If you know anything at all, no employer is going to hire another worker to produce less
of a product than they had before.
You're paying out money, you're getting less return.
Obviously idiotic.
Also, nobody's going to be hired on the line here, because on the line, the marginal product
is zero.
You're hiring a worker for a certain amount of money, you've got no more, zero increase
in product.
You're not going to do that either.
So Zone 3 is for both, in other words the whole, because what happens in Zone 3 is there are too many workers per fixed capital.
There are so many workers per land and per capital equipment that are producing a lower product all the time, or even no more product.
So nobody is going to operate in Zone 3. No factor will be employed in Zone 3.
That's pretty self-evident. The problem with Zone 1, Zone 1 is a little trickier. I went through that old thing, but the point with Zone 1 is,
In the area of Zone 1, the fixed factors are too excessive compared to the number of workers.
You have so few workers per land and capital that the workers have to rush around trying
to use all of them, you wind up with a lower average product.
The marginal product is negative.
The marginal product for fixed factors is negative in Zone 1.
And on the line, the marginal product is zero for fixed factors.
To show that, if you have two workers trying to grow wheat in 10,000 acres, you get more
wheat if you cut out half the acreage.
If you simply cut them out, the workers are going to find themselves a smaller amount
of land and be much better at it.
So in other words, here you have an excessive amount of a variable factor, so the marginal
product of the variable factor labor in this case is negative, and here the marginal product
of the fixed factor is negative, and therefore nobody employed, no factor will be employed
So you wind up with a conclusion that all factors of production, land, labor and capital, will
always be employed in Zone 2 for any product whatsoever.
In other words, in the area of diminishing returns, where average physical product is
declining, marginal physical product is declining a little less, or greater than zero.
This doesn't need empirical testing either, those who want to do it can do it, but it's
not necessary, it's part of the logic of reality.
So the next step is to demonstrate what the demand curve is, this is what we're trying
to get at here.
The employer, of course, is interested not so much in physical production, he's interested
in selling it and getting an income, so we have to bring in the price system.
By the way, in general, in economics, as you go through, go on, continue in life, you'll
read economics willy-nilly from time to time on the financial pages or whatever.
Remember, any model of the economy doesn't mention the price system as crackpot.
Prices have got to show up somewhere.
If they don't show up, for example, much of macroeconomics, prices drop out.
Don't talk about prices.
Be very suspicious if any economic model or theory doesn't mention prices.
Prices are the key to the whole system.
So similarly here, what happens is the employer is interested in total revenue and total course,
of course, maximizing profit.
In the case of revenue, he's interested in factors of production which will bring him
greater revenue.
So the total revenue, of course, as we know, is the price of the product times the quantity
produced.
So if you sell Wonder Bay for a buck a loaf, you sell a thousand loads of Wonder Bay, you're getting a thousand bucks.
That's how money in the price system comes into the picture.
And so now we're looking at what is the marginal revenue productivity of each factory production, of each worker, of each piece of land, etc.
How much money is brought in by the product?
So what you do is you multiply, in the case of marginal, so here you have marginal physical product,
is delta Q over delta alpha, and a marginal revenue, which is how much each loaf of bread,
Wonder Bread brings into the firm and money, in terms, is equal to delta TR divided by
delta Q. In other words, you sell one more loaf of Wonder Bread or one more Hi-Fi set,
and you get certain total revenue coming in. You sell it for, you know, whatever it is,
If you multiply these two things, MPT times MR, delta Q drops out, and you get delta TR divided by delta alpha.
In other words, how much money is brought in, how much income or revenue is brought in by one more worker, one more piece of land, one more machine.
So this is the marginal revenue product.
This is the marginal physical product times the marginal revenue.
On averages, average physical product, Q divided by alpha, there's a number of bushes a week per worker, let's say, times, then you have average revenue, which is TR divided by Q, which by the way is the same thing as the man curve, that's what price is, this is the price curve of the man curve.
Remember, this is an old friend of the Mann Curve, this is the average revenue curve.
Price, this is quantity, and remember, price times quantity is total revenue, so this is
the price curve of the Mann Curve.
Marginal revenue curve is also falling below it.
So this, when you multiply average physical product on average revenue, at least the quantity
drops that, and you're left with TR per alpha, in other words total revenue per worker, let's
say, which is the same thing as average revenue, revenue product.
In other words, revenue product, how much total income is brought in by each worker
or each machinery, comes into the picture by multiplying the physical product times
the price, or times the marginal revenue, that's how the money system is brought into
the picture.
My final contention was on Tuesday that this is, that the demand curve by the employer for
every factor of production will be the marginal revenue product curve.
This is the, oh wow, we're looking at a demand curve for workers or machines or land, this
is say price or wage rate in the case of workers, this is the quantity hired, alpha or quantity
What I'm contending is that the man curve of the firm or the industry or whatever for workers is the same thing as the marginal revenue product curve.
Because the employer, when the employer is trying to hire a worker, let's say you're comparing the cost of the benefit, comparing the revenue brought in by the worker with the cost of paying out.
Remember, you're trying to act at each point where you're making a profit and maximizing your profit.
Well, if the wage rate, let's say, is $5 an hour, this is the market wage rate, which
for a certain type of labor employer has to pay, if you're, this is, let's say, 100 workers,
and wage rate is $5, that's how much you're paying out, and if the worker brings in a
marginal worker, in other words, a marginal, one more worker will bring in at the margin
7 bucks an hour. That's the productivity. Then, he's making an extra profit of $2 per hour on each additional worker.
If you keep hiring workers, as long as you make a profit, as long as the revenue product is greater than the wage rate,
as long as the money you're taking in is greater than the money you're shelling out,
You keep hiring more workers so long as this is positive, it's tapping the surplus of the state.
But each time you hire more workers, the marginal revenue product curve is falling,
you get less and less of a profit, and you finally wind up with equality.
Actually, you really stop over here. It's one of my arguments in micro theory.
You really stop, say, over here. For our purposes, you don't have to go into that.
What you do is you keep going until you maximize your profits.
And so you get to the point where you just expect a teeny bit more from a worker than you're paying out.
And after that, you stop before you make losses. If you're, let's say, 200.
If you're hiring 300 workers and you're in a situation where MRP is falling all the time, you have diminishing returns,
then you have a situation where you're paying out $5 and you're only getting $3 in revenue.
You're losing $2 per worker, for each additional worker.
In other words, you fire them, you get back to the situation, you avoid your losses, again
you get back to here.
Once again, you have a built-in feedback mechanism, so to speak, which keeps the number employed
or the number hired or the number bought, whatever it happens to be, equal to the marginal
revenue product of a factor.
So in other words, if the rate rate is up here, you hire this many, you hire this many,
you hire that many, etc., etc.
And we've already seen the definition of a demand curve, the definition of any demand
demand curve and given the price, this will show you how much will be purchased or hired
in this case.
Given the price and the lower the price the more will be purchased or hired, etc., etc.
We've already seen when we talk about minimum wage law that demand curve for labor is falling.
Now we're showing why it's falling, exactly how it's falling and what determines it is
the marginal revenue product curve, which is also falling because you have a falling
A falling marginal physical product curve, falling in the relevant zone two, and a falling
marginal, because the marginal revenue curve is always falling, because the demand curve
is always falling, you multiply these two, you get a falling marginal revenue product.
Multiply two falling curves, you have to line up with a third falling curve, okay, as a
product.
So, this is the demand curve for the factors of production.
It's the marginal revenue product curve for labor, different kinds of labor for capital
In short, it's called the Marginal Productivity Theory.
Marginal Revenue Productivity Theory is the correct word, but you could just say Marginal
Productivity Theory for short.
And some people have challenged this thing, somehow it's evil or whatever, this is simply
the fact.
In other words, any price of factors, including wage rates, will equal the marginal revenue
Mark Curve. This determines the demand curve for labor or land or capital. Then of course
you have the supply curve. So you have the demand curve for labor or any factor, which
is marginal revenue or product, or you have the supply curve which is whatever, you wind
it up with a market equilibrium wage rate or rent of land or price of capital goods
or whatever.
This is the summation of what we had to do that because I'm throwing too much at you.
And what we'll now do is investigate the labor market in particular, which is the most important
of the factor markets.
Obviously, of course, we're interested in the people, we're interested in what happens
to wage rates, why they're what they are, and what determines them.
In the case of labor, you do not really get a vertical supply curve.
Land will have a vertical supply curve or any given capital equipment.
In the case of labor, however, nobody's going to work 40 hours a week or whatever for a
penny an hour.
You want to stay home.
In other words, leisure is always an alternative.
So it's something like that.
In other words, you'll at least get something like this, with a sharp falling off of the
supply of labor curve as you get into a low wage rate area.
And the greater the unemployment insurance or the welfare payment, the higher this is
going to be, the bigger the floor you've got on how much wage rate people will accept.
So also another thing, and it gets more complicated by the fact that some people are not on the
labor force.
I think I've already mentioned this when I dealt with unemployment, the minimum wage
law.
The whole population, the labor force is defined as those who are employed or seeking employment.
So it's sort of a variable thing because some people are retired, other people are babies,
so there's a lot of play in the system. For example, the last 20 years or so, or 10 years,
a lot of housewives, of course, have entered the labor force. So you have people who are,
the population might have stayed the same or gone up a little bit, but the labor force has gone way up for that reason,
for that particular reason. So there's a tendency, even in the short run, to have a forward sloping
supply curve for labor because if you raise wage rates enough, people will stop being
half-lives and join the labor force. In other words, there's an incentive. It's a little
bit dependent on babysitter prices, or whatever you want to call it, daycare prices or something.
To raise wage rates there for women considerably above the babysitting price or daycare price,
you'd have more women entering a labor force.
Wage rates go down, less of them will enter, so generally there'll be a forward sloping
supply curve for labor even in the immediate short run, even day to day.
So we can have a little bit more like this.
Now this general supply curve will change for each industry, for each firm.
In other words, this is true for labor for any other factor.
If you remember, if you multiply the alternatives open for you, then you have a more elastic
you get that becomes the curve.
Consumers of demand curve for, remember for Wonder Bread, as much flatter than the Man
Banker for Bread as a Whole. Similarly, the supply curve of labor, say, to one industry would be much flatter, more elastic than the supply curve of labor in general.
In other words, as I said, of plumbers, there's a big increase in the amount of plumbing, let's say, and the wage rates of plumbing go up.
You'll have people going in, you'll have a more flatter supply curve of plumbing, a supply curve of labor to an industry.
It's flatter. If you raise the wage rates, more people will be brought into plumbing or computer engineering or whatever.
The lower up people get out of it. This is a more longer run thing, of course, and with that, you get a longer run perspective.
The estimated supply curve of each firm will be very quite flat.
So if Ford increases wage rates compared to General Motors, people tend to leave General Motors and go into Ford or vice versa.
So the supply curve of labor to a firm will be flatter than the supply curve of labor to an industry or labor in general.
So labor is partially mobile, and it's not completely mobile, but it is mobile to a large
extent.
In many cases, of course, people leave, it's not that you leave an industry at the age
of 50.
I mean, farmers, there's been an overall shift over the last two centuries from the
farm to the city.
It's not that every farmer drops a pitchfork and leaves.
It's that the sons of the farmers growing up leave the farm and go to the city.
So the most mobile labor force, of course, are teenagers or people just entering labor
force.
Much more mobile people have been in the business for 20 years, so generally the mobility takes
place among young people.
They're the ones that are freer to move to California and all the rest of it.
So you don't need everybody to be mobile for this thing to work.
All you need is some people, and that's exactly what they do.
They leave for opportunities, they leave Michigan and go to California and go to Texas and stuff
like that.
In England, there's much lower mobility.
People tend to, if they're born in structure, they live in structure until they die, they
never see beyond twenty miles of that
so uh... there are different cultures which have different
rates of mobility, so to speak
historically over time what tends to happen is that
capital equipment per worker goes up, in other words
you have
you start with Crusoe, if you remember way back in the first
Our, we talk about Crusoe, Star of Crusoe, you have one stick, that's his capital equipment,
one net, or a bow and arrow or something.
Now we've got, over the centuries, we've accumulated lots of capital equipment.
And as we do that, it increases the productivity of the labor force.
In other words, if this is the marginal productivity of labor, it keeps increasing over the years
because there's more capital equipment and better technology of capital per worker.
That's really the key.
In other words, you have a labor force, of course, goes up, but you have an even greater
increase in capital equipment and productive capital equipment, et cetera, et cetera.
So as a result of that, you have a fall in the price of machinery, fall in the price
of capital equipment, and a fall in the price, of course, of consumer goods, and an increase
in wage rates.
In other words, the man for labor, as the productivity of labor increases over time,
and this is man for labor, we're not talking about, quiet please, we're not talking about
Wage Rates. Over time, the history of capitalist development is a history of increase of capital
equipment and high technology, which constantly increases the demand curve for labor and thereby
increasing the wage rate. So this is a supply of labor, you have something like that. But
over time you have a continual increase in what's known as real wage rates, wage rates
per purchasing power, not just in money terms, which could be inflationary, but in real terms
The reason why the standard of living goes up over the century, especially since the Industrial Revolution, the mid-18th century,
is the continuing increase of capital investment, capital equipment, and technology embodied in capital equipment.
Technology by itself wasn't doing anything. The Romans probably had a lot of high-tech development.
They didn't apply it much to real life. Just inventions isn't enough. You have to apply them in industry, in capital investment.
and body of them, so to speak, in capital investment.
So what you have over time, tendency is to have higher wage rates with more jobs.
In other words, there's room for more people as you keep increasing the man curve for labor.
So the way you have increased employment at higher wage rates.
This is a labor market.
So what this mostly rests on is increased capital development, capital accumulation, and higher technology embodied in capital accumulation.
For this you need savings, you need investment, and the rest of it, you need a capitalist function to do this.
And so over time then you have more jobs and higher wage rates. This is the history of the 19th and 20th centuries, fortunately.
Okay, so the route, this is one route to higher wage rates.
The other route, possible route to higher wage rates, is the route taken by restrictionism,
by cartels, at this time cartels of labor, called labor unions, namely, what you try
to do, given the demand for labor, instead of increasing, instead of promoting the idea
of increased capital investment, higher wage rates through jobs, what you try to do is
restrict the supply of labor, push it to the left in some way, thereby increasing the wage
rate at the expense of those who are displaced.
In other words, you take the labor force, you restrict it in one way or the other, you'll
see various ways in which it's done, and thereby decreasing wage rates for some people and
increasing wage rates for others at their expense.
This is a restrictionist solution, so to speak.
In this method, the method of capital investment, you're increasing the number of jobs and increasing
In this method, you decrease the number of jobs and increase wage rates.
So what you're doing is you're excluding a bunch of people, either immigrants through
immigration restrictions, or through unions, non-union people who are pushed into other
lower wage occupations.
So this is the, in the labor market, this is the way it's done, you can't, unions don't
have any, unions can't determine wage rates, they can't say, okay, we decide to have 50%
wage increase.
If they can do that, they can do it unlimitedly, you know, just like with minimum wage law.
The union can come and say, we want quadruple the wage rate for everybody.
Okay, we'll do it. Can't do that because the firms are going out of business.
So what a way it's done is by trying to control the labor force,
restricting it and pushing wage rates up at the expense of other workers.
So what you have in real life, in contrast to the Marxist myth that
you have a group of capitalists on the one hand with common class interests,
a group of workers on the other hand with common class interests, and two are at war, just the opposite.
Capitalists are competing among themselves for goods and services and all that, and workers compete among themselves for jobs and wages, etc.
So unions are very much like a cartel of workers, with a similar aim of cutting the supply and raising the wage rate.
We'll see how that can be done next time.
What unions try to do is control the labor market for their particular labor as they
can keep out entry in one way or the other and they can then raise the wage rate.
The economic power of the union, and I will define economic power as the ability not to
just make noise but the ability to raise wage rates above the non-union level.
is very different from publicity, the powerful unions are usually the ones that are small,
highly skilled craftsmen, people who have a very small craft and where you need a long
years of apprenticeship to be good at it, which is a small part of a labor force. In
In other words, it depends again, the power of the union depends a lot on the elasticity
of the man curve for labor.
In other words, if, let's take, let's take the automobile workers union, where it's probably
pretty elastic, let's take ditch diggers, they're very elastic, almost anybody with
a good pair of arms and shoulders can be a ditch digger, it does not take ten years of
degrees and stuff like that, okay?
So, you have an elasticity of demand for it, so if you, this is a demand for ditch diggers,
and you have a ditch digger's union, which pushes the wage rate, we demand 50% wage increase,
and you get something like, you know, the quantity of labor higher falls off drastically,
we have huge unemployment, this breaks the union, in other words, the union's not going to last very long,
you demand a certain wage rate increase, and even if you get it, you have 80% unemployment in the industry,
the unemployed ditch diggers go undercut the union at the end of it.
So, in other words, any successful union raising wage rate will cause unemployment.
The point is that they cause a lot of that, they'll destroy the union.
That's why there's no Ditchdigger's Union, otherwise no successful Ditchdigger's Union.
So what you have, these successful unions will tend to be those which have an inelastic demand curve for that particular labor.
So that if you raise the wage rate, let's say this is the supply curve labor, if you push the supply curve to the left,
When you raise the wage rate, you'll cause some unemployment, but not too much, maybe 5% or 10% or whatever.
And the best you're going to hope for is there'll be no visible unemployment.
All you do is eliminate jobs for teenagers coming in, so you won't see unemployment.
There just won't be any jobs available that would have been available without the union increase.
So to do that, you have to have an inelastic demand curve for labor. You have to have certain conditions.
One of them is when you have to control the labor force just to get there in the first place.
The second one is, it should be a small percentage of the total cost of the business, a small percentage of the payroll, so to speak.
To give you an idea, it's a beautiful example from the history of Pauley here.
We used to have two mighty unions here, two massive unions, so to speak.
The faculty union, called the American Association of University Professors, which represented the entire faculty of 280 whoever it was.
and the staff union, which still exists, I think it's part of district 65 of a wholesale retail cart union, something like that, they represent the staff, secretaries, et cetera, so there's a mass union, so to speak, within Polly, 200 members, 150 members, whatever, they have never succeeded in increasing wage rates at all, as a matter of fact, we barely, we usually fall behind, of course, the living increase, we had a faculty union for many years, they used to spend a lot of time on bargaining, as is typical, they used to have hundreds and hundreds of man hours of hysteria,
and so forth, and they wind up three years after the fact. In other words, in 1980, we'd be still bargaining for 1977 wage increases.
And we'd finally get 7%, which would usually be the cost of living, the inflation rate.
So after the union was dissolved, the union was kicked out by the administration, we still got the 7%, actually we got less than that.
We still got the cost of living increase without any bargaining time lost.
In other words, the whole thing was more or less a net loss of general conflict, energy and the rest of it.
On the other hand, the only successful union in this place, a teeny union which nobody ever heard of, the boiler tenders local.
I think there were three boiler tenders, one boiler.
Two or three boiler tenders as long as the boiler tenders local, whatever it is, the boiler tenders union.
So one time they had a little strike, kind of funny.
They had one picket way off from the corner and around the corner so nobody could see them.
I said, on strike, very decorous little strike, we're not on strike, local 38 or whatever,
the boiler tenders union.
So in those days we had a mighty and powerful faculty and staff union, we went, allegedly
powerful, we went to them, we said, would you like solidarity, he wants to pick it with
you and he wants to help propagandize, leaflet, go away, leave us alone, we don't have nothing
to do with you people.
And so after about three weeks of a very decorous strike, the boiler tenders strike was settled,
they got a 50% wage increase.
Why?
Why? Because there are only two or three guys. They probably can afford to give a 50% increase to three people.
They can't afford to give 50% to 200 people. That's the difference.
In other words, if you have a teeny union in the interstices of the labor force, so to speak,
and I don't know how skilled it is. There's only some skill involved in boiler tending.
And you have a small labor force that's sort of in the pocket of the situation,
and an employer can afford to give you a big increase.
These are the successful unions during the days of the free labor market, even now.
In other words, the sort of unions which made it, which were able to raise the wage rate for their employees,
were unions that are small, skilled craft, but they can restrict the labor force.
For example, stonemasons. There are very few stonemasons left.
It's a magnificent, lovable craft, and unfortunately sort of dying out.
The only stonemasons are elderly Italians who were trained in Italy, I think.
They're getting, you know, they're getting fairly old by this time, so they're only about five stonemasons, whatever, in the United States.
They have a strong union, because what the hell, I mean, how many stonemasons are hired?
You can afford to have a big increase.
So at any rate, so what you have then, in the free labor market, before 1935, in other words, from 1880s to 1935,
they had more or less a free labor market. There was no government intervention in the union, in the labor market.
In this period of a free labor market, the only unions which were successful
were those with skilled, so-called craft unions, skilled, small unions
which can restrict their labor force, which are a small percentage of the payroll,
glassblowers, cigar-banned workers,
stonemasons, particularly in the building trades, construction, which is still true by the way,
joiners, plumbers,
carpenters.
The thing about the billing trades is that in a sense they're local, they're monopolistic
within each locality.
In other words, if you're, let's say, in the garment business or the printing business
and your unionized, your costs go up or your prices go up, business can shift to North
Carolina, which it does happen.
Say you have a garment factory in New York, it's unionized, the costs are high, and the
buyers simply go to, you know, somebody sets up a clothing factory in North Carolina, which
is non-union, they undercut the current New York plan, the whole New York plan goes bankrupt,
of the Union goes bust. But in construction, you can't do it that way. In other words,
Chicago construction or Houston construction doesn't really compete with New York construction.
You're not going to leave New York to become a construction person, a real estate person
in Chicago. So it's more or less geographically monopolistic, so to speak, construction. Therefore,
unions have been able to take root in the building trades or construction more than
any other industry, more than any occupation. You have a whole bunch of construction, as
The same unions, craft unions, carpenters, machinists, electricians, joiners, a whole bunch of the masons, et cetera, et cetera, all heavily, the restriction is monopolistic.
These firms, these unions control their labor force with a mighty will. They increase their wage rate to the expense of other non-members. How do they do it? They cut the supply.
In other words, you can't be, at least until recently, I don't know if there's a whole affirmative action sort of stuff, but before, let's say a few years ago at least,
You cannot join the carpenter's union, electrician's union, plumber's union, say in New York or in Jersey City or whatever, unless you're the son or nephew of an existing union member, period.
And all non-sons and non-nephews are excluded. In other words, you have very sharp restrictions. As a result, you can increase your wage rate.
If you have an inelastic demand curve, it's even better, you can increase your wage rate.
At the expense of those who would like to become carpenters, joiners and electricians, they can become supermarket clerks instead.
or they're driven in, they're pushed into non-union or non-powerful union occupations.
So if you want to be an electrician, let's say, in Hoboken, you can't do it.
You're not a son or a nephew of a union member, you can't do it.
You just can't be an electrician.
You have to either move to Texas or California or become a supermarket clerk or a gas station
attendant.
So what happens is, in other words, is these unions have been accused of being racist.
Well, in a sense, they're racist, but also they hate all, not only other races, but they
discriminate not only against other races, but against non-relatives, that's what they
Non-sons and non-nephews.
In recent years, women have entered the construction trade, so it's a little bit of loosening up on this,
but it's still, I think, basically true that these craft unions are highly restrictive.
So what happens is that this is a union membership, this is a craft union occupation.
You cut the supply drastically to the left by restricting the supply of, say, electricians only relatives.
Then you increase your wage rate. These people, however, are excluded. These people would have been electricians, like to be electricians, are pushed into other non-union industries.
So they become, let's say, supermarket clerks or something like that, which increases the supply of labor in the supermarket clerks or in gas station attendants.
So the wage rate goes down. In other words, what these unions are doing, they're increasing the wage rates of their members at the expense of lower wage rates for other people, for competing workers, so to speak.
There's no overall increase in wage rates over the entire labor force, but unions, if they can do it at all, they can accomplish the raising of wage rates for their members at the expense of other occupations who suffer lower wage rates.
So what you have is competition within the labor force. Not so much employers will get hurt by union restrictions as other workers, or not relatives, or not fortunate enough to be the son of an existing union member.
So before 1935, in the free labor market, the unions took hold of crafts and construction industry in particular. Anthracite coal, in contrast to bituminous coal, which is what most coal is, bituminous coal is all over the place, all over the eastern seaboard, in West Virginia, Kentucky, Pennsylvania, whatever. It's also in the mountain state. Anthracite coal is only in a little area of eastern Pennsylvania around Scranton. So it's very easy then.
And so it was easy to organize a powerful anthracite coal union, which was done, which could then be restricted and all the rest of it, but not in bituminous coal, which only came in after 1935 when the government intervened heavily in the labor market.
So, the only other, let's see, construction, exercise, a few skilled crafts, glass balling
and things like that, and the only other one I can think of at this moment is the musicians
union, a strange paradox.
Apparently the thing with musicians, this is so true, actors, the acting, the stage
hands union, the theater, very powerful craft unions, they suffer very heavy unemployment,
Unemployment. In other words, they push up the wage rate enormously. Unemployment in the
musician industry is like 80, 90 percent. Same way with actors. Actors are mostly waiters
in restaurants, things like that. They wait for their big break. So apparently acting
in theater and musicians is such that people love to play music to such an extent. They're
willing to accept a 90 percent unemployment rate, spend most of their time hanging around
on media occupations waiting for their big break. In that sort of situation, they don't
Break the Union, in other words. It's a very, sort of a bizarre, eccentric kind of occupation.
I learned labor economics from a former union economist with very knowledge, very savvy
and all this. He looked down the list and he said, well, musicians are, how come musicians
can break the mold? How come they can have a big unemployment rate, which wouldn't be
tolerated, say, in an FSI coal or construction? He said, well, musicians are crazy anyway.
Everybody knows that. Anyway, that's the reason. In other words, they're willing to accept
a union wage rate which which unemployed most of them most of the time because they're waiting for that big break
this is uh... these are really the only
the only uh... unions that were successful before 1935
within that framework there was a very small percentage of labor force obviously, in other words
uh...
between 1886, 1885, let's say 1935
proportion of union membership to the total labor force was
varied between
3.8%, something like that. A very small proportion. In other words, the union problem, whatever
it is, was fairly limited. It was limited mostly, as I say, to construction, anticyclo,
and the rest of the time, within this 3.8%, it would fluctuate in accordance with the business
cycle. In other words, in the boom periods, okay, in the boom period, demand for labor
goes up. So, it's increased wage rates. So, in other words, wage rates go up in a boom
and the boom period and unions took the credit for it and say, hey, look, we're increasing
our wage rates in the clothing industry.
People join the union because of that and then comes the recession, the man for labor
goes down again, wage rates would fall on the free market and unions try to keep wage
rates up and it's heavy unemployment and it breaks the union.
So what you have then, within the 3 to 8%, the 3 to 8% reflect on the business cycle.
In other words, the recession would be down to 3% and the boom would go up to 8% and then
would fluctuate with a business cycle within a very small range, way less than 10%.
It would fluctuate in accordance with the business cycle factor.
So unions would always collapse in recessions, because the reality would hit, wage rates would fall,
and they would try to keep the wage rates up, and bingo, the whole thing would collapse.
So even though historians like to talk about unions, one thing they're usually ideologically in favor of,
The other thing is sort of dramatic, they have a strike, it makes the headlines, it really wasn't that important, it really only covered a small percentage of the workforce.
And what happens then is that with World War I, I mean with the New Deal period, 1930s, everything shifts, there's a massive government intervention which still exists.
The massive intervention, basically two major pieces of intervention, one was 1932, was
the Norris LaGuardia Act, which still exists, which outlaws injunctions for labor disputes,
outlaws the uses of the injunctions, outlaws the injunctions.
Injunction is a weapon that came in the court system in the early 19th century.
Usually if somebody's aggressing against you, somebody's stealing your watch or something,
you call the cops, you try to punish them or prevent them from getting the watch back or whatever.
In other cases, however, we have a continuing pattern of aggression. In other words,
let's say somebody's always driving a truck across your lawn. Let's say there's a traffic jam
in your corner, and the trucks would like to sort of go across your lawn so they can avoid the traffic, and they'd do it.
Some truck keeps doing it week after week. You go to court and get an injunction.
In other words, the judge says, thou shalt not do it. If you do it again, we'll
clap you in jail or whatever. So, the injunction is a way of
preventing a continuing pattern of
aggression or violation of your rights.
It's a very important weapon of the courts, which didn't exist before, about 1810 or so.
Well, in the Onus LaGuardia Act, the way injunctions came in and labor-mortem excuses, on a strike situation, going on strike, what you're doing is you're saying, we won't work anymore for your company until you give us a 20% wage increase or whatever.
The employer tendency is to say, all right, that's up to you, we'll hire somebody else. If you don't want to work for $3 an hour or whatever, we'll hire people who will work.
And that immediately creates a problem for the strikers who then proceed to try to beat up the one way or the other, prevent non-strikers from taking their jobs, in other words, from doing the work at a rate which strikers don't want to do.
So in other words, essential to the victory of any strike for the Union is to use violence against non-striking workers, against replacement workers known as scabs and the vernacular.
So, in order to keep scabs out, or keep the non-strikers out, they have massive picket
lines which intimidate people or beat them up or blow up their homes or their cars, stuff
like that.
So in other words, violence and labor disputes are almost always done by the Union, the reason
is because the only way you can really win a strike is to prevent non-strikers from replacing
Employers don't really have any incentive to commit violence, it's simply the defense's
weapon to try to keep their plan in order and try to keep the non-strikers from being
So generally, there's an a priori insight in most labor issues, most of the violence committed by the unions.
I have also some personal stories of this sort, which still exist, by the way.
A few years ago, I was a student in this class who was working for Con Ed, it was a Con Ed strike.
And a planet Con Ed was down in Madison Avenue or something, somewhere in Midtown Manhattan.
And the union sort of established control over who could get in and out.
in and out.
In other words, the Union said, well, we'll allow managers to stay in, and we'll allow
managers to keep the con-ed going.
We won't allow any managers to come back in, to say, at least, they had to stay there for
the three weeks, you know, whatever the length of the strike is.
They allow food to be shipped in, very, very nice of them, I mean, they allow them to send
food in, but they won't allow the managers to come back, they have to stay there physically
and sleep there and stuff.
Fortunately it only lasted a week or two.
My father, unfortunately, was in this situation. He was a chief chemist of what was then Tidewater Oil Company, now part of Giddy, now part of Texaco, I guess, or something.
Anyway, it was Tidewater Oil Company trying to plant in Bayonne, New Jersey, and the union went on strike.
The union was a so-called company union, which according to the textbooks must be a weak, dominated union, weak, you know, the tool of the employers.
And we're not a tool of the employers at all. We're very feisty.
And so they call a strike and oil refineries have to keep going. You can't shut them down because it'll take a couple of years to bring them up again. You have to keep a maintenance plant going.
So the managers were allowed to stay there and keep the plant going. However, they weren't allowed to come back in. The union wouldn't allow it. The union established its control over the territory, so to speak.
The cops, of course, look the other way, and so they allowed food to be shipped in.
In this case, my poor father was there for about three months, literally, a three-month
strike.
Prison is like being in a concentration camp, being allowed to stay in this crummy dump.
I mean, the refinery is not sort of a luxury resort, if you've ever seen a lower refinery.
So in other words, the Union seizes control, instead of the police performing their alleged
function of preventing violence and keeping the peace, the police abandon this responsibility
to turn over the rule over the streets, so to speak, to the Union.
So at any rate, this is fairly common, and really still is, except in the South, for
example, which always has a sound attitude to a Union question.
Namely, if the police prevent any kind of Union violence, where the police really prevent
Union violence, strikes usually collapse.
There's usually very little Union power for that reason.
A famous case of that is the Kingsport strike in Kingsport, Tennessee, about 10, 15 years
It's a very illustrative kind of situation at Kingsport. Kingsport was a modern plant
in Tennessee, in Appalachia country. And here's this plant which was hiring at a top wage
rate of the area. Beautiful working conditions, great place. Everybody wanted to work for
the Kingsport printing plant. High unemployment in the area. It's Appalachia, which is, next
time I'll tell you why it's Appalachia, because the coal miners union activities. Anyway,
A whole bunch of unemployed people wanting to get good jobs supplied by Kingsport. Kingsport
Union goes down on strike demanding higher wages, totally crazy, sort of like a kamikaze
assault because there's no way you have a... See, the printers always have the propound
of the doctrine. You have to take years to be a good printer. The views of apprenticeship
is like being a physician. There's a lot of baloney. You can train a good printer in a
couple of months. Of course, the printing people knew that. So when the printers went
The unions couldn't use violence because in the south you can't get away with that, you don't own the streets, so they had to take their chances, and the Kingsport Press hired more workers and trained them in a couple of months and that was it.
Workers were very happy, they were getting good jobs, hey, we got a great job at Kingsport, a printing plant, and the strike is still going, supposedly, but they just faded away, they were officially still on strike 20 years later, 10 years later.
In practice, they're all gone. The unions shut up shop and left.
So, if you look at the classic pattern of unions, there was no way they could win it.
It was really like a suicide squad.
They couldn't use violence, they couldn't restrict the supply because there was plenty of heavy unemployment in the area.
And so why do they do it?
Interesting question. Were they totally dumb? Were they crazy?
No, they weren't. But what happened was, unions are now dominated by the national union.
The way the structure of union power goes is that every union has a national union, whatever
it is, the woodworkers union, machinists, automobile workers, whatever, printers, they've
got a national union which has the locus of power, the nationals have a bunch of locals
which are mostly dominated by the national, the national can tell them what to do, locals
The national often join a federation, in our case right now it's the AFL-CIO, the American
Federation of Labor Congress of Industrial Organizations, but the AFL has no power in
itself.
They try to arbitrate disputes within the national union.
The locus of power is the national union which is represented in the AFL, but they really
don't, it's like the UN in a sense, there's no government power over the national union.
So what happened was this, the New York State and New England are essentially in many ways
decaying areas.
In other words, if you're ever going to see textile plants or printing plants or whatever
in New England, they're all falling apart, they're like 19th century buildings and they're
inefficient, they're too small, they're heavily unionized, it raises their costs, etc., etc.
What's happened in the United States over time, the Northeast has originally been a major industrial area.
In other words, the Northeast quadrant has industrialized New York, Pennsylvania, Michigan, et cetera, et cetera.
And demand for labor went up as the capital investment went up, wage rates went up.
So we had wage rates higher in the Northeast than in the South.
The South was much less industrialized.
So in this kind of situation, the trend over time, over the long run, remember the long run equilibrium, is for workers to leave the South and go to the North to get more jobs, higher wage rates, and for capital to leave the North to be attracted to the South to lower wage rates.
So you have a mutual flow here, tending in the long run toward equality of wage rates. In the very long run you tend toward equalization of standard of living.
So, of course, southern people have migrated to the north, and capital, especially in inefficient
industries, gets migrated to the south.
I already talked about how minimum wage laws acted as a tariff, in a sense, kind of crippled
southern competition.
So, what happened is, in Kingsport, Tennessee, for example, we have a brand new modern plant,
no unions, lower wage costs, lower everything costs, higher productivity, out-competing
these inefficient backward companies in New York and New England, and so the New York
New York headquarters told the local down here, well first of all it happened with the
printers, it was the printing companies in New York, New England, went to the union and
said, look we're being outcompeted by these guys in North Carolina, Tennessee and whatever,
do something about it, try to cripple them, in other words, try to impose higher labor
costs on the South. You can't do it through a federal minimum wage law, you do it through
trying to unionize them. Try your best, try to unionize them so we can get rid of their
competition. So the national union gives an order to their local in Kingsport, Tennessee,
like for higher wage rates, even though they had nothing to lose, the National Union had
nothing to lose, they were sacrificing the Kingsport locals, so to speak, they're okay,
go for it, chances are low you can do anything about it, we have nothing to lose, only the
Kingsport people have something to lose, and sure enough of course they collapsed, but
the whole thing was a collusion between the printers, the Northern printers, the Northern
Employers and the Northern Union trying to cripple Southern competition, try to get unionized
in the South.
Now this is a story which repeats itself all throughout industry, in other words, instead
of unions versus capitalists, what usually happens is that capitalists plus unions try
to screw the rest of us, either through tariffs or through minimum wage law, through imposing
unionization on other parts of the industry, et cetera, et cetera.
Time and again this is what happens, it violates the Marxian myth that somehow you have solidarity
and the Party of the Workers is against capitalists.
Let's just start on the coal miners union.
We all know about Appalachia and its very heavy unemployment in the coal fields, really,
of Kentucky and West Virginia, etc.
What happened was, this was all deliberately brought about more or less by John L. Lewis,
who was the brilliant head of the United Mine Workers Union, which came in in the 1930s.
I already mentioned the Ars Maguardia Act.
There's another act even more important, which I'll get to next time, the Wagner Act,
Act, as a result of which, John L. Lewis was able to unionize the bituminous co-workers
for the first time successfully, he goes into a pact with the large mine operators, basically
saying this, all Lewis was interested in was maximizing the wage rate of his union workers
with seniority, that's what he cared, he didn't care about anybody, he didn't care about young
people, about non-union people, he didn't care about any of that stuff, so, essentially
We colluded with the large miners, mine owners, to push the wage rates way up, thereby imposing
higher wage costs on the small mines and putting them out of business, which is what the large
miners wanted to do.
You screw your competition by having a national bargaining rate, national bargaining wage
rate, the entire coal industry, push up the wage rate, bankrupt the smaller coal mines,
can cause unemployment for younger mine workers, those with that seniority, those growing up
who just want to get a job right now, unemployed them. Lewis didn't care. Lewis understood
about the demand curve and it did very well. The demand curve had caused the unemployment.
He didn't care. What he wanted to do was maximize the pension funds and the union leaders then
stole later on, stole from, the boogle fund, maximize the benefits for the existing workers
as a seniority and hell with everybody else.
As a result of that, we had massive unemployment and massive bankruptcies in the coal fields
in Pennsylvania, West Virginia, Kentucky and the rest of it, which really created a
whole Appalachia problem.
There wasn't a real Appalachia problem before, it wasn't exactly a flourishing area, but
it wasn't a massive area of poverty and unemployment before John L. Lewis colluded with the mine
owners to bring this about.
And next time we'll start, we'll talk about the Wagner Act, because it's a key thing which
changed the whole face of unionism.
Market and Government Intervention, in the mid-1930s, the Federal Government massively
intervened in the labour market to substitute for a free labour market, a government dominated
one, a controlled one. There were two basic, two major pieces of legislation which is expressed
then. The first one, less important, was the Norris-LaGuardia Act of 1932, which prohibited
and it still does prohibit federal injunctions in labor disputes and really just court injunctions
period because states followed after the federal government on this, which means that you can't
take a union to court and have an injunction to prevent it from engaging in violence and
situation, so prohibiting injunctions
By the way, one of the reasons why so many unions are controlled by the organized crime
is because unions engage in activity which organized crime is also very expert in, like
violence and controlling the labor supply, in other words, excluding some groups of workers
and half of other groups of workers or something organized crime is quite expert in doing.
So it's sort of a natural field for organized crime to work in.
Also, the unions have built up huge pension funds, which, since the 30s, which of course
is a nice plum for people who got a hold of.
Any rate, the most important mechanism came in in 1935 with the Wagner Act, which is still
on the books.
I'm going to modify a little bit the basic Wagner Act provisions still hold.
Basically what the Wagner Act does is it compels collective bargaining, compels collective bargaining.
By the way, the textbooks, every textbook that I know of mislead you about what the Wagner Act says.
It usually says the Wagner Act is a Magna Carta for labor because it guarantees the right of collective bargaining.
Bargaining, that's baloney, unions always have that, workers always have the right of collective bargaining in the United States, it didn't have it in Britain, it's in 1906, the United States workers always had the right to form unions and try to bargain, so what the Wagner Act does is compel bargaining by employers and by non-union workers, in other words compels collective bargaining, force collective bargaining with a union
that has a majority of workers in a bargaining unit, that's the basic, all the provisions
of the national, this by the way is officially called the National Labor Relations Act, Wagner
The Winder Act for short, after Senator Wagner in New York, the National Labor Relations Act, and a bargaining unit.
All the provisions are logically deducible from this basic axiom, in other words basic fundamental clause, fundamental essence of the Winder Act,
to compel collective bargaining where the union has the majority of workers in a bargaining unit.
The first question is, what's a bargaining unit? Good question. It's up to the government to decide what a bargaining unit is. It's not a natural situation.
And so the minor act is administered by the National Labor Relations Board, the point about the federal government, NLRB for short, which decides what a bargaining unit is.
It's not automatic. For example, take for example, say the steel industry. Here's the US Steel, it's a steel company, and there's machinists working in a steel plant, which want to have their own union, machinist union, which is a craft union, a traditional construction, a craft union construction industry. They want their own union.
The steelworkers then form an industrial union, they want to include everybody, they want to represent everybody working in the steel industry, regardless of what occupation they're in.
Machinists want to have their own union.
The steelworkers union, which is an industrial union, we'll get to that in a minute,
contrasts to a craft union, because the craft union wants to exclude people.
Craft Union gets its power by pushing the supply curve to the left and pushing wage rates up at the expense of workers who are excluded.
The industrial union tries to maximize, tries to include everybody, tries to maximize the number of people in the union.
So that immediately goes against the craft union. The question is, what is the bargaining unit? What's up for the NLRB to decide?
If they decide the machinists are their own bargaining unit, then the machinist union will win.
If they decide the bargaining unit is the whole plant, the steelworker's union will win.
Or if they decide the whole firm, a firm might have 20 plants in it.
So the bargaining unit is a plant. Is it the whole firm? Is it the whole industry?
In some cases, they decide the whole industry is a bargaining unit.
So it's purely arbitrary and it depends on the ideology of the National Life and Relations Board members.
Basically it.
In the 1930s, when the NLRB was formed, it was a very left-wing period, and the NLRB was very left-wing.
They always decided against craft unions in favor of industrial unions. They always decided in favor of maximizing union membership.
But this, of course, does not necessarily have to be that way. It depends again on how the NLRB members see it.
I think there are five members. They have the staff and all that sort of stuff. They have regionals, locals and all that sort of stuff.
But basically they have their appointed members and they can decide whichever way they want.
where they want. So it's not obvious what a bargaining unit is. Who decides who has
the majority? Well, the NLRB has to call an election. They have the majority in an officially
sanctioned election, which the NLRB holds at a certain date. They don't have to hold
at a certain date. They can decide whether or not to hold an election and when to hold
it. So in other words, you have unlimited power virtually going to the guys in the NLRB
and the power to interpret these vague provisions.
So another thing that happens is that the compels collective bargaining.
So what's collective bargaining?
They have to decide what collective bargaining is.
It's also not very obvious.
What does it mean?
Well, in the old days, during the 30s and 40s, I left liberals in a heyday.
If an employer said, you know, they have to meet with a union.
How often does he have to meet with them?
Who knows?
And it was originally, in the 30s and 40s, it was decided that if the employer doesn't
So what does good faith mean? It's a very subjective kind of decision. So usually if
the employer didn't come in, didn't offer a wage increase, this was considered not in
good faith. It wasn't really bargaining. It was illegal. In other words, this whole sort
of mandates constant wage increases. Nowadays, of course, in the last 20 years or so, it's
are very different and there are many conservatives in the NLRB, anti-union or non-union or whatever
it is.
Now, of course, what's been happening, especially since the recession in 1980, 1981, is that
the employer comes in and demands a wage cut.
This has been happening in the last four or five years.
And in the last few years now, the unions are no longer that happy with the NLRB.
They used to love it.
They used to call it the Magna Carta of labor's rights.
And now they see the NLRB rule against them and decide, well, yeah, why can't you come
So this question of how often they have to meet, what does bargaining good faith mean?
For example, in General Electric around the 1960s, the famous Vice President of Personnel
Relations Lem Mule and Boo-ware came up with this theory of Boo-ware-ism.
Boo-ware-ism is said, look, what you do is present, when you come to the bargaining table,
In other words, this is the offer and that's it. Take it or leave it. And we offer a 10%
wage increase or 5% wage cut or whatever it happens to be, and don't bargain any further.
Well, this is a big, so this has been adopted by, quite successful, adopted by many employers.
And the question is, is this really legal? Is it bargaining good faith to present one
offer? Well, if you don't say it's bargaining good faith, well, how many offers are you
supposed to present? So the whole thing is very murky. Indeed, it was declared illegal
but the point is none of these things are obvious. Another thing, compelling collective bargaining also was interpreted as meaning the statutes that the employer cannot discriminate against union organizers, so it's illegal, in other words, if you're going to have an election, have a free and fair election so to speak, then it was declared illegal to discriminate against union organizers. So it's not that they couldn't fire union organizers,
And it meant they couldn't keep a blacklist in the old non-union days. Employers could keep a blacklist so that Joe Zilch, as a militant union organizer, his name would be set to other employers. Watch out for Joe Zilch, he's a bad apple. This is not illegal. It's also illegal to discriminate.
It's also, as part of this, was interpreted by NLRB, a mean, that employers have to present
a supply union organization with meeting halls on the plant property.
It's kind of a peculiar situation, here the employer, let's say, doesn't want to have
a union.
Yet he's compelled by the law to provide the union organizers with a hall, with leaflet
space, you know, that sort of stuff, because that's their point of view.
Also in the heyday of the 30s and 40s, the employers would apply the free speech, as
to employ free speech in the capital of the 20 years ago and so forth and so on.
As a result of this compulsory collective bargaining system, union membership, which had been,
if you remember, between 2 and 8%, it was around 3% when the NLRB, NRA was passed, skyrocketed
and during the late thirties and also during World War II when the
the war labor force compelled union, had compulsory unionization for defense plants or war plants
as a result of this
this kind of
privileging of unions, the percentage of membership
percentage union membership
of the labor force
which had, as you remember
fluctuated from about two to eight percent
suddenly increased to about
Skyrock up to about 25%, I think it was, the maximum, something like that. A lot depends
on how you define, how you, if you include agricultural workers and government employees
in there. But anyway, around 25% by 1945. So this is of course a quantum leap. In other
words, all of a sudden unionism becomes an important part of the American economic system,
which it really wasn't before, due to the fact we have a government-regulated labor
And the unions which came in during the late 30s, 35, were mostly industrial unions, which
were again more favored by the NLRB, which tried to include everybody in the industry.
The steelworkers union, the rubberworkers union, the electrical workers union, bituminous
co-workers union, you know, mine workers, etc., etc., all of these mass organizing
drives.
This is very dramatic also.
So it was a very dramatic organizing drive, the automobile steel industry, automobile industry,
So all these came in in the late 30s. Since the AFML was structured in favor of craft unions and against industrial unions, they formed their own group in the late 30s called the CIO, or the Congress of Industrial Organizations.
Notice that industrial organization is the key term to distinguish that from the craft union.
So, politically, the CIO unions were pretty leftist in the late 30s and 40s and they were organized along different lines.
After World War II, the communists who controlled a lot of the CIO unions were kicked out by the union people.
people and after, by around the fifties or sixties, somewhere around there, the two of them,
AFL and CIO began to sort of merge, began to sort of peacefully co-exist and finally merged
again to form the current AFL-CIO. They still have jurisdictional disputes but more or less
they try and iron it out. So now we have the umbrella union including the old AFL and the
newer CIO. The CIO, by the way, is the first organization to set up a political action
Commission Committees, PACS, which are now of course all over the place, set up by corporations
and also other organizations.
Well since World War II, unionism has gone to a steady decline, even with the Wagner
Act, it's been declining ever since, it's now down about 18%, something like that, it's
a long run decline.
There are many reasons for this. For one thing, there's a greater affluence, people are less interested in unions.
For another thing, of course, there's been a shift of the economy toward the Southwest, which has never been particularly unionized,
and toward new high-tech industries, computers and whatever, calculators, etc., etc.,
and toward white-collar jobs, engineers and so forth, which have never been particularly unionized, unionizable.
So, in other words, as the old smokestack industries decline, the old assembly line type industries decline, you have more and more service industries and engineering and professional occupations, unions are steadily in decline and probably will continue doing so, in spite of repeated hysteria on the part of unionists, how are we going to do something to reverse it?
I maintain that most of the industrial unions have no real economic power, since they don't restrict the supply of members, even though they make a lot of noise and have a lot of publicity and so forth, they don't really increase the wage rates of their members, as the craft unions can do.
I mentioned already about the faculty and the staff here, sort of a microcosm. They talk a lot and have a lot of members and some bureaucrats, but they really don't have much power.
So what the industrial unions do, the success of the industrial union basically is they have a lot of voting power, they're politically powerful, so they have a lot of voters, which craft unions don't.
So they vote, and they have a big union bureaucracy, with big union dues and huge union bureaucracy who are very well paid at the top, and they have a whole network of professional union bureaucrats.
So you have unions in the United States that are now very different from what they were in the 30s.
They're much less ideologically, much less leftist, and also they're sort of bureaucrats.
They're sort of people who often go to college and never work.
Say if you're head of a pipe fitter's union, you're often never a pipe fitter.
You never see a pipe.
You become an MBA or whatever, you become a labor expert,
and you become head or vice president of some steam fitter's union or co-union,
even though you've never seen a stink fit.
So this of course sets up resentment on the part of the workers
because they begin to feel that not only quote exploited by the employer,
but also exploited by the union, their own union who is forcing them to pay heavy dues
to set these people up where they really don't accomplish much.
They don't really raise the wage rates of the workers.
So there's a lot of friction with the old egalitarian spirit of unions is long gone.
So we have, and it's also been of course a falling back or loss of union solidarity, union spirit.
Most people are not that pro-union anymore. It used to be that nobody would cross the picket lines.
Everybody thought unions were great. Now even liberals are pretty sour on unions.
They don't have the mystique they had in the 30s and 40s.
When the Republicans first took over Congress in 1946, for the first time since 1930, they
had been pledged to repeal the Wagner Act, get rid of this whole system.
They didn't do it.
What they did is they added some stuff in 1948 called the Taff-Hartley Act, which was
really just an amendment of the Wagner Act in addition to it.
So we have now a Wagner and Taff-Hartley structure.
I think this is 48.
And the Taff-Harley Act is essentially, they added stuff on top, in addition to unfair
labor practices by employers, unions can now engage in unfair labor practices.
Those unions are now being regulated as well as employers.
For example, if unions are too blatant, unions have to have elections once in a while.
They don't lose them.
But it's now considered unfair labor practice, never to have an election.
In the old days, most unions never had an election.
You come in, you're a union president.
I was a great saying in the labor movement, I mean, once a union president, always a union president.
Once you get into power, you're there for life. It's still more or less true, even with elections.
In some cases, like the United Mine Workers, there have been big changes.
But in most cases, once you get in, you're there forever. It can never be dislodged.
It's not like having a political machine.
Also, they can't engage in too much racial discrimination. They still engage to some extent.
So in other words, there's a certain amount of certain curves now in unions through...
So essentially what the NLRB has added to its power, it kept the same Wagner Act provisions
and added on union provisions regulating unions.
The closed shop is now illegal, closed shop in a situation where you can't get a job unless
you're going through a union first, in other words, the equivalent would be you couldn't
You can get a job as a poly professor unless you've first joined the AOP or any other occupation.
That's now illegal, but the union shop is still legal, so the union shop is you can get
a job on your own, but then you have to join the union within 30 days, whatever the provision
is.
So it's basically the same thing.
It's slightly less restrictive, a closed shop, but it's not too different.
Then there's other provisions that you're probably familiar with, like you can't have
a strike against the government employee strike, you have to wait 30 days, there's various
Provisions of Slowing Down Strikes, but these are mostly sort of marginal provisions, like
the key provisions are still there, the Wagner Act provisions are still there. Now there are
various states which have outlawed the union shop too, a whole bunch of states up again
now, mostly in the southwest and the mountain states, which just seems to me it goes against
private property and a free market, because what you're doing when you outlaw the union
shop, you're preventing the employer from voluntarily signing an agreement with the
Union saying we will only have union workers. There are various reasons why many employers
are pro-union. For example, the poor Metropolitan Opera, every few years there's a strike against
the Metropolitan Opera. They have to confront about 30 craft unions, each one which has
a different contract deadline. There's a stagehand union, an actor's union, a scene designer's
union, so forth and so on, and each one of them can strike and none of them is bound
by the other people, and each one will then also honor the picket line of the other unions.
So the employer, the metropolitan opera, has to confront about 30 different unions, which
is extremely difficult. They'd much rather have one union than just make an agreement
with that and that will end it. So many employers tend to favor industrial unions even because
they figure craft unions are just too many of them to deal with, too feisty, and too
much economic power in a sense. There's one classic case, so in other words, some employers
were all in favor of the Wagner Act. Most of them were against it. Various employers
were pro-corporate state, pro-business industry partnership that were in favor of the Wagner
Act. There was one classic case of this whole situation where Gerard Swope was head of General
Electric for many years. He wrote a letter to William Green, who was head of the American
Federation of Labor. This was written in the late 1920s. Please, Mr. Green, why don't you
organize General Electric? Come in and organize it, because we have too many craft unions
In other words, we have, you know, machinists have to deal with four or five unions. Why don't you come with one union and just organize a whole general library and then we can have an agreement?
And Greenville banks said, God bless you, Mr. Swope, we love you, you're a great pro-union person. However, we can't do it if we're committed to the craft union.
We can't form an industrial union. So, when the CIO came in, people like Swope helped write it and lobbied for it because then you say, okay, we'll deal with one industrial union and a general library and make an agreement.
Agreement, and the workers don't have to shut up. In many cases, the employer prefers
dealing, as I say, with one union, and if the union is willing to collaborate, so to
speak, they can just form so-called sweetheart agreements, where all the workers will then
be committed to it, because of this compulsory collective bargaining. The individual worker
can often be screwed here, because they often suffer from the fact that the union organizer
A union, the national union is in favor of a mild wage increase or whatever.
So there's constant conflict from below on this sort of basis.
As right now a big strike has been going on for the last eight months in Austin, Minnesota,
which is a small city in a prairie out there, the Hormel plant, which is a big food manufacturer,
and the locals all in favor of a big strike have been striking, and the national union
is very much against it.
The National Union is going to put the local in a trustee ship any day now, in other words, crack down on and displace the leadership, and the local swears to fight on.
There's a whole big struggle over this of the local versus national.
As I was already said here, the National Union is always a big power center, and the locals have very little power, so there's a big fight over this.
One of the classic things that happened, maybe I mentioned this already, but this is like result of the...
Did you mention John L. Lewis in the United Mine Workers Union yet? No.
The bituminous coal industry, they try to have the United Mine Workers in the bituminous coal industry, but it was never successful because of the free market.
In other words, they organized some few coal mines in Pennsylvania, the wage rate would go up, the costs would go up.
They'd go bankrupt, they'd be outcompeted by non-union mines in West Virginia or whatever.
So, the United Mine Workers Union didn't succeed until the Wagnerite came in, which then compelled collective bargaining and then set forth a condition, set up a condition for a successful union.
The head of the United Mine Workers was John L. Lewis, a famous bushy-bob figure, Welshman, Welsh-American, who understood about the demand curve. He was brilliant.
Brilliant. I was interested about the whole demand curve and demand for labor. They understood
that this is wage rate, quantity of labor hired, that the only way to raise wage rates
by union activities is to cut the supply, shift the supply to the left at the expense
At the expense of diminished employment, in other words, he realized that the union action
pushing up the wage rates would un-employ a whole bunch of coal miners.
He didn't care about that, he was only in favor of it because his object was to maximize
the wage income for those union workers with seniority, those who had been in the union
for ten years or something.
At the expense of younger workers, those who didn't have seniority, and new people coming
He didn't care about that. What he wanted to do was to maximize the income of existing union members of seniority.
So he had industry-wide bargaining with the coal miner, the whole coal mining association.
The coal miners, the large coal mine operators, were more in favor of this.
They were in favor of higher wage rates to impose crippling higher costs on their small competitors, small miners, and they realized they couldn't pay it.
In other words, we had industry-wide agreements between the coal operators and the coal union tremendously pushing up wage rates and leading to the bankruptcy of the smore mines, total depression in the coal mine industry, bankruptcy of the smore mines and massive unemployment in the coal fields, which continues to this day as the so-called Appalachia problem.
There was no Appalachia problem before the unions came in, or the coal mining industry came in.
The coal mining industry was the major employing center in that whole area.
So as a result you have depression in the coal industry, but the large operators continued,
the union members continued on with seniority, they were in great shape and sort of rode
into the sunset, destroying the entire industry in its wake, but building up a huge pension
fund and everything else had to be looted by the union organizers.
So here's a beautiful example, a crystal clear example of how, in the Moxian myth, workers
are always in solidarity against the employer. The employer is competing with each other
for products, to sell stuff and to buy stuff, and workers compete against each other. We
saw with immigration restrictions and everything else, and with the craft unions, and with
the coal mining situation, when one group of workers benefit the expense of unemployment
for the other group, for the younger people coming up. So we have collaboration between
There was some monopolistic collaboration between the large employers and the union.
Similar to the collaboration between the printing union, remember, and the printing
employers in New York and New England to try to hobble, to try to impose higher costs on
the southern, efficient southern printers, Kingsport strike.
So similar things happened in the coal situation.
So the whole Appalachian problem is really a product of the mine workers, of the mine
worker employer, large employer collaboration in the 40s and 50s and 60s.
Most of the increase, whatever increase in unions that have been in the last 20 years
has been in government employee unions, which is really not exactly the same thing as, I
mean that depends on what the government is willing to pay and it's not entirely an employer
Employer vs. Employee Situations. It's how much the government officials, the taxpayers
or whatever are willing to shell out. So the only union growth has really been in that
in the government employee area. This of course has also made government very costly, like
the post office, garbage collection. So there's now a big drive toward privatization. People
get fed up with paying very high garbage costs or whatever and they contract out to private
firms, which are either non-union, well, unionized, they don't have the same sort of cloud as the government union, they're simply, because since the taxpayer pays, the government doesn't really care. He'd be a nice guy. He's a government official. They're dealing with big unions, unions with big membership. They say, yeah, sure, we'll give you a 20% wage increase. Why not? The taxpayer shelves it out. Not the guy, not the president or the mayor or the governor. But this has now come to a ruse, to get to a situation where government is so costly, that even the government is now looking around for privatizing alternatives. And so you have
We have garbage collection in many cities in the United States, there are private fire companies where the government simply contracts it out to the fire company instead of the fire department.
Also, as I've said, the government officials don't have any real incentive to be efficient and to benefit the consumer because the taxpayer is forced to kick in.
The fire, if anybody has any experience with fire departments, for example in New York,
the usual, they usually don't care about the private property they're allegedly trying to save.
In other words, the objective is to put the fire out relative to having to destroy a whole bunch of apartments
in the name of putting out the fire.
And because there's no consumer payment, you have to rely on a consumer to shell out.
So it's a very different sort of situation with a private farm service.
Same way of course with the mail and also the government services.
I think this is actually sums up the union situation.
The pro-union spirit is more or less dwindled a lot in the United States, so you don't have
the backing for the stuff.
One more thing I should say about unionization, about 20 years ago there was a famous great
boycott.
Cesar Chavez, one of the unionized grape workers in California and other areas, and the idea
The idea was that the consumer should kick in, should help out the grape workers' union
by boycotting grapes.
Now the effect of this, of course, is if you're boycotting grapes, and here's a man for grapes,
the effect, of course, is to cut the supply, the demand curve for grapes, here's the price
of grapes, and reduce it because you're boycotting grapes.
Of course, another peculiar thing about the whole grape thing is you can't see, when you
look at a grape, you can't tell if it's a union grape or a non-union grape.
The result of this course was to diminish the demand curve for all grapes, including the poor guys who unionized grapes.
At any rate, the result of this course was that you cut the demand curve for grapes, shifted to the left,
reduced the profits of the incurred losses in the grape industry, and the result, the demand curve for grape workers goes down.
So the result of the boycott was to lower the wage rate for grape workers, instead of increasing them.
Eventually, when they finally knuckled under, they did have unionization, they did increase the grape unions, although that's sort of diminished now for the last 10 years.
But the interesting thing is that, in other words, if you look at the direct action here, boycotting, what boycotting does is it reduces the demand curve or something and thereby lowers the wage rate.
So the goal, the objective was to benefit the grape workers, instead of that really injure the grape workers, at least for the whole period when the boycott was going on.
As one economist wrote at the time, he said, if you want to really help the grape workers, you should eat as many grapes as possible, you should increase the man curve for grapes,
which then of course increases the man curve for grape workers and increases their wage rate and increases the employment, instead of the other way around, which cuts the wage rate and cuts the employment.
So boycotts are generally a self-defeating way of trying to benefit the workers involved,
and at least while the boycott is going on, you can say, wow, the boycott is victorious,
it helps them, it's kind of a, you know, I'm not sure the great workers really consulted
about this in depth, at least the full consequences were stalled after them before the boycott
got underway.
This is a trouble by way of all boycotts in general.
An ideological boycott, say a boycott of Russia or South Africa or whatever, the problem is
it doesn't help the workers who are involved in this thing.
It cuts the demand curve and thereby reduces their wages and their employment.
So it's a very tricky kind of weapon to use.
It's a weapon which is much more self-indulgent, it's a weapon which is usually employed by
people far removed from the action, who don't see the consequences on the people involved.
Okay, we now cover the union question, the next step on a, we can only deal with it to some extent, the next step is to talk about the supply of labor, talk about the union and the effect on the supply of labor,
the supply of labor and population, in other words, one of the big determinants of labor supply is the number of people around.
And so the question then is, the question of population growth, which about 10 years ago was a big thing.
There were a lot of, the opinion of population growth fluctuated a lot in the 20th century.
Usually in the old days the idea was the bigger the population the better.
And then with the Malthusian theory, this was the Reverend Thomas Robert Malthus,
An English minister, an economist, around late 18th, early 19th century and in writing
in a period, interesting enough, writing in a period of a tremendous industrial revolution
where population was going up and standards of living were going up at the same time.
Writing in this period around 1790s, Malthus concluded that the world is going to hell
because of increased population growth.
the way he put it was
the famous phrase was that the population tends to grow geometrically
in other words
it tends to double and quadruple whenever everybody has two kids or four kids
and each one of them has four kids
you have sort of a skyrocketing or exponential increase in population
whereas the food supply
grows only arithmetically, it only grows
I guess more moderately, it's a very peculiar construction, but anyway
the population grows geometrically
And food supply grows arithmetically, and so therefore, he said, population always tends to press on the food supply, people are tending to die out, in other words, people are always down a subsistence level, if that, and as population presses on the food supply, this causes famine, wars, because everybody's, you know, warring for the only water hole left and that sort of thing, killing each other all the time.
and the wealth of the scarce food and disease and famine, all these things are coming awake
which tends to keep the population down.
In other words, as population becomes excessive, people kind of die out, they starve, there's
diseases and they kill each other.
So this is the, it's a very gloomy picture, of course, of world history.
It's a curious thing, he wrote this just at a time, in a period when the population was
going up indeed, but when the food, when the standard living was going up.
we wrote it, it's very odd for a guy to write this just as standard living was taking it off into the stratosphere for the first time in 500 years
in other words, what you really had is the population remained about the same in Europe
about constant, from about 1000 A.D. until about 1750
this is simplification, but basically this is what it is, it didn't really fluctuate much, it didn't keep increasing
we're used to a situation where population is always going up, it didn't happen
1750, he started taking it off, doubling every 30 years or so, and the reason is because
if standard living went up, that's basically the reason we'll go into.
So he's writing this thing just at a time when everybody, when the population was really
improving, not only going up, but also improving standard living, and it's influenced economics.
The classical economists became Malthusians, always worried about the population pressing
on the food supply, just at a time when obviously it wasn't pressing on the food supply.
In the early 20th century, as the population started declining in Western Europe, in France
and other places in Western Europe, the population was declining, and so the theoreticians started
belly-aching about race suicide, as they call it, because the world is going to die out.
What they do is they project trends. They say, well, if the French population is going down by 2% a year or something,
it means in 80 years the French franc will be wiped out. In other words, given the existing rate,
they simply extrapolate the trend. They say, gee, the franc will disappear in 80 years or 100 years, whatever it is.
This, by the way, is the way demographers operate. It's a very simplistic...
We just take existing trends and extrapolate them, and of course you can have any sort of horror result.
So then they started having bounties for kids in France and other parts of Western Europe, subsidized number of kids because they were also worried about cannon fodder.
In other words, they were worried if the French population declines, how are they going to fight? How are you going to conscript people in the army if there's no people to be conscripted?
So they started giving bounties for kids, you know, give you a thousand dollars per kid born.
And this indeed tended to turn around in the population growth.
and about 10, 15, 20 years ago, they started a ZPG history and the population is growing too fast and it won't have any room to stand on, we'll disappear, we'll be starving, therefore we should limit population growth now, a big so-called ZPG movement, calling for zero population growth, okay we'll resume this next time, next Tuesday