24:34.220 --> 00:24:39.220 As a matter of fact, it was illegal for the employer to give an increase, because it would have violated the collective bargaining arrangement. 281 00:24:39.220 --> 00:24:44.220 So for three years, we sat around and waited, and finally we got the same 6% or 7% or something. 282 00:24:44.220 --> 00:24:51.220 So it means that the whole thing was slowed up. The only thing the Union accomplished, this great unionization principle, was to slow up our increases for three years. 283 00:24:51.220 --> 00:24:56.220 There's a great lesson which I'll return to in a minute, about the function of unions to slow up everything. 284 00:24:56.220 --> 00:25:01.220 While this was going on, while this big hassle was going on, we almost struck and so forth and so on, 285 00:25:01.220 --> 00:25:07.220 while this was going on, there was a small, very tiny boiler tender union, which had no connection with our union. 286 00:25:07.220 --> 00:25:12.220 There were only about four or five boiler tenders in the whole place, and I remember the local something or other boiler tenders union, 287 00:25:12.220 --> 00:25:18.220 they wanted a wage increase, and they had a little strike, it was the most pleasant strike you've ever seen in your life, it was a mini strike. 288 00:25:18.220 --> 00:25:23.220 They had one picket way out in the corner somewhere and nobody could see him. 289 00:25:23.220 --> 00:25:26.220 So our union organizers were really gung-ho union types. 290 00:25:26.220 --> 00:25:28.220 They went to this guy and they said, hey, don't you want solidarity? 291 00:25:28.220 --> 00:25:31.220 Don't you want the faculty and the students or whatever to protest them? 292 00:25:31.220 --> 00:25:33.220 No, no, no. Stay out of it. We have our own. 293 00:25:33.220 --> 00:25:36.220 We know what we're doing. Go away. 294 00:25:36.220 --> 00:25:40.220 That's the union solidarity, working class, all that nonsense. 295 00:25:40.220 --> 00:25:42.220 We have our own ways. Don't worry about it. 296 00:25:42.220 --> 00:25:44.220 Sure enough, after about two weeks of this mini strike, 297 00:25:44.220 --> 00:25:55.220 The only sort of threat was that they tried to get the teamsters to honor the picket line or whatever, and they wouldn't be able to carry food into their beloved cafeteria, which wouldn't have been a picture of a loss. 298 00:25:55.220 --> 00:26:04.220 They had a little mini strike often, very quiet. At the end of this whole hassle, while we were still worrying about our 7%, they got something like a 30% or 40% wage increase. 299 00:26:04.220 --> 00:26:10.220 They settled, and why I was probably able to do this was because the five workers amounted to a hell of a beans. Why not? 300 00:26:10.220 --> 00:26:19.060 The origins, the economic origins of racial and religious discrimination always look for 301 00:26:19.060 --> 00:26:22.420 trade unions, because it's almost always there that you'll find it. 302 00:26:22.420 --> 00:26:26.940 For example, our most famous case in the modern world of racial discrimination is apartheid 303 00:26:26.940 --> 00:26:28.660 in South Africa. 304 00:26:28.660 --> 00:26:34.140 Everybody thinks that apartheid originated with the boars of the rural areas, who were 305 00:26:34.140 --> 00:26:37.860 sort of nutty anyway, and they wanted to keep everybody in their place, but it did not originate 306 00:26:37.860 --> 00:26:42.300 with the Boer Farmers. It originated, as William Hutt, distinguished economist wrote 307 00:26:42.300 --> 00:26:48.300 in his Great Path of the Economics of the Colour Bar, it originated in 1919 or so with 308 00:26:48.300 --> 00:26:53.700 the Anglo, the non-Boer workers of South Africa, who were very bitter about the fact they were 309 00:26:53.700 --> 00:26:57.740 skilled craftsmen. The Negroes in the urban areas had been essentially common labourers. 310 00:26:57.740 --> 00:27:02.340 Negroes were beginning to get educated and rise up a bit, becoming shop form in a sense. 311 00:27:02.340 --> 00:27:07.220 This struck terror into the hearts of the WASP workers. And so the WASP workers, organizing 312 00:27:07.220 --> 00:27:12.500 and Trade Union put enormous pressure on the South African government to pass laws preventing 313 00:27:12.500 --> 00:27:17.580 Negroes from becoming foremen and from rising up from the common laborer level, which they 314 00:27:17.580 --> 00:27:18.580 finally did. 315 00:27:18.580 --> 00:27:22.820 They did it under the pressure of a general strike called by the WASP unions. 316 00:27:22.820 --> 00:27:26.380 The general strike was headed by certain William Andrews, and the punch line here is that William 317 00:27:26.380 --> 00:27:29.020 Andrews was the head of the Communist Party of South Africa. 318 00:27:29.020 --> 00:27:33.940 What we have is the Communist Party of South Africa, the leading Marxist-Leninist promoters 319 00:27:33.940 --> 00:27:38.340 Workers of the idea of class solidarity, working class solidarity and against racism, these 320 00:27:38.340 --> 00:27:42.820 are the guys who were promoting the racial apartheid laws in the labor market in South 321 00:27:42.820 --> 00:27:49.340 Africa. Professor Huck goes into this with great relish. This same pattern appeared in 322 00:27:49.340 --> 00:27:54.140 the late 19th century United States. The origins of racial discrimination on the government 323 00:27:54.140 --> 00:27:58.420 level against the Chinese workers who were coming in from China and coming into California 324 00:27:58.420 --> 00:28:02.940 and the West. And the Chinese were fantastically good workers. They had all the Protestant 325 00:28:02.940 --> 00:28:32.940 The White Workers turned to the government, local government, county government, and state government, the federal government finally, to either exclude the Chinese altogether, or once they're here to kick them out, in California for example, they pass ordinances, just kicking Chinese out, not allowing Chinese own real estate, or operate a business, or anything, or live practically, and of course these laws were eventually declared unconstitutional, but in the meantime they were being employed, 326 00:28:32.940 --> 00:28:37.740 And the people who are most gung-ho about discrimination against Chinese, government 327 00:28:37.740 --> 00:28:41.540 discrimination of the most severe sort, the most gung-ho people were the labor unions 328 00:28:41.540 --> 00:28:45.100 or the vanguard of this, and the most gung-ho of these were the Marxists and the left wing 329 00:28:45.100 --> 00:28:46.100 unions. 330 00:28:46.100 --> 00:28:50.260 As a matter of fact, there was a congress in San Francisco, an anti-Chinese congress, 331 00:28:50.260 --> 00:28:52.780 I forget the year or something, I think late 80s. 332 00:28:52.780 --> 00:28:57.140 The most anti-Chinese, the ones who wanted to use immediate violence, lynching, to lynch 333 00:28:57.140 --> 00:29:01.140 all the Chinese immediately without even waiting for the government, were the communist anarchists, 334 00:29:01.140 --> 00:29:12.500 When it came to immigration restrictions in general in the 1920s, the leaders of immigration 335 00:29:12.500 --> 00:29:17.940 restrictions were the AFML-CIO who wanted to shift the supply curve to the left and thereby 336 00:29:17.940 --> 00:29:22.480 keeping out immigrants and thereby raising the wage rates of those workers who were lucky 337 00:29:22.480 --> 00:29:25.460 enough to be here before the immigration restrictions descend. 338 00:29:25.460 --> 00:29:29.620 The point is, you see, not that workers are more racist basically than employers, but 339 00:29:29.620 --> 00:29:33.140 The point is that the way the economics of the thing operate is that it pays employers 340 00:29:33.140 --> 00:29:35.980 not to be racist, but it pays workers to be racist. 341 00:29:35.980 --> 00:29:40.180 In other words, it pays workers to get laws passed to keep competitors out. 342 00:29:40.180 --> 00:29:43.540 Now, this idea of keeping competitors out, of course, is not just racial competitors, 343 00:29:43.540 --> 00:29:45.900 any kind of competitors, any identifiable group. 344 00:29:45.900 --> 00:29:50.580 For example, child labor laws, where nobody can work until a certain age unless you have 345 00:29:50.580 --> 00:29:53.700 working papers and you satisfy the government and the other thing. 346 00:29:53.700 --> 00:29:57.260 These are essentially put in by unions because they want to keep the wage rate higher of 347 00:29:57.260 --> 00:30:27.260 And of course, they don't exactly put it that way, although they do put it that way if you read their literature with a certain amount of care, because the general public, they don't say we want to keep child laborers out because they're competing with us, they'll say we've got to protect the children, we've got to keep them in school until they're 25, that sort of stuff, because what you're doing is that the older workers find that the supply curve of their youthful competitors is being, their youthful competitors are being kicked out of the market, their own supply curve gets pushed to the left. 348 00:30:27.260 --> 00:30:33.300 So far from an inherent solidarity of the working class, what you really have is a constant 349 00:30:33.300 --> 00:30:37.660 temptation of one group, actually a temptation of businessmen too, to use the government 350 00:30:37.660 --> 00:30:38.660 to smash their competitors. 351 00:30:38.660 --> 00:30:43.620 So the point is we get in the labor market the temptation of one group of workers to try 352 00:30:43.620 --> 00:30:48.260 to use the government to eliminate in some way or hobble or restrict your competition. 353 00:30:48.260 --> 00:30:53.420 But doing it using all sorts of fancy rhetoric, which doesn't disclose your truth. 354 00:30:53.420 --> 00:30:57.100 And usually in their own literature they disclose them, in their own magazines, but in dealing 355 00:30:57.100 --> 00:31:08.260 If we look at the history of what labor unions were successful in America, while it was a 356 00:31:08.260 --> 00:31:14.060 relatively free market, in other words before 1935, usually what you had is the industrial 357 00:31:14.060 --> 00:31:15.060 unions didn't make it. 358 00:31:15.060 --> 00:31:18.540 In other words, industrial union is based on the principle that trying to get everybody 359 00:31:18.540 --> 00:31:21.980 who works in this industry to join the union, everybody who works in General Motors to join 360 00:31:21.980 --> 00:31:24.380 the UAW, that's an industrial union. 361 00:31:24.380 --> 00:31:27.660 These unions didn't make it, they were very unsuccessful, because the demand curve for 362 00:31:27.660 --> 00:31:31.420 labor was elastic, they didn't control their supply, as a matter of fact they were trying 363 00:31:31.420 --> 00:31:34.740 to encourage more people, usually they were trying to encourage more people because this 364 00:31:34.740 --> 00:31:40.140 meant more money for the union bureaucrats, it wasn't an idealistic thing particularly. 365 00:31:40.140 --> 00:31:44.580 This is contrast of a craft union, the principle of a craft union is to have each craft, each 366 00:31:44.580 --> 00:31:52.100 small highly skilled craft gets together, the broiler tenders or the carpenters or the doughnut 367 00:32:22.100 --> 00:32:30.100 is a very localized kind of industry. You can't compete. In other words, U.S. Steel competes with Jones & Lockhart, competes with steel plants all over the country, even all over the world. 368 00:32:30.100 --> 00:32:39.100 We compete with German steel companies and so forth. In what sense can you say that a construction project in New York competes with a construction project in San Francisco? 369 00:32:39.100 --> 00:32:45.100 There's really no competition. There's no inter-local competition in the construction business, except in a very remote sense. 370 00:32:45.100 --> 00:32:54.100 If you're giving construction contractors in New York a bad time, they can't just pick up and move to Memphis, but you can do that in other firms. 371 00:32:54.100 --> 00:33:01.100 You have in other words an absence of inter-local competition. You have sort of local, I wouldn't say monopolies, an absence of inter-local competition. 372 00:33:01.100 --> 00:33:09.100 Therefore, it's much easier for the craft unions to take over because, say, if you raise the wage rates in New York construction, you can't move out very quickly. 373 00:33:09.100 --> 00:33:13.100 You can cripple it, of course, eventually, but you can't move out and immediately start competing. 374 00:33:13.100 --> 00:33:14.100 are competing. 375 00:33:14.100 --> 00:33:18.940 The construction industry was ripe for aircraft unions, which they did get. 376 00:33:18.940 --> 00:33:23.180 Anthracite coal was another example, and contrasted by tuminous coal, which has deposits all over 377 00:33:23.180 --> 00:33:28.740 the eastern seaboard practically, in Kentucky and West Virginia and Pennsylvania, etcetera. 378 00:33:28.740 --> 00:33:33.100 Anthracite coal is confined to a teeny area in eastern Pennsylvania, so it was very easy 379 00:33:33.100 --> 00:33:34.100 to unionize it. 380 00:33:34.100 --> 00:33:38.020 In other words, the anthracite coal union got together and they unionized it fairly 381 00:33:38.020 --> 00:33:39.020 quickly. 382 00:33:39.020 --> 00:33:41.780 They couldn't, despite all their efforts, they could not unionize it by tuminous coal 383 00:33:41.780 --> 00:33:42.780 industry. 384 00:33:42.780 --> 00:33:46.780 Unionized a couple of mines, you'd raise the wage rates, which would raise the cost, 385 00:33:46.780 --> 00:33:49.780 and then the mines can't compete with the other mines, and these mines go out of business, 386 00:33:49.780 --> 00:33:53.780 and the unions bust them. This is a classic way in which unions can't operate. 387 00:33:53.780 --> 00:33:56.780 There's any kind of wide competition. 388 00:33:56.780 --> 00:34:02.780 And then the railroad brotherhoods, this is before 1926, because the railroad industry was essentially nationalized 389 00:34:02.780 --> 00:34:07.780 as far as labor went in 1926, but even before then, the railroad then was the big four, 390 00:34:07.780 --> 00:34:12.060 So the firemen and the engineers and whoever the other two groups are, the highly skilled 391 00:34:12.060 --> 00:34:16.620 groups, in contrast to the operating workers, the guys who speak to the tracks, etc., who 392 00:34:16.620 --> 00:34:20.620 were not unionized, the highly skilled craft unions were unionized. 393 00:34:20.620 --> 00:34:25.300 And there again, they didn't have too much inter-rural competition, except in a very 394 00:34:25.300 --> 00:34:26.300 larger sense. 395 00:34:26.300 --> 00:34:30.700 Apparently the only industry, the only union that doesn't fit this pattern of localized 396 00:34:30.700 --> 00:34:36.620 non-competition as a musician union, somehow the musicians were able to unionize strongly 397 00:34:36.620 --> 00:34:55.860 A lot of attempts to unionize the textile and the garment industry in particular, because 398 00:34:55.860 --> 00:34:59.900 the people who came over in the early 20th century, who were garment workers, politically 399 00:34:59.900 --> 00:35:03.180 and philosophically dedicated to unionism, so they desperately tried to organize the 400 00:35:03.180 --> 00:35:09.180 The garment industry, ladies and men's garment industry, they never succeeded. They succeeded for a little while and then they'd be wiped out. 401 00:35:09.180 --> 00:35:18.180 The garment industry, for example, is very mobile. You could unionize a Manhattan garment firm and impose higher costs and then overnight, where's the firm? 402 00:35:18.180 --> 00:35:23.180 You go to work and then the firm's gone. The guy's packed up with two or three machines and going to Memphis or whatever. 403 00:35:23.180 --> 00:35:26.180 Headed for the hills and then you have to start all over again. 404 00:35:26.180 --> 00:35:30.820 So you have a very mobile industry and it was very difficult, even with great dedication 405 00:35:30.820 --> 00:35:37.120 and the philosophic fanaticism of the government, union and organizers, to do anything successfully 406 00:35:37.120 --> 00:35:39.300 before 35. 407 00:35:39.300 --> 00:35:44.300 The other thing you can say about the history of American Unionism is that during boom periods, 408 00:35:44.300 --> 00:35:50.940 during inflations or boom periods, prosperity periods, the tendency for Unionism to increase. 409 00:35:50.940 --> 00:35:56.420 The reason was because during booms, the demand for labor goes up, wages are increasing and 410 00:35:56.420 --> 00:35:59.260 employment is increasing, and the unions sort of ride the wave. 411 00:35:59.260 --> 00:36:03.660 Since the demand for labor is going up anyway, you can unionize without any penalty, without 412 00:36:03.660 --> 00:36:06.580 causing unemployment, and the unions can take credit for the increase. 413 00:36:06.580 --> 00:36:09.740 Boy oh boy, you see what we're doing if you fellas were increasing wages by 10%. 414 00:36:09.740 --> 00:36:13.780 The fact that this would have happened anyway is of course shoved under the rug. 415 00:36:13.780 --> 00:36:17.140 So in boom periods, the tendency for unions was for unions to increase. 416 00:36:17.140 --> 00:36:23.980 The thing is that the percentage of the labor force the unions have is always pretty small, even at the best of times. 417 00:36:23.980 --> 00:36:30.980 The percentage that would fluctuate, we define the labor force as being all those people who are either working or seeking work. 418 00:36:30.980 --> 00:36:35.340 Now, who's seeking work is very difficult to determine, no question about that. 419 00:36:35.340 --> 00:36:38.940 Defining the labor force is all those working and seeking to work. 420 00:36:38.940 --> 00:36:46.380 The percentage that the unions have of labor force, the 435, range from 2%, say 7% or 8%. 421 00:36:46.380 --> 00:36:52.380 In other words, during boom periods, the percentage of unions, people unionize and go up to 7%, then there'd be recession. 422 00:36:52.380 --> 00:36:56.380 What happens in recession? Recession is the demand for labor falls. 423 00:36:56.380 --> 00:37:01.380 The swollen boom in inflation and wage rate is now a surplus of labor. 424 00:37:01.380 --> 00:37:08.380 In other words, heavy unemployment, because the demand for labor is now much less than the supply at this obsolete rate. 425 00:37:08.380 --> 00:37:11.380 As a result, you have this big pool of unemployment, and this busts the union. 426 00:37:11.380 --> 00:37:17.380 The Union tries to keep wage rates up and the unemployed workers undercut it and the Union is busted. 427 00:37:17.380 --> 00:37:23.380 This happened in every recession and so the recession period you go back down to your 2% or so, 435. 428 00:37:23.380 --> 00:37:29.380 So in other words, the Union would be concentrated in certain key craft industries or craft organizations. 429 00:37:29.380 --> 00:37:36.380 They'd be in those industries usually which are not geographically competitive, so it was more naturally monopolistic if you want to use that term. 430 00:37:36.380 --> 00:37:40.380 And then they would do better on the booms and they immediately lose out again on the recession. 431 00:37:40.380 --> 00:37:47.380 The only exception of this was during World War I, well it wasn't an exception, but during World War I of course it was a boom period. 432 00:37:47.380 --> 00:37:54.380 The percentage of unionization would tend to go up anyway, but during World War I we had our first collectivist economic planning in America. 433 00:37:54.380 --> 00:38:04.380 And the Wilson administration encouraged unions in every way possible to try to get people into unions and generally use the force of government to unionize the population as a labor force. 434 00:38:04.380 --> 00:38:09.180 Force, and did that in order to, well, for many reasons, support the new idea of a partnership 435 00:38:09.180 --> 00:38:13.740 of government and industry, a tripartite corporate that's controlled the whole system, and also 436 00:38:13.740 --> 00:38:16.900 the push for the war effort, to get the workers behind the war effort. 437 00:38:16.900 --> 00:38:21.780 The result of all this, the war labor board and its decisions, was to raise the rate abnormally 438 00:38:21.780 --> 00:38:24.380 to 12 percent. 439 00:38:24.380 --> 00:38:27.780 During the 1920s, there was still a boom, and most of the 20s, of course, was the biggest 440 00:38:27.780 --> 00:38:32.780 boom we had had in American history up until then, so you'd actually assume that a unionized 441 00:38:32.780 --> 00:38:35.380 and the proportion of labor force would go up, but instead of that it went down. 442 00:38:35.380 --> 00:38:40.780 In the first boom in American history, the percentage of people in unions dropped steadily during the 20s. 443 00:38:40.780 --> 00:38:46.280 Why? Well, one is because you're getting rid of this excess fat, so to speak, 444 00:38:46.280 --> 00:38:49.780 the artificially induced World War I kind of situation. 445 00:38:49.780 --> 00:38:56.280 And two, because the employers rather cleverly started putting in what was known as employee representation plans 446 00:38:56.280 --> 00:39:01.780 as a competition to unions, so that the workers in the plant would have their own collective representatives 447 00:39:31.780 --> 00:39:34.700 What we can only call coercive unionization. 448 00:39:34.700 --> 00:39:40.700 The start of the Norris-LaGuardia Act in 1931 or 32, which did two things, one it outlawed 449 00:39:40.700 --> 00:39:44.220 what was known as yellow door contracts, because the word yellow door contract is sort of a 450 00:39:44.220 --> 00:39:45.220 smear term, obviously. 451 00:39:45.220 --> 00:39:49.860 What it was was non-union contracts, in other words, you hire a guy, as part of your condition 452 00:39:49.860 --> 00:39:52.380 of employment, you agree not to join a union. 453 00:39:52.380 --> 00:39:55.100 Beautiful contract, which meant the guy, if he tried to join a union, he was immediately 454 00:39:55.100 --> 00:39:57.300 fired because he violated his contract. 455 00:39:57.300 --> 00:40:00.340 This contract was outlawed in the Norris-LaGuardia Act. 456 00:40:00.340 --> 00:40:05.340 Secondly, the Norris-LaGuardia Act prohibited the use of injunctions in any labor dispute. 457 00:40:05.340 --> 00:40:11.340 This meant that if the union was about to commit violence, you could no longer go to the court and get an injunction preventing this. 458 00:40:11.340 --> 00:40:15.340 You had to wait until the violence was committed and then try to do something about it. 459 00:40:15.340 --> 00:40:23.340 So that was a key thing, the Norris-LaGuardia Act, in privileging labor unions against anybody else, putting them above the law, so to speak. 460 00:40:23.340 --> 00:40:29.340 And then a whole bunch of other things where local governments in particular looked the other way at union violence. 461 00:40:29.340 --> 00:40:36.340 The unions are inherently committed to violence in this sense. Employers are always trying to keep their production going, that's their major interest here. 462 00:40:36.340 --> 00:40:41.340 The unions, when they're striking, their major interest is keeping non-striking workers from working. 463 00:40:41.340 --> 00:40:48.340 In other words, they're trying to keep non-strikers out from taking their jobs and therefore rendering them useless in this whole situation. 464 00:40:48.340 --> 00:40:51.340 Because if you can hire other workers, you can say, I'm going on strike. 465 00:40:51.340 --> 00:40:56.340 Supposing I did that, supposing I quit my job and say, I'm on strike now, I'm going to pick a sign, 466 00:40:56.340 --> 00:41:02.340 Pauli would be very happily say, okay, we'll hire somebody else and that's to you and I can be picketing for the rest of my life. 467 00:41:02.340 --> 00:41:11.340 So the point is the Union cannot do anything at all, no power whatsoever, unless they can in some way keep that non-striker from replacing him on the job. 468 00:41:11.340 --> 00:41:20.340 The only way they can really do that, first they can cultivate this mystique of never crossing a picket line, that's extremely important in this thing, but basically it's like physical force. 469 00:41:20.340 --> 00:41:26.840 In other words, when union strikes, they're almost impelled by the logic of the situation to use force to keep the strikebreakers out. 470 00:41:26.840 --> 00:41:28.840 And that's what they do, almost inevitably. 471 00:41:28.840 --> 00:41:33.340 So in other words, we find out that there was violence in 1877 on the Pullman strike, or whatever. 472 00:41:33.340 --> 00:41:35.340 You know immediately right away who is responsible. 473 00:41:35.340 --> 00:41:37.840 We know the unions are responsible without even looking at the facts. 474 00:41:37.840 --> 00:41:40.340 That's their inherent interest in the situation. 475 00:41:40.340 --> 00:41:45.340 It's true that employers have used violence in the past to try to beat up union organizers and stuff like that. 476 00:41:45.340 --> 00:41:49.840 But the point is that inherent in the situation of the unions almost always have to use violence in a strike situation. 477 00:41:49.840 --> 00:41:52.520 situation where the employers either can or can't. 478 00:41:52.520 --> 00:41:56.200 The local governments, especially in the north, the south is still pretty firm on this. 479 00:41:56.200 --> 00:42:00.000 In the north, the local governments, the police are instructed not to do anything, not to 480 00:42:00.000 --> 00:42:04.760 interfere in quotes and labor disputes. And that really means, of course, the unions are permitted to beat up 481 00:42:04.760 --> 00:42:07.880 strikebreakers. That's the essence of the whole thing. 482 00:42:07.880 --> 00:42:09.700 Here we have the class struggle, 483 00:42:09.700 --> 00:42:11.160 the real class struggle 484 00:42:11.160 --> 00:42:15.320 totally nakedly revealed. The real class struggle is not between workers and employers, 485 00:42:15.320 --> 00:42:18.320 not between unions and employers, the real class struggle is between the union 486 00:42:18.320 --> 00:42:26.320 and the strikebreakers. These two groups of workers, the non-union workers are trying to get in, the union workers are claiming so-called property right on the job 487 00:42:26.320 --> 00:42:33.320 and try to keep the other workers out. This privileging of unions allowing them to use violence and strikes is endemic. 488 00:42:33.320 --> 00:42:41.320 The second fixing that happened was that in addition to allowing union violence, which incidentally is not being allowed in the South. 489 00:42:41.320 --> 00:42:46.320 One of the reasons why the South has not been industrialized much is that the South takes no guff from union violence. 490 00:42:46.320 --> 00:42:55.320 In 1935, the Federal Government passed the Wagner Act, which succeeded the Section 7 of the N.I.R.A., which is 1933, which is similar, but the Wagner Act really fastens this thing. 491 00:42:55.320 --> 00:43:05.320 We've been living under the Wagner Act ever since. When the Republicans came in in the mid-40s, they passed the past Hartley Amendment to the Wagner Act, which is really just cosmetic. It did not change the situation. 492 00:43:05.320 --> 00:43:19.320 We've been living under the Wagner Act ever since. When the Republicans came in in the mid-40s, they passed the Taft-Hartley Amendment to the Wagner Act, which is really just cosmetic. It did not change the situation, or what most people think it has. We were still living essentially under the Wagner Act. 493 00:43:19.320 --> 00:43:30.320 But the Wagner Act was essentially this, one that outlawed, quote, anti-union discrimination, unquote. Not only was it a yellow dog contract outlawed, but an employer was prohibited from firing a union organizer. 494 00:43:30.320 --> 00:43:37.320 In other words, if you're an employer and you see this guy troublemaking, type, wandering around instead of working, he's out there trying to organize a union, you can't fire him. 495 00:43:37.320 --> 00:43:52.320 Secondly, the Wagner Act set up machinery headed by the National Labor Relations Board for compulsory collective bargaining for any union who can win a majority vote held by the National Labor Relations Board anytime when the union wants it. 496 00:43:52.320 --> 00:43:54.320 Petitions are sent in. 497 00:43:54.320 --> 00:44:00.320 If they can get a majority vote of the so-called bargaining unit, who defines the bargaining unit? The NLRB defines the bargaining unit. 498 00:44:00.320 --> 00:44:07.320 And usually, especially in the early days of unionization, the NLRB would change the definition to a core of where they think the union could win. 499 00:44:07.320 --> 00:44:14.320 In other words, if the union had a majority in the whole industry, they'd call the unit the whole industry. 500 00:44:14.320 --> 00:44:19.320 If it was the whole firm, they'd call it the whole firm. If it was just one plant on the firm, they held an election only in that plant. 501 00:44:19.320 --> 00:44:40.320 The Union wins the majority, then all the minority are compelled to be represented by that union. 502 00:44:40.320 --> 00:44:43.320 They cannot bargain individually with the employer anymore. It's not illegal. 503 00:44:43.320 --> 00:44:51.320 The employer is forced to quote, bargain in good faith, unquote, with a majority with an officially designated union. What's bargaining in good faith? Who knows? 504 00:44:51.320 --> 00:44:59.320 It's all what the NLRB says it is. If they have a conservative NLRB, they'll allow this whatever, and if they have a left-wing NLRB, they won't allow much of anything. 505 00:44:59.320 --> 00:45:04.320 If you went in, if you didn't offer a wage increase, it was called not bargaining in good faith. 506 00:45:04.320 --> 00:45:12.320 Under this regime, we have compulsory collective bargaining, the majority of the so-called unit, and outlawing anti-union discrimination. 507 00:45:12.320 --> 00:45:18.320 Take a diagram, starting with, say, 1900 and continuing on to 1935. 508 00:45:18.320 --> 00:45:22.320 This is the fourth percentage of unionization in the y-axis. 509 00:45:22.320 --> 00:45:28.320 It goes from somewhere like 2% to 8% until 1935, and all of a sudden zip is up to about 25%. 510 00:45:28.320 --> 00:45:35.320 From then on, it's been going down slowly ever since, because what's happening is there's been a shift, a relative shift over time, 511 00:45:35.320 --> 00:45:39.320 since World War II, from manufacturing industry to service industries. 512 00:45:39.320 --> 00:45:44.320 The service industry is usually non-unionized, so the impact of unionization is dwindling anyway. 513 00:45:44.320 --> 00:45:49.320 What happened to the real wage rates while this was going on? What happened was nothing. Zip. Zilch. 514 00:45:49.320 --> 00:45:54.320 In other words, if you take average wage rates, average wage rates for the whole industry, 515 00:45:54.320 --> 00:45:59.320 in this whole period, going up to 3% every year, keeps on going up 3%. 516 00:45:59.320 --> 00:46:02.320 Before and after, there's no change whatsoever. 517 00:46:02.320 --> 00:46:07.320 Sudden staggering increase in unionization had no effect whatsoever on average total wage rates. 518 00:46:07.320 --> 00:46:12.320 What does it do? Well, it benefited some unions, the expense of others. It shifted around a little bit. 519 00:46:12.320 --> 00:46:19.320 It redistributed some income from strong unions to weak unions, or from non-unions to weak unions to strong unions. 520 00:46:19.320 --> 00:46:22.320 But overall, it did not benefit the labor force. 521 00:46:22.320 --> 00:46:30.320 What does the union actually do? What the union actually does, really, down deep, is to slow everything up, to slow up change. 522 00:46:30.320 --> 00:46:34.320 Because as I said before about Brooklyn Polly, if you have a non-union situation, 523 00:46:34.320 --> 00:46:39.320 The wage rates fluctuate rapidly in accordance with the demand and supply of the labor force. 524 00:46:39.320 --> 00:46:42.320 If you have a union situation, you can't change anything. You've got a three-year contract, 525 00:46:42.320 --> 00:46:45.320 a three-year contract, you have to negotiate for months, there's a whole big headache. 526 00:46:45.320 --> 00:46:48.320 There's a big, long process involved in changing anything. 527 00:46:48.320 --> 00:46:55.320 So what you have essentially with unions is sand in the machinery, sand in the gears, slowing down everything. 528 00:46:55.320 --> 00:46:58.320 Well, this means that you're slowing down in both directions. 529 00:46:58.320 --> 00:47:02.980 In other words, in an inflationary period, in a boom period, union wage rates tend to 530 00:47:02.980 --> 00:47:07.200 lag behind non-union wage rates, and say nothing in prices in general. 531 00:47:07.200 --> 00:47:11.400 In general, unions tend to do badly during an inflationary period, which of course is 532 00:47:11.400 --> 00:47:15.320 one of the reasons why many business interests tend to like inflation. 533 00:47:15.320 --> 00:47:19.400 During a recession, however, unions also throw down any cut in wage rates. 534 00:47:19.400 --> 00:47:24.440 So the economic power in general of unions at this point is really only in recession 535 00:47:24.440 --> 00:47:36.440 period. Aside from the Kraft Union situation, which has been there anyway before 1935, as far as economic power goes, it's really mostly in recessions where you can't cut wage rates and cause unemployment right away. In boom periods, they do pretty badly. 536 00:47:36.440 --> 00:47:48.440 Hey, interesting thing has happened about economists and unions. When I was first entering the economic profession, there was a whole wing of people called labor economists. There still are. They specialize in labor and they were very gung-ho pro-union. 537 00:47:48.440 --> 00:47:49.440 Pro-Union 538 00:47:49.440 --> 00:47:55.400 By this time, or after unionism has been in full flower now for 25, 30 years, you can 539 00:47:55.400 --> 00:47:57.960 finally find anybody who is pro-union in the economics profession. 540 00:47:57.960 --> 00:48:01.440 The labor economists will talk mostly about discrimination, they say very little about 541 00:48:01.440 --> 00:48:02.440 unions. 542 00:48:02.440 --> 00:48:03.440 If they say anything about unions, it's very apologetic. 543 00:48:03.440 --> 00:48:08.120 They really pretty well acknowledge that the unions don't increase wage rates, that they 544 00:48:08.120 --> 00:48:11.640 benefit one group of workers in the sense of the other and so forth and so on. 545 00:48:11.640 --> 00:48:14.240 It's hard really to do anything else. 546 00:48:14.240 --> 00:48:18.440 The other cheering thing about this is that for all veteran anti-union types like myself 547 00:48:18.440 --> 00:48:22.380 it's kind of encouraging because you look around and I was brought up in total and intense 548 00:48:22.380 --> 00:48:26.520 hatred of labor unions, but if you realize that unions really don't have that much power 549 00:48:26.520 --> 00:48:30.760 even though they're 25% of the labor force, they really don't do much except putting sand 550 00:48:30.760 --> 00:48:34.920 in the machinery, then you don't have the sort of panicky outlook as many conservative 551 00:48:34.920 --> 00:48:39.440 economists do still about unions tend to think the world is going to go under, the economy 552 00:48:39.440 --> 00:48:41.440 is going to collapse because it's heavily unionized. 553 00:48:41.440 --> 00:48:47.440 It's really not true because unions don't have that much of an impact, except for the craft unions, which have been around for a long time anyway. 554 00:48:47.440 --> 00:48:54.440 The industrial unions, even though they make a lot of noise, they slow up the machinery, they really don't cause much dislocation, they don't have much economic power. 555 00:48:54.440 --> 00:49:03.440 It doesn't mean I look benevolently on unions, it means I just don't have the historical hostility of unions, which many of my conservative economic brethren have. 556 00:49:03.440 --> 00:49:09.440 Some interesting examples of one of the things that unions do, and one of the reasons why labor economists are disillusioned with them, 557 00:49:09.440 --> 00:49:14.140 This business union collusion, which happens quite often, for example, in the coal industry, 558 00:49:14.140 --> 00:49:19.440 John L. Lewis, who was the famous head of the coal miners union, was an extremely good economist. 559 00:49:19.440 --> 00:49:23.940 He understood the way you increase wage rates is by disemploying a whole bunch of people. 560 00:49:23.940 --> 00:49:25.940 He said, great, this is exactly what he wants. 561 00:49:25.940 --> 00:49:31.440 He was only interested in maximizing the income of his senior workers, in other words, the guys with seniority. 562 00:49:31.440 --> 00:49:35.440 He destroyed the coal mining industry because you only do it slowly enough so that his favorite, 563 00:49:35.440 --> 00:49:39.440 The workers of seniority will get theirs and everybody else gets shafted. 564 00:49:39.440 --> 00:49:44.360 You do it in such a way, you disemploy only the younger workers and the workers without 565 00:49:44.360 --> 00:49:47.720 seniority, and the workers who have seniority can continue off the rest of their lives with 566 00:49:47.720 --> 00:49:49.520 a very high wage rate. 567 00:49:49.520 --> 00:49:53.200 Many employees are willing to go along with this because the big minds, the lower-cost 568 00:49:53.200 --> 00:49:57.200 big minds, were very happy to put their smaller competitors out of business by this, by raising 569 00:49:57.200 --> 00:49:59.000 the general cost for everybody. 570 00:49:59.000 --> 00:50:02.640 They put their marginal competition out of business, thereby raising the price of coal. 571 00:50:02.640 --> 00:50:07.480 So we have an employer collaboration at the expense of the smaller marginal co-operators 572 00:50:07.480 --> 00:50:12.320 and the non-union workers and the younger workers, as a result of which we have now Appalachia. 573 00:50:12.320 --> 00:50:16.880 One of the reasons for Appalachia is you have co-workers who can't find a job. 574 00:50:16.880 --> 00:50:19.520 One of the reasons they can't find a job is because they've been kicked out of the whole 575 00:50:19.520 --> 00:50:23.960 thing by union employer collaboration. 576 00:50:23.960 --> 00:50:26.200 But this sort of thing goes on quite a bit. 577 00:50:26.200 --> 00:50:31.200 I think it's one of the reasons why the labor economist friends have sort of become disillusioned 578 00:50:31.200 --> 00:50:32.200 with Unionism. 579 00:50:32.200 --> 00:50:35.280 So how do you solve the Union question? 580 00:50:35.280 --> 00:50:38.240 Many conservatives, for example, Professor Hutt, who's just written a very good book, 581 00:50:38.240 --> 00:50:40.120 called The Strike Threat System. 582 00:50:40.120 --> 00:50:44.160 People like Hutt are so anti-Union, they want to use the power of government to crack down 583 00:50:44.160 --> 00:50:45.160 on Union. 584 00:50:45.160 --> 00:50:49.120 So there are either outlaw strikes, which really means compulsory arbitration, whereas 585 00:50:49.120 --> 00:50:52.880 it really means the government stepping in and deciding wage rates, or outlawing unions 586 00:50:52.880 --> 00:50:57.200 altogether, or outlawing industry-wide bargaining, or so-called right to work laws, which really 587 00:50:57.200 --> 00:50:59.760 outlaw a closed shop, which really interfere with a contract. 588 00:50:59.760 --> 00:51:08.760 Because if you're an employer, you want to have a closed shop for some reason, you want to have your stone masons, elderly Italian stone masons, give them a closed shop, why should you be prohibited from doing it? 589 00:51:08.760 --> 00:51:12.760 The right to work laws do that. They interfere with the right of free contract. 590 00:51:12.760 --> 00:51:16.760 So these people are so anti-union, they're willing to use the, probably use the power of government to crack down on unions. 591 00:51:16.760 --> 00:51:21.760 My contention is you don't need any of this nonsense, aside from the violations of property rights. 592 00:51:21.760 --> 00:51:27.760 All you have to do is eliminate what the union meant us, is simply remove the special privileges which have grown up around them, 593 00:51:27.760 --> 00:51:33.520 on them, repeal the Oswald-Guardia Act, repeal the Wagner Act and TOTO, end all this looking 594 00:51:33.520 --> 00:51:38.000 the other way for union violence and the whole problem would disappear overnight. We'd be 595 00:51:38.000 --> 00:51:42.920 back to our old electricians in Hoboken and that would be about it. Maybe the crazy musicians. 596 00:51:42.920 --> 00:51:48.640 And so the whole union problem would really wither down, wither away, wither down back 597 00:51:48.640 --> 00:51:52.120 to the pre-1935 side. It was dramatic but really not so important.