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NOTE 07. Major Episodes in American Labor History: An Austrian Reevaluation, Part I (video)

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All right, good morning. This morning I want to start talking about issues involving labor unions and labor history.

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And in a way the title is sort of misleading because there's much that can be said about labor markets that is not peculiarly Austrian.

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But I didn't know how else to make it at least remotely provocative sounding, so I put the word Austrian in the title.

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Again, I want to start off by recommending a few books that are useful or at least a few authors you should look out for.

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And the first one, because I think it's been a relatively neglected book from about 1987,

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is a book by Howard Dickman called Industrial Democracy in America.

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And you should make sure that if you look into this that you get the book by Howard Dickman

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by Bernard Dickman, because there's another book called Industrial Democracy in America by other authors, which is not really as good.

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His book is subtitled Ideological Origins of National Labor Relations Policy.

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Then, of course, you can hardly go wrong with W.H. Hutt, who's, of course, written a great deal on labor economics and, incidentally, on matters of labor history.

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And then two of the great sort of free market labor economists out there would be of course Morgan Reynolds and Charles Baird.

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Now I've discussed this matter with one of those two gentlemen.

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I've noted that it seems that this is an area in which there's tremendous work still to be done.

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I know what it's like being a young scholar and you're wondering where's my niche and what work still needs to be done and what can I do, what's my role.

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Well, here's an area you might consider, and that is the area of labor history, because labor history as currently written is practically unreadable.

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Because it's written by people who frankly understand apparently almost nothing about the economics of how labor markets work.

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It's based almost entirely on sentiment. I mean, it's like Lisa Simpson is writing all these books.

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In fact, studying labor history often times the best thing to do rather than trying to read labor historians who time after time sometimes distort what actually happened is to go back to the most primary source you can find.

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For example, in the late 19th century even the New York Times was actually relatively reliable

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My father was a teamster for about 15 years, and there is a Simpsons reference here, of course, that the teamsters are doing some work at the Simpsons home.

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So we definitely need sound work in labor history.

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My father was a teamster for about 15 years.

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And there is a Simpsons reference here, of course, that the teamsters are doing some

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work at the Simpsons' home and Homer Simpson walks outside and sees a few of the teamsters

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just standing around and he wants to see if he can outlazy the teamsters.

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So they're all seeing who can stretch the loudest and be as obnoxious as possible.

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But the fact is, my father was a teamster.

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So I don't want to just make cheap shots at these folks.

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I want to be making deeper, more significant points.

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But the fact is that any Marxist worth his salt would think that I'm just the victim

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of false consciousness.

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I mean, if I come from a working class family, then for heaven's sake, I should favor working

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Working Class Interests, well the fact is I do favor working class interests which is

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precisely why I hold the positions I do.

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Well practically everyone, every student over the course of his education hears the same

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kind of predictable story about the history of American labor and labor unions and that

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is that American laborers were terribly exploited and their wages were reduced to practically

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subsistence level, and then it was only due to favorable legislation or to the work of

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labor unions that the condition of labor began to improve.

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But had it not been for these, it is simply taken for granted that, you know, the vast

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bulk of us would still be working 80-hour weeks and our children would be working in

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mines.

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Well, a lot of my friends are working 80-hour weeks because they're lawyers or investment

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bankers.

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Yeah, they make more money than I do, but you know, I like my 15-hour week and my leisure time very much too much to give up for any other profession.

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Now, Boehm-Bawerk actually said on the issue of labor that he noted that a lot of times people form their judgments on this matter really out of emotional factors, really more than anything else.

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This issue is on a field where the heart as well as the head is wont to speak.

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What people wish to believe, they believe very readily.

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Well, this standard tale of labor history is in fact almost entirely false.

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And those parts of it that are true, for example, the low standard of living that people undoubtedly did enjoy in the 19th century,

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are true for reasons other than those alleged by pro-union historians

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who see in them only confirmation of their prejudices against the market economy.

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Well, as late as the 1920s, labor law in America was based more or less on the following considerations.

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First, essential principles included freedom of contract and association.

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A laborer was perfectly free to reject any offer of compensation that an employer might make to him

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and, conversely, an employer was likewise entitled to reject any offer made by a laborer.

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An employee was free to withhold his labor services if unsatisfied with his employer's terms.

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Likewise, a group of laborers jointly exercising this individual right were permitted to do so.

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But no one was allowed to prevent individuals who wished to work from exercising their right to do that.

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Strikers, like anyone else, were forbidden to interfere with consumers' right to shop where they liked.

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Strikes could not obstruct suppliers from making deliveries, since to do so would again violate the rights of others.

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And finally, since the employer's plant was private property, the employer had the absolute right to decide who would be permitted to enter,

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and complete strangers who wished to enter for the purpose of agitating his employees could be lawfully excluded altogether.

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Now, incidentally, the way I'm going to do this is start off with some historical background, look at American labor law, and then later try to address some of the myths of labor unionism and try to explain what was the actual cause for the rising standard of living in American history, because again, it's sort of carelessly assumed that because we had labor unions and then we had a rising standard of living that the unions caused the rising standard of living, but of course,

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Now this outlook, this posture, whereby both sides in the labor relation were permitted to make offers voluntarily, reject whatever offers they wished, is evident already in the early 19th century, and it is not true, as is often alleged by pro-union historians, that unions per se were being enjoined by the courts to cease and desist their activities,

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It was not union activity per se that the law sought to penalize.

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If a group of workers wished to organize themselves and to engage in peaceful activities,

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a non-obstructive strike or various social or other types of activities, negotiating type activities,

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the law did not stand in the way.

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It was simply when you began to bash people's heads in because they wanted to work when you didn't

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or when you tried to obstruct deliveries to your employer or engaged in other kinds of property destruction or whatever, that was what the law chose to forbid.

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In 1806, for example, there was a case in Philadelphia involving a group of journeymen who formed a union and then tried to get all local bootmakers

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to hire only members of their union and to fire any existing employees, anyone who was not a member of that union.

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Well, a judge found the unionists guilty of conspiracy and restraint of trade and levied a fine upon them.

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But he was levying the fine not because they organized themselves into a union,

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but because they attempted to interfere with the peaceful labor relations of other people who just happened not to be union members.

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Other cases like this in the early 19th century in other states only solidified this principle.

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So from the very beginning we see that the courts are acknowledging that people have a right to form unions, to join them, to partake in their activities,

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but they do not have any rights to interfere with the lives of non-union workers and employers.

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Now, a very prominent case that is quoted a lot in free market type books typically is an 1835 New York case called People vs. Fisher.

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This case involved unionists who were trying to prevent an independent boot maker from undercutting them in terms of wages.

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The man who owns an article of trade or commerce is not obliged to sell it for any particular price, nor is the mechanic obliged to labor for any particular price.

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He may say that he will not make coarse boots for less than one dollar per pair,

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But he has no right to say that no other mechanic shall make them for less.

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If one individual does not possess such a right over the conduct of another,

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no number of individuals can possess such a right.

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All combinations, therefore, to effect such an object are injurious not only

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to the individual particularly oppressed, but to the public at large.

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It may be that Penoch, who is the independent,

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from greater industry or greater skill made more profit by making boots at 75 cents per pair than the defendants at a dollar.

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He had a right to work for what he pleased. His employer had a right to employ him for such a price as they could agree upon.

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The interference of the defendants was unlawful. Its tendency is not only to individual oppression but to public inconvenience and embarrassment.

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Well, even into the 1920s, as I say, this understanding continued to prevail in the law.

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And a case that Professor Baird cites in a number of his works is that of the 1921 case of American Steel Foundries versus the Tri-City Central Trades Council.

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Now, in this case, this is a case that involves some actions that had occurred years earlier,

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Because sometimes, obviously, these cases take a long time to be heard.

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But what basically took place is that in late 1913, American Steel Foundries closed its doors.

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Business conditions were unfavorable and they had to lay off about 1,600 workers.

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Some of these workers were members of unions that were affiliated with the Tri-City Central Trades Council.

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Council. But the company had permitted people of whatever union or no union to be employed.

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Well a number of months later the company in fact reopened but on a limited basis and

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they rehired about 350 workers, some of them union members. But they rehired them on different

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pay scales. There were pay cuts ranging from 2 cents to 10 cents an hour compared to what

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The workers had been earning before the company had shut down in late 1913.

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Well, this Tri-City Trades Council, the vast majority of whom had never been employed by American Steel Foundries,

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decided to declare a strike in protest of this wage cut of the lower pay scale paid to these 350 workers.

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Well, of the 350 workers who had been rehired when Steel Foundries reopened,

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Only two of them joined this strike.

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The other 348 wanted to keep working on the terms they'd been offered.

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But the Tri-City Trades Council, which from the point of view of the firm, is made up

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almost entirely of strangers, decided that they were going to go ahead with this strike

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and they set up pickets, substantial pickets made up basically of strangers at every single

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entrance to the firm.

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And so for a period of about four weeks, this in effect stranger picket engaged in repeated

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beatings and assaults against those workers who went in and tried to work.

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We have reports of at least several employees who slept at the plant so they could continue

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working because they were afraid of facing the pickets.

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Well finally a federal court issued a restraining order and managed to put a stop to the violence.

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Well the union argued that the court had no authority to do that because they argued that

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the Clayton Act of 1914 had put restraints on the ability of the courts to intervene

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in that way.

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But the Supreme Court in this 1921 case disagreed.

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What the Supreme Court declared for one thing was, first of all, talked about what the Clayton

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Act said.

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The Clayton Act had been called the Magna Carta of labor unionism by Samuel Gompers

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because the Clayton Act of 1914 had apparently at least exempted labor unions from prosecution

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under the Sherman Anti-Trust Act for conspiracies and restraint of trade.

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But what the Court found was that the Clayton Act protected unions only when they were lawfully

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The law protected only peaceable persuasion by employees, so that the law does not protect, of course, people engaged in violence.

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Interestingly, in this Tri-City Trades Council case of 1921, the Supreme Court went so far as to declare that even if you have a picket line that's peaceful,

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let alone what was happening in this case, where people are actually being beaten,

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Even when you have a picket line that's peaceful, the Supreme Court declared that that is inherently intimidating and in effect tends to act as a barrier to entry to the struck firm and in that way interferes with any firm's ability to carry on its operations.

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And so the court declared that a picket would have to restrain itself to one, one, you could have one picket per entrance, but you couldn't have, you know, flying squadrons of strangers showing up at every single entrance.

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Only employees of the struck firm could actually serve as picketers.

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And although the picketers could talk to, of course, could speak to non-striking employees, they could only engage in non-threatening discussion.

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If they in effect threaten people, well then the court can enjoin that type of behavior, because in effect this is inherently threatening behavior.

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So that's, now needless to say, labor historians hate this decision, but this is, that was, it doesn't matter what their opinion is, that was the state of the laws of 1921.

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Things begin to change, though, in the 1930s, first under Hoover and then under FDR.

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So, prior to the change in the law, the formation of unions, per se, was not considered legally actionable, but simply the use of coercion to coerce others, to deny employment to people who did not join the union.

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Well, first we get in 1932, signed by Herbert Hu, with the Norris-LaGuardia Act, which had a number of important provisions, but will not be nearly as sweeping as what will come in the more distant future.

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First, this legislation made so-called yellow dog contracts unenforceable in the courts.

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These were contracts in which an employee could be required as a condition of employment to promise to restrain from union activity.

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Now, again, this is a position that a lot of people to this day oppose,

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I suppose that an employer should not be permitted as a contract, as part of their contractual arrangement with their employees to be able to demand that employees not participate in union activity, but of course in a system of free contract, you know, whatever terms people voluntarily agree on would be considered acceptable, and if of course, if they can't attract enough employees by offering those terms, they would, under the pressure of the free market, be obligated to abandon them anyway.

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Morgan Reynolds has actually an interesting article in the Journal of Libertarian Studies.

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I think it's the only article he wrote for it, so it's easy to track down if you go to

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Mises.org and you look for Morgan Reynolds.

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He has an article that, among other things, points out that yellow dog contracts, in many

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cases, were in fact initiated by employees themselves who had had experience with unions

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who found that oftentimes they turned out not to be beneficial to the workers and they

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And they would rather not be bothered by a group of hostile strangers trying to interfere with their negotiations with their employers, so oftentimes the initiative for yellow dog contracts, contrary to popular belief, came from the employees themselves.

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Well, according to this plank of the Norris LaGuardia Act, if you forbid yellow dog contracts,

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you're saying that employers cannot boycott union labor. They can't say that if I'm going to hire you,

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you have to promise not to engage in labor union agitation.

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But on the other hand, unions were not forbidden to boycott non-union labor.

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They could, of course, carry on their activities.

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The Act exempted labor unions from prosecution under the Sherman Anti-Trust Act once and for all.

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And in effect, it severely impaired the ability of the courts to issue injunctions in labor disputes.

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In fact, even when the labor disputes had turned violent,

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The burden of proof to demonstrate that violence was in fact taking place was so high and unreasonable

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that in practical terms it made it impossible for courts to issue injunctions to stop this violent activity.

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So, in other words, replacement workers could be being beaten and there was nothing that in effect a judge could do about it.

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Now, the reason that labor unions so disliked injunctions was that an injunction, the purpose of an injunction was as far, in fact, Morgan Reynolds, I think, explains it the best.

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He says, an injunction temporarily restrained union actions pending a trial, and this explains the intense union campaign against its use in labor disputes because once violence-ridden strikes were enjoined for a few days,

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In the last few days, they were very difficult to revive, reorganize and rekindle.

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Now, it is one of the many myths, by the way, of American labor history that the courts just issued injunctions frequently and indiscriminately.

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They just issued injunctions even when labor unions were engaged in perfectly peaceful activities.

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But this is why you should look at the work of labor economist Sylvester Petro,

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The labor policy of a free society was dedicated in part to Ludwig von Mises, who wrote a great many scholarly articles on this subject.

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And he actually did a study of work stoppages between the years 1880 and 1932.

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He found that injunctions were extremely rare.

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He said federal injunctions were issued in not even 1% of all work stoppages,

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while state injunctions were issued in less than 2% of all work stoppages.

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and he says that even these very few injunctions were issued not to thwart labor union activity per se,

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but instead to put a stop to violence against persons and property.

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Well, now even this protection of the employer's rights, yes, employers have rights too, would henceforth be absent.

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Incidentally, there was a book that was published in 1930 called The Labor Injunction

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and the Labor Injunction that was written, co-authored by Felix Frankfurter, The Justice, and this book, the thesis was that labor unions had been treated unfairly in the common law with excessive use of injunctions against peaceful activity.

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And this revisionist work that's been carried on not only by Petro and others, Dickman, has shown that in fact the Frankfurter book is completely entirely dishonest.

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I mean, it's either grossly incompetent, or just frankly dishonest.

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Now, the New Deal of Franklin Roosevelt added to this the National Labor Relations Act of 1935,

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which tends to instead be called the Wagner Act because of Robert Wagner who introduced it.

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Now, it used to be the case that a worker, if you didn't want to join a union

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or pay union dues, then you just didn't.

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You just refrained from joining and you didn't pay the dues.

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But the Wagner Act overturns this standard liberty.

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When you begin with the Wagner Act and going forward, if a majority of workers in a particular

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bargaining unit decide that they are going to unionize, then that union represents all

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All workers, whether it was the workers who decided to join, the workers who did not want

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to join, the workers who didn't vote one way or the other, it represents them all.

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And it was argued that this was perfectly fair.

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So from then on, if a majority of workers choose to unionize, all the workers must join

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and pay union dues.

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Now the usual defense of this was to say that, look, the Wagner Act calls for a single certified

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bargaining agent to represent all workers in a given bargaining unit.

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And so if you're going to have a single labor union to represent all workers, which is called

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for by this act, then it stands to reason that every worker who works in this unit should

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have to join that union and pay dues.

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Because why should they get to free ride?

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Why should they enjoy, at no cost to themselves, all the benefits that come from the labor

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union negotiating on their behalf?

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That was the argument.

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So therefore it makes sense to coerce, and it's just to coerce all workers into paying

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union dues, because all of them are enjoying the benefits of being represented by this

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single union.

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Well, of course, this overlooks the real problem, which is the idea of having an exclusive union

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in the first place.

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If the unions would just bargain on behalf of their own voluntary dues-paying members,

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then there wouldn't be a problem of non-members getting union benefits for free.

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If individuals were allowed to represent themselves and to enter into contracts with employers

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on their own terms, those who wished to remain non-union would not be free-riding on the

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benefits bestowed by labor unions, since the union would simply not bargain on their behalf.

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But federal labor law no longer guarantees workers this freedom.

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Now it is true that in 1947 you get the Taft-Hartley Act, which was passed at a time when much

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of the American population had grown extremely impatient with labor unions and striking activity.

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But the Taft-Hartley Act is quite mild, in fact, in its provisions, and it really doesn't

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overturn any of the major planks of the National Labor Relations Act, which again in summary

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Murray had in effect taken the position of exclusive bargaining, that once one union is decided, that union represents every single worker, and every single worker must pay union dues.

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It doesn't overturn the idea that there has to be just one union, and that union has exclusive representation, but what it did do was to give the states in effect the right to pass right to work laws,

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which at least said that a union couldn't force union membership and union dues on workers

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as the price for keeping their jobs, but it doesn't say that you can have company unions

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or any such thing as that, that's still forbidden, but it at least means that you could, in some

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states, I don't know how many, maybe 20 something states now, have right to work laws, which

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at least mean that you can exempt yourself and not be in effect driven out or denied

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Employment.

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Now, it's interesting that just a year before the National Labor Relations Act was passed,

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Franklin Roosevelt had opposed this idea of exclusive representation.

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In 1934, the United Auto Workers had threatened to shut down the entire auto industry unless

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they were recognized as the exclusive bargaining agent for all auto workers.

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To avoid that strike, Franklin Roosevelt intervened and settled it on the basis of proportional

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representation.

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said that the United Auto Workers represents only its own members

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and people who want to belong to other unions or company unions or whatever

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would represent those people. And people who wanted to have no union at all

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would represent themselves. And Franklin Roosevelt said

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that in his opinion, this was the only kind of union representation that was consistent

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with the American tradition of liberty.

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So he took the position, at least in 1934,

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that we shouldn't have this position in which you have an exclusive bargaining agent

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and you can coerce people to be represented by it even if they don't want

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representation services from that union.

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Now, why the president changed his mind is

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an interesting matter in itself, but let's just continue on this

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front. Now, there's a term we need to introduce called union security.

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Union security is the sort of

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This is a not so terrible sounding term that is used to refer to the practice whereby workers who don't even want the representation services of a union have them forced upon them and typically have to pay for them.

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These were the terms of the original 1935 legislation. This is called union security because it is security for the union and for the people who work for the union because of course it guarantees them an income.

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are going to be collecting dues from everybody and that practice whereby people are coerced

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into paying these dues as a requirement for keeping their jobs, which as I say was the

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original intent of the 1935 Act, is obviously of great benefit to unions.

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So in effect what right to work laws do is they abolish union security so that people

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don't have to join a union as a condition of employment, but nevertheless it keeps this

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This Principle of Exclusive Representation Intact for Everybody Else

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Okay, let's see, what are the things we want to do?

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Oh yeah, another thing that's been said in defense of this, in defense of the idea that

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when a majority of workers vote to choose a particular union to represent them, that

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therefore it's legitimate for all workers to be in effect coerced into being represented

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by this one union.

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Sometimes it's argued that this is just democracy and, you know, we recognize democracy in political

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The Theory of Money and Credit

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that the individuals retain the right either to represent themselves

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or to choose to be represented by a different organization.

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Now, labor relations law has very often consisted of bizarre turns of phrase

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and strange almost Orwellian principles.

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And the National Labor Relations Act is no exception.

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Because notice what it says.

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Notice what it says. It says that it is an unfair labor practice for an employer by discrimination in regard to hire or tenure of employment to encourage or discourage membership in any labor organization.

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So on the one hand, it would be unfair for an employer to discriminate in hiring or in granting tenure to encourage or discourage membership in any labor organization.

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So that would seem to make union security illegal. It would be unlawful for an employer, in effect, to be hiring or not hiring on the basis of union activity because, of course, that's what the unions would, in effect, say, you can't hire anybody unless they're going to be in our union.

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Once you hire them, we're going to force them into our union. It says here it would be an unfair labor practice for an employer to encourage or discourage membership in any labor organization.

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But, it goes on to say, provided that nothing in this act shall preclude an employer from making an agreement with a labor organization to require, as a condition of employment, membership therein.

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Well, to translate that into normal English, what that's saying is that employers are forbidden from encouraging membership in a union, but they can compel membership in a union.

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This is how, when you have laws that are based on special interests, you get bizarre results such as this.

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Okay, now, once a union has been certified by a majority of workers,

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I mean, basically, typically the way this goes is that once there's interest among the workers in setting up a union,

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establishing a union, certifying a union as their exclusive bargaining agent,

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Well, first what they try to do is to get workers to sign cards that authorize the union to act as their agent.

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And once they get maybe a third of the workers signing these authorization cards,

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then the National Labor Relations Board will step in and conduct a certification election.

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In other words, if a third of the workers have signed these cards,

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That's sort of a prima facie indication that there is an interest in organizing a union.

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And so the National Labor Relations Board will oversee, they'll be petitioned for a certification election.

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Then that election will be carried out by secret ballot, which is at least an improvement over the old just raise your hand.

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And if the union gets more than half, 50% plus one, of the workers, then it gets representation privileges.

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Well, we've already seen that that privilege permits the union to claim to be the institution of representation for all the workers,

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regardless of their own feelings about unionization.

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But what's significant is that there is no routine decertification election.

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It's not like every two years they go back and say, well, how do we feel now?

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Even if it's 20 years later and most of the workers have either died or retired or moved on to other jobs

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and the bulk of the remainder are either indifferent or not interested in the union, it is presumed to continue.

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to continue. I mean, there's no automatic decertification and you have to really jump through hoops to get a decertification election taking place.

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Now this principle of exclusive representation, which once a union has been certified, it is declared to represent everybody,

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when it comes to democratic countries, the United States is basically alone in organizing its labor relations in this way.

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Canada also does it this way, but basically they got the idea from the United States.

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Other democratic countries permit a variety of representation within a particular firm, including things like company unions, but also just a variety of different unions or no union at all.

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This is considered to be a decision up to the individual worker.

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In other countries, the assumption is the old traditional American assumption

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that people should not have to submit themselves to the will of a majority

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in cases involving the disposition of their own labor services.

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At least from 1935 to 1947, and then there were still some problems after 1947,

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There were limits on the free speech of the employer that were in place.

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The National Labor Relations Act in fact said, well actually I'll just point out that the,

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before going into that, that an employer could not actually say to the workers,

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hey, you shouldn't vote in favor of the union.

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Like when he knew that a certification election was coming,

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he shouldn't go around saying, you shouldn't do this, you should or shouldn't do this.

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Well, in 1947, with the Taft-Hartley Amendments, which was amending the National Labor Relations Act, we get this statement that seems to give free speech rights to the employer, it says,

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Well, in 1947, with the Taft-Hartley amendments, which was amending the National Labor Relations Act, we get this statement that seems to give free speech rights to the employer.

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Now, as I say, there was no free speech provision in the Wagner Act. Employers, until 1947, were just required to sit there and they couldn't do anything.

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But this provision that was inserted in 1947, it turns out, has got a loophole you could drive a truck through.

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Because notice it says that an employer cannot be accused of engaging in an unfair labor practice just because he expresses a view, just because he says something.

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But if expressing that view contains a threat of reprisal, or force, or promise of benefit, well then he can be hauled into court.

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Well, the thing is, almost anything that an employer might say with regard to labor unionism could in some way be twisted as being a threat of reprisal or a promise of benefit.

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I mean, if the union says, hey, you know, I think this is really not in your interest and someday you may regret this, well, there you go.

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That's a threat. Isn't that some kind of a threat? You may regret this. Well, you better be more precise. How will I regret this?

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Well, you know, things may turn bad for you, the company may go out of business because of the wage demands or something.

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Can't say that. So it turns out that, yes, you can speak against unionism, but only in some weird way that no one really knows exactly how to do it.

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So, for instance, the Supreme Court in 1969, in a case that involved the National Labor Relations Board and the Gissell Packing Company,

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made an unbelievable judgment.

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It involved a company that in 1952 had suffered a strike that had paralyzed it.

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Two of its plants were shut down for three months and it did tremendous damage.

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And eventually when they reopened, they reopened on a non-union basis.

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Well, years later, the mid-60s, the Teamsters got the requisite number of signatures on those cards

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and they were going to hold a certification election.

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Well, during the campaign to try to get workers to go ahead and vote to certify the Teamsters,

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the employer went around telling people, you know, did you not forget what happened in 1952?

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The last time we had unions here, we had this strike, it was not in the best interest of anybody,

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Paralyzed everybody, people lost their jobs, and that could happen to you again.

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And if you became unemployed, some of you would have, especially because of your advanced age,

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it would be hard for you to find other jobs, think about what you're doing.

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Well, the Supreme Court declared that those statements were threats of reprisal.

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And so even though the certification election went against the Union,

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the Court, as Baird points out, set aside the election results

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imposed a bargaining order on the employer, so the employer was ordered to recognize and bargain with the union

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as exclusive bargaining agent without a second election.

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So in effect, although the employer, as Baird points out, may express general views about unions,

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what he says cannot sound like a threat.

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Well, in effect, the employers now can't say anything that's sort of remotely anti-union

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The National Labor Relations Act also requires that once a single certified union is established, employers are required to bargain in good faith with that organization.

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Whether an employer has bargained in good faith is of course not an easy thing to determine.

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The National Labor Relations Board will determine what constitutes in good faith.

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So oftentimes what it means is that if a company just simply says,

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look, this is the package we're prepared to offer, this is the only reasonable package,

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the best package we have, and they say that's final, that's our final offer,

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we can't possibly improve on it, they would almost certainly be accused of not bargaining in good faith.

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Employers under the Act are required to permit union organizers,

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and they have to come out with a terrible offer so that the union will say,

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well, that's terrible, how about this one?

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So in other words, they have to, in effect, provoke kind of an argument back and forth.

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They can't just come out and say, we think this is the best thing, take it or leave it.

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You have to come out with a ridiculous plan.

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The union has to start with a ridiculous plan and then they have to argue with each other.

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Employers under the Act are required to permit union organizers who were not employed in their firm to use their own property in order to persuade their employees to unionize with their union.

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Union workers can in fact block the employer's access to replacements, they can block deliveries coming in, they can block customers.

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Not only is mass picketing now permitted, which remember under the Tri-City Trades Council case, only you could have one picket per entrance, but now you can have mass picketing, you can have total strangers picketing, and employers are now forced to rehire, in many cases, strikers even if they've been engaged in acts of violence, they have to rehire them.

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Now, there's a National Labor Relations Board ruling that actually said that, obviously, if a striker, let's say, killed somebody, you wouldn't really be obligated to rehire him.

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But the National Labor Relations Board said that the employer can refuse to rehire a striker if his misconduct during the strike is so violent or of such serious character as to render him unfit for further service.

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But, on the other hand, you have to rehire him if simply his behavior constitutes a trivial, rough incident that occurred, quote,

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in a moment of animal exuberance.

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Now, the explanation was that certain kinds of impulsive behavior, being, quote,

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saying, quote, normal outgrowths of the intense feelings developed on picket lines must have

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been in Congress' minds when they developed this law and were defending the right to strike.

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And so Charles Baird points out that excused instances of animal exuberance have included

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beatings, stabbings, bombings, threatening of non-strikers' families, destruction of

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and the union as an organization bears no penalty for that, would bear no penalty for that at all.

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Now there are two kinds of strikes that since the late 1930s have been recognized in American labor law.

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And they've sometimes been called on the one hand economic strikes and on the other hand unfair labor practice or ULP strikes.

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Now an economic strike is what we sort of tend to think of when we think of a strike.

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A strike that is undertaken in pursuit of higher wages, better working conditions, shorter hours perhaps, and the like.

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An unfair labor practice strike, on the other hand, is undertaken in response to a perception that the employer in the course of bargaining,

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or perhaps in his very refusal to bargain, has violated National Labor Relations Act rules.

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So, in other words, in the course of the bargaining or in some type of behavior or in trying to, you know, whatever.

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If in any way he violates any of the standards that we've seen, then the strike against him in that case would be an unfair labor practice strike.

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So, for example, a lot of times when there's collective bargaining going on, the union's bargaining, the company's bargaining, they're going back and forth,

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But if they hit a brick wall in the bargaining, well, sometimes a union will strike and say the employer is not bargaining in good faith, so it's an unfair labor practice strike.

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Now, what's the difference? Who cares whether it's an economic strike or an unfair labor practice strike?

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Well, the difference is that ever since about 1938 when the Supreme Court ruled on this, employers are not allowed to hire permanent replacements in unfair labor practice strikes.

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They can hire only temporary replacements. When that strike is over, they have to hire back any employee who wants to be rehired in that type of strike.

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They have to hire them back immediately or otherwise they would have to start paying back pay to them.

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So it's very significant what type of strike it is.

381
00:45:32.060 --> 00:45:40.060
But with an economic strike, employers do in fact have the right, according to the Supreme Court, to hire permanent replacement workers.

382
00:45:40.060 --> 00:45:51.060
So, strikers therefore have a right in the law to be immediately reinstated after every ULP strike is over,

383
00:45:51.060 --> 00:45:58.060
and they have the right to be reinstated at the end of an economic strike in cases where replacements have not been hired.

384
00:45:58.060 --> 00:46:05.060
If there are still openings that have not been filled by replacements, then the strikers, in effect, have a claim on those positions.

385
00:46:05.060 --> 00:46:10.060
Now this may seem like an artificial distinction, and of course in some ways it is.

386
00:46:10.060 --> 00:46:19.060
The way that the court defended this distinction was to say that an employer who finds himself the subject of an economic strike,

387
00:46:19.060 --> 00:46:25.060
whose workers are striking for higher wages or whatever, has not necessarily done anything that violates the law.

388
00:46:55.060 --> 00:47:24.060
Although Section 13 of the National Labor Relations Act provides that nothing in this act shall be construed so as to interfere with or impede or diminish in any way the right to strike,

389
00:47:24.060 --> 00:47:28.540
It does not follow that an employer, guilty of no act denounced by the statute,

390
00:47:28.540 --> 00:47:34.380
has lost the right to protect and continue his business by supplying places left vacant by strikers.

391
00:47:34.380 --> 00:47:40.620
And he is not bound to discharge those hired to fill the places of strikers

392
00:47:40.620 --> 00:47:45.740
upon the election of the latter to resume their employment in order to create places for them.

393
00:47:45.740 --> 00:48:02.740
Okay, so some labor union sympathizers have argued that the Supreme Court here is not rendering this decision in line with the original intent of the National Labor Relations Act, that the Act did not, in fact, envision this.

394
00:48:02.740 --> 00:48:18.740
But Robert Wagner himself said in 1939 that he was in favor of every step that the Supreme Court has taken toward clarifying the meaning and defining the scope of the act.

395
00:48:18.740 --> 00:48:30.740
Now, it may seem, by the way, because although the law prohibits the employer to just fire a striker, typically, there are exceptions to that,

396
00:48:30.740 --> 00:48:35.740
You can't just fire a striker, you can hire permanent replacements, as we've seen.

397
00:48:35.740 --> 00:48:40.740
You can hire permanent replacements in the case of an economic strike,

398
00:48:40.740 --> 00:48:44.740
and you can hire temporary replacements in the case of an unfair labor practice strike.

399
00:48:44.740 --> 00:48:50.740
But what the heck is the difference between firing somebody for striking

400
00:48:50.740 --> 00:48:54.740
and, on the other hand, hiring a permanent replacement for that person?

401
00:48:54.740 --> 00:48:57.740
Permanent replacement for that person seems like the same thing.

402
00:48:57.740 --> 00:49:03.740
And again, unionists have long claimed that this is just a semantic difference and there is no difference.

403
00:49:03.740 --> 00:49:06.740
But there actually is. There actually is a difference.

404
00:49:06.740 --> 00:49:19.740
For one thing, a permanent replacement has, in other words, what I mean to say is a striker who is striking in an economic strike,

405
00:49:19.740 --> 00:49:26.740
who has had a permanent replacement worker hired to replace him, has indefinite preferential rehiring rights.

406
00:49:26.740 --> 00:49:41.740
That is to say that in the future, if an opening comes up at that firm, the first people the employer is legally obligated to go to, to ask, do you want this position, would be strikers who've had permanent replacements to replace them.

407
00:49:41.740 --> 00:49:53.740
So in effect, any time there's any job vacancy at all, the employer cannot hire any new person until any eligible striker who is interested has been reinstated.

408
00:49:53.740 --> 00:49:56.740
And there's no time limit on this. It could be years and years in the future.

409
00:49:56.740 --> 00:50:03.740
He must go and give preferential hiring consideration to people who had been strikers.

410
00:50:03.740 --> 00:50:12.740
And it's not even just that if the same job that the striker went on strike for reopens,

411
00:50:12.740 --> 00:50:17.740
that I have to go to that person. If any job in my firm comes open, I have to go to that person.

412
00:50:17.740 --> 00:50:19.740
It also has to be of the same weight.

413
00:50:19.740 --> 00:50:24.220
Even if I'm a tire manufacturer and I start making bagels,

414
00:50:24.220 --> 00:50:27.060
I have to go back to the original strikers and ask,

415
00:50:27.060 --> 00:50:29.340
would you like a job making bagels?

416
00:50:29.340 --> 00:50:32.940
So it is actually a fairly substantial difference

417
00:50:32.940 --> 00:50:34.700
between being fired, in which case, of course,

418
00:50:34.700 --> 00:50:37.940
you would have no claim whatsoever on the employer,

419
00:50:37.940 --> 00:50:40.820
whereas if you have been permanently replaced,

420
00:50:40.820 --> 00:50:45.180
nevertheless, you are the first person to get any opening.

421
00:50:45.180 --> 00:50:47.780
Does it also have to be of the same weight?

422
00:50:47.780 --> 00:50:48.860
Not necessarily.

423
00:50:48.860 --> 00:51:01.860
In fact, it can even be for a more prestigious position, in fact, so it wouldn't even necessarily have to be at the same wage.

424
00:51:01.860 --> 00:51:09.860
If the worker has found substantially equivalent employment elsewhere, then this provision would lapse.

425
00:51:09.860 --> 00:51:16.860
Now, all of these legislative measures obviously make it much easier for labor unions to accomplish their goals.

426
00:51:16.860 --> 00:51:24.860
In order to fulfill the purpose of a labor union, the stated purpose is to increase the wages of their members.

427
00:51:24.860 --> 00:51:31.860
What labor unions have to do is to restrict an employer's access to alternative sources of labor.

428
00:51:31.860 --> 00:51:36.860
So the idea is to artificially reduce the number of people in the labor force,

429
00:51:36.860 --> 00:51:41.860
so to reduce the supply and therefore that would increase the wage.

430
00:51:41.860 --> 00:51:44.860
That's the purpose of the labor union.

431
00:51:44.860 --> 00:51:51.860
So the labor unions typically are organized, you know, partly against their employer, but they're primarily organized against other workers.

432
00:51:51.860 --> 00:51:57.860
They're organized against people who want employment, let's say, with this firm and who are non-union.

433
00:51:57.860 --> 00:52:04.860
They're not interested in that. They want to restrict the supply so as to increase wages for their own workers. That's the point.

434
00:52:04.860 --> 00:52:13.860
So non-union workers who wish to seek employment on the terms offered by an employer whose firm is unionized must be prevented from doing so.

435
00:52:13.860 --> 00:52:20.860
So, Edward Chamberlain of Harvard University once described the legal status that labor unions have thereby been granted.

436
00:52:20.860 --> 00:52:22.860
He said this,

437
00:52:22.860 --> 00:52:29.860
If A is bargaining with B over the sale of his house, and if A were given the privileges of a modern labor union,

438
00:52:29.860 --> 00:52:35.860
he would be able, one, to conspire with all other owners of houses not to make any alternative offer to B,

439
00:52:35.860 --> 00:52:39.860
using violence or the threat of violence, if necessary, to prevent them.

440
00:52:39.860 --> 00:53:09.860
2. To deprive B himself of access to any alternative offers. 3. To surround the house of B and cut off all deliveries including food except by parcel post. 4. To stop all movement from B's house so that if he were for instance a doctor he could not sell his services and make a living. 5. To institute a boycott of B's business. All of these privileges, if he were capable of carrying them out, would no doubt strengthen A's position. But they would not be regarded by anyone

441
00:53:09.860 --> 00:53:18.860
It's for this reason that Hayek once said, I think it was in the Constitution of Liberty,

442
00:53:18.860 --> 00:53:24.860
Hayek said, we have now reached a state where unions have become uniquely privileged institutions

443
00:53:24.860 --> 00:53:27.860
to which the general rules of law do not apply.

444
00:53:27.860 --> 00:53:51.860
Now, of course, because there is such sympathy, there's this kind of a mythos that surrounds labor unions that makes it an unthinkable offense that you would cross a picket line or continue working when a strike is going on, or actually take a job at a plant at which you had not previously been an employee, but take a job during a strike because you wish to work on the terms that are being offered.

445
00:53:51.860 --> 00:53:55.860
I always wondered why it is that such people are considered to be the lowest of the lowest.

446
00:53:55.860 --> 00:53:59.860
I mean, don't they have families? Aren't they workers? Like, why are they dehumanized?

447
00:53:59.860 --> 00:54:05.860
But for example, Jack London once wrote, because of course we all know, but those people are called scabs.

448
00:54:05.860 --> 00:54:11.860
You're a scab if you want to provide for your family in that situation. You're just a scab.

449
00:54:11.860 --> 00:54:18.860
Jack London said, after God had finished the rattlesnake, the toad, the vampire,

450
00:54:18.860 --> 00:54:22.860
He had some awful substance left with which he made a scab.

451
00:54:22.860 --> 00:54:26.860
Kind of dehumanizing, I think.

452
00:54:26.860 --> 00:54:32.860
Well, in any case, what will often happen then would be that the police,

453
00:54:32.860 --> 00:54:35.860
you know, we need the public police to keep law and order.

454
00:54:35.860 --> 00:54:39.860
Well, they'll just stand there, like, you know, somebody's getting his head bashed in.

455
00:54:39.860 --> 00:54:43.860
The policeman will say, hey, I think I've got to go give that guy a ticket over there.

456
00:54:43.860 --> 00:54:46.860
He's going 43 miles an hour in a 40-mile zone.

457
00:54:46.860 --> 00:55:06.860
In effect, coercion, or the threat of coercion, is at the heart of the labor union experience, because how else are you going to keep other people from voluntarily entering into the labor union?

458
00:55:06.860 --> 00:55:12.620
Coercion or the threat of coercion is at the heart of the labor union experience because

459
00:55:12.620 --> 00:55:17.900
how else are you going to keep other people from voluntarily entering into agreements

460
00:55:17.900 --> 00:55:23.100
with employers and thus at least apparently driving down wages?

461
00:55:23.100 --> 00:55:26.980
Well, you have to intimidate them into not doing this or use violence against them or

462
00:55:26.980 --> 00:55:32.340
build up this mythos in people's minds that they wouldn't dream of doing it.

463
00:55:32.340 --> 00:55:36.180
This is why Henry George once wrote in the 19th century, those who tell you of trade

464
00:55:36.180 --> 00:55:40.980
Unions bent on raising wages by moral suasion alone are like those who would tell you of

465
00:55:40.980 --> 00:55:45.220
tigers that live on oranges.

466
00:55:45.220 --> 00:55:52.580
Now there are a couple of examples of incidents that occurred in the course of American labor

467
00:55:52.580 --> 00:55:57.780
history that I found particularly revealing in what they tell us about labor law.

468
00:55:57.780 --> 00:56:06.180
For example, there was a United Mine Workers strike in the early 80s, in which, as Morgan

469
00:56:06.180 --> 00:56:11.220
Reynolds points out, he says, non-union miners and mine owners armed themselves or shut down

470
00:56:11.220 --> 00:56:14.540
their operations for the duration of the strike.

471
00:56:14.540 --> 00:56:19.820
Truck convoys used lead trucks with five foot long magnets to sweep up nails and spikes

472
00:56:19.820 --> 00:56:21.080
on the road.

473
00:56:21.080 --> 00:56:23.360
These were some of the tactics that were being used.

474
00:56:23.360 --> 00:56:29.260
When UMW ambushes and gun battles broke out, Kentucky Governor John Y. Brown adopted a

475
00:56:29.260 --> 00:56:34.220
policy of what he called strict neutrality, declaring, we're not going to camp on one

476
00:56:34.220 --> 00:56:40.620
side or the other. A non-union mine operator protested, the concept of neutrality toward

477
00:56:40.620 --> 00:56:47.120
breaking the law is not found in any statute or practice in our society. But in other words,

478
00:56:47.120 --> 00:56:52.180
violence could be used by unionists, and the governor will say, well, you know, who am

479
00:56:52.180 --> 00:57:09.180
Or there was an interesting arbitration ruling by the National Labor Relations Board in the mid-1970s that declared that, was speaking of a firm that had kept its plant open during a strike, and the ruling said this,

480
00:57:09.180 --> 00:57:21.180
says, although the company had a legal right to keep the plant open, its decision to do so gives it some share of responsibility for creating an environment conducive to violence.

481
00:57:21.180 --> 00:57:27.180
So the company, right, the company kept its plant open and so it's really sort of their fault, isn't it?

482
00:57:27.180 --> 00:57:29.180
They should have just shut down.

483
00:57:29.180 --> 00:57:37.180
Now the result of union activity then is to reduce the number of jobs in an industry and to raise the money wages of union labor,

484
00:57:37.180 --> 00:57:44.620
While at the same time relegating many workers driven out of this line of work by the decreased

485
00:57:44.620 --> 00:57:49.860
quantity of labor demanded there to other lines of work whose money wages must decrease

486
00:57:49.860 --> 00:57:54.740
as a result of the greater supply of workers now forced to compete for them.

487
00:57:54.740 --> 00:57:59.940
But it's not simply that labor union activity tends to displace people, that well, I'd like

488
00:57:59.940 --> 00:58:05.340
to get a job in this but I'm not in the union and they don't want to let me in, they want

489
00:58:05.340 --> 00:58:11.340
They want to restrict the number of workers, so I'm sort of forced out of this industry, I've got to go work for something else.

490
00:58:11.340 --> 00:58:16.340
It's not just simply that, well, I would have worked here, but now I work here, and so it's just a wash.

491
00:58:16.340 --> 00:58:22.340
The gains to certain workers are more than offset by the disabilities inflicted upon other workers.

492
00:58:22.340 --> 00:58:29.340
I mean, quite apart from the subjective factor mentally of being driven from your chosen field.

493
00:58:29.340 --> 00:58:35.340
When union activity reduces the number of people who can be profitably employed in skilled trades,

494
00:58:35.340 --> 00:58:38.340
it correspondingly increases the number of skilled laborers

495
00:58:38.340 --> 00:58:43.340
who are now forced to find work in fields that are well below their level of competence.

496
00:58:43.340 --> 00:58:47.340
The outcome of this displacement of skilled labor is no different from a situation

497
00:58:47.340 --> 00:58:51.340
in which laborers never possessed these skills in the first place.

498
00:58:51.340 --> 00:58:55.340
If union privilege prevents some workers from putting their skills to proper use,

499
00:58:55.340 --> 00:58:59.340
The effect is the same as if they had never gone to the trouble to acquire them at all.

500
00:58:59.340 --> 00:59:05.340
Thus, society produces below its potential and wealth that would otherwise have been created never sees the light of day.

501
00:59:08.340 --> 00:59:13.340
Now, of course, much of the reason that labor unions have the sympathy that they do

502
00:59:13.340 --> 00:59:19.340
is that people have this sense that, of course, without unions, how could workers be prosperous?

503
00:59:19.340 --> 00:59:24.340
They don't have a strong negotiating position, employers have a much stronger negotiating position

504
00:59:24.340 --> 00:59:31.340
and so therefore they have to have a counterbalance to that natural advantage that employers are alleged to enjoy.

505
00:59:31.340 --> 00:59:39.340
And this is a position that we see in effect given voice even in Adam Smith's book, The Wealth of Nations.

506
00:59:39.340 --> 00:59:44.340
In speaking of workers and employers, Smith said as follows.

507
00:59:44.340 --> 00:59:45.340
He said,

508
00:59:45.340 --> 00:59:51.140
It is not, however, difficult to foresee which of the two parties must, upon all ordinary

509
00:59:51.140 --> 00:59:56.020
occasions, have the advantage in the dispute and force the other into a compliance with

510
00:59:56.020 --> 00:59:57.680
their terms.

511
00:59:57.680 --> 01:00:03.820
The masters, being fewer in number, can combine much more easily, and the law besides authorizes

512
01:00:03.820 --> 01:00:08.540
or at least does not prohibit their combinations while it prohibits those of the workmen.

513
01:00:08.540 --> 01:00:10.940
Well, not in the U.S. certainly.

514
01:00:10.940 --> 01:00:15.600
We have no Acts of Parliament against combining to lower the price of work, but many against

515
01:00:15.600 --> 01:00:20.080
combining to raise it. In all such disputes, and here's the key, the masters can hold

516
01:00:20.080 --> 01:00:25.640
out much longer. A landlord, a farmer, a master, manufacturer or merchant, though they did

517
01:00:25.640 --> 01:00:29.480
not employ a single workman, could generally live a year or two upon the stocks which they

518
01:00:29.480 --> 01:00:35.140
have already acquired. Many workmen could not subsist a week. Few could subsist a month

519
01:00:35.140 --> 01:00:40.260
and scarce any a year without employment. In the long run, the workman may be as necessary

520
01:00:40.260 --> 01:00:45.260
to his master as his master is to him, but the necessity is not so immediate.

521
01:00:45.260 --> 01:00:53.620
Well, I think that's a fairly standard understanding that most people have, but yet I'm going to

522
01:00:53.620 --> 01:00:59.580
suggest that this is in fact not an accurate way of thinking about what actually happens

523
01:00:59.580 --> 01:01:05.540
in labor markets and that it doesn't correspond either to sound theory or to in fact the experience

524
01:01:05.540 --> 01:01:10.240
that various countries have had throughout recent history.

525
01:01:10.240 --> 01:01:17.020
Now, if it's true, first of all, that because the employer can, allegedly, can afford to

526
01:01:17.020 --> 01:01:22.280
wait longer because he's got bigger stocks of things he needs for subsistence, whereas

527
01:01:22.280 --> 01:01:26.520
the worker is typically living very, very close to subsistence and can't just sit around

528
01:01:26.520 --> 01:01:30.360
and wait, if the employer can just sit there and say, look, this is my offer, I'll just

529
01:01:30.360 --> 01:01:35.240
sit here and wait for you to crawl up to me and take it, if that really is true, then

530
01:01:35.240 --> 01:01:40.840
Certain things should follow from that, that don't in fact seem to follow from that.

531
01:01:40.840 --> 01:01:45.920
If labor is more easily exploited, let's say, than capital, I mean, you can't say to a pile

532
01:01:45.920 --> 01:01:51.480
of steel, you know, I'm only going to give you five bucks a pound, so you just sit there

533
01:01:51.480 --> 01:01:55.160
and I'll just sit here and wait, you know, it wouldn't work with an inanimate object.

534
01:01:55.160 --> 01:02:00.120
Or the seller of an inanimate object, also being an employer, presumably has stocks to

535
01:02:00.120 --> 01:02:02.920
hold out so he can hold out.

536
01:02:02.920 --> 01:02:07.240
So the argument of labor exploitation would be that it's easier to exploit labor and

537
01:02:07.240 --> 01:02:12.720
hire it at a wage that its level of productivity doesn't just...

538
01:02:12.720 --> 01:02:18.560
In other words, when you hire labor, the argument is that I can hire people for like nothing

539
01:02:18.560 --> 01:02:20.720
because they're going to starve otherwise.

540
01:02:20.720 --> 01:02:26.280
But if I use capital, well, pretty much when I purchase some capital equipment, I've got

541
01:02:26.280 --> 01:02:27.760
to purchase it at the going rate.

542
01:02:27.760 --> 01:02:31.840
I have to purchase it at a rate that is in some way commensurate with the benefits that

543
01:02:31.840 --> 01:02:41.840
will accrue to me from it, because I'm buying it from, after all, another capitalist, who himself has stocks of goods, so I can't exploit capital in the way I can exploit a laborer.

544
01:02:41.840 --> 01:02:55.840
Well, if that really were true, then we would expect to find profits being much higher in labor-intensive industries than in capital-intensive industries, but this does not seem to have empirical support.

545
01:02:55.840 --> 01:03:00.840
There are also certain myths of labor union history that are incorrect,

546
01:03:00.840 --> 01:03:06.840
that are based on this presumption that the laborer is at a bargaining, negotiating disadvantage.

547
01:03:06.840 --> 01:03:12.840
For example, before there was anything remotely approaching substantial unionism in the United States,

548
01:03:12.840 --> 01:03:19.840
there was already a very substantial upward trend in wages throughout the 19th century, all into the 20th.

549
01:03:19.840 --> 01:03:24.840
Right now labor unions account for, I think there are 9% of American labor is actually unionized.

550
01:03:24.840 --> 01:03:54.840
Unionized, it's basically always been a very insubstantial figure, relatively small, it's gone up, it went up in the 30s of course because the law was giving it a lot of advantages, but it's always been relatively small, by the year 1900 it was about 3%, 3% of the labor force is unionized, and yet American workers into the 1920s were continuing to have substantially higher wages than their much more heavily unionized counterparts in Europe, they got the 8 hour day sooner, and so on.

551
01:03:54.840 --> 01:03:59.340
There's a standard view that says that large scale employers, the great big companies,

552
01:03:59.340 --> 01:04:01.720
tend to exploit unorganized workers.

553
01:04:01.720 --> 01:04:06.720
But in fact, the empirical evidence is that the larger firms were in fact paying better

554
01:04:06.720 --> 01:04:10.080
than the smaller firms.

555
01:04:10.080 --> 01:04:14.280
There's this claim that workers are at a disadvantage because they don't have as much in terms of

556
01:04:14.280 --> 01:04:19.120
savings where they can subsist on that while they're waiting for the employer to give in.

557
01:04:19.120 --> 01:04:23.480
But in fact, there does not seem to be any difference in the wage rates that workers

558
01:04:23.480 --> 01:04:29.680
Workers with Substantial Savings Received and Workers Without Savings Received.

559
01:04:29.680 --> 01:04:37.160
Labor unionism, in fact, impoverishes society in a variety of ways that are not immediately

560
01:04:37.160 --> 01:04:38.160
apparent.

561
01:04:38.160 --> 01:04:43.000
They're not intuitive, I think.

562
01:04:43.000 --> 01:04:46.760
First we have the distortions in the labor market that we've seen, people being forced

563
01:04:46.760 --> 01:04:51.200
to go into fields for which they're overqualified because unionism has shut them out of the

564
01:04:51.200 --> 01:05:03.200
and the field for which they had trained, but in fact the damage that unions have inflicted on the economy in recent American history is actually far greater than anybody might suppose.

565
01:05:03.200 --> 01:05:17.200
And I cite in my book a study by veteran Galloway that was published jointly by the National Legal and Policy Center and the John M. Mullen Institute for Employment Practice and Policy.

566
01:05:17.200 --> 01:05:23.000
But veteran Galloway did this study in 2002 that is available online, I think, to this day.

567
01:05:23.000 --> 01:05:26.600
And I think I can, in fact, if you just did a Google search of all those names,

568
01:05:26.600 --> 01:05:31.700
veteran Galloway, National Legal and Policy Center, John M. Olin Institute, you'd probably find it.

569
01:05:31.700 --> 01:05:36.000
But here's what they concluded, and this sounds absolutely counterintuitive at the beginning.

570
01:05:36.000 --> 01:05:44.800
They concluded that over the past half century alone, labor unions have cost the American economy a whopping $50 trillion.

571
01:05:44.800 --> 01:05:51.800
Now, that seems like they must have just, they forgot to carry the one, or they've got too many zeros, or this can't possibly be so.

572
01:05:51.800 --> 01:05:57.800
But, in fact, this is not a misprint. That was, in fact, their conclusion.

573
01:05:57.800 --> 01:05:59.800
And they write this. They say,

574
01:05:59.800 --> 01:06:05.800
The deadweight economic losses that are brought on by labor unionism are not one-shot impacts on the economy.

575
01:06:05.800 --> 01:06:10.800
What our simulations reveal is the powerful effect of the compounding over more than half a century

576
01:06:10.800 --> 01:06:34.800
The study did find that union labor does typically earn wages that are 15% higher than those of their non-union counterparts, but it also found that wages in general suffer dramatically as a result of an economy that is 30-40% smaller than it would have been in the absence of labor unionism.

577
01:06:34.800 --> 01:06:52.800
Now, I have a bunch of, I think, pretty overwhelming evidence on this, about how unionism has in fact contributed to not the well-being of workers, but actually to the overall impoverishment of American labor.

578
01:06:52.800 --> 01:06:58.800
But I think I'm going to save most of that for next time, and then I'm going to look at a couple of historical episodes next time.

579
01:06:58.800 --> 01:07:15.800
The thought experiment is this, as we know, the usual argument is that in the absence of labor unions, employers will pay unconscionably low wages.

580
01:07:15.800 --> 01:07:19.800
But George Reisman has got a useful thought experiment to the contrary.

581
01:07:19.800 --> 01:07:25.800
He says, let's suppose you have a car in New York City, which, by the way, is an unbelievable hassle.

582
01:07:25.800 --> 01:07:31.800
Where would you park it? It costs a fortune. It's a nightmare. There's traffic all the time anyway.

583
01:07:31.800 --> 01:07:34.800
And let's just say you decide that you just want to get rid of this car.

584
01:07:34.800 --> 01:07:38.800
And you pretty much take anything that you can get for it.

585
01:07:38.800 --> 01:07:41.800
In fact, you take one dollar for the car.

586
01:07:41.800 --> 01:07:45.800
In fact, let's say you would pay somebody to take this car off your hands.

587
01:07:45.800 --> 01:07:53.800
Now the question is, does that mean that in practice you are in fact going to have to pay somebody to take that car away?

588
01:07:53.800 --> 01:07:58.800
The Theory of Money and Credit

589
01:08:23.800 --> 01:08:33.800
This person, because of his low bid, will miss out on the opportunity to own the car altogether, since his rivals will simply outbid him.

590
01:08:33.800 --> 01:08:37.800
In effect, the same thing happens in the labor market. This is how Charles Baird explains it.

591
01:08:37.800 --> 01:08:44.800
He says, this idea that workers without unions will inherently have a disadvantage in bargaining power relative to employers,

592
01:08:44.800 --> 01:08:49.800
is the basis for most individuals' support of unionism, and is picked up again in the Wagner Act.

593
01:08:49.800 --> 01:08:55.520
The Wagner Act expressly says in the act itself, it actually includes a statement saying that

594
01:08:55.520 --> 01:09:00.360
because we all know that laborers are at a disadvantage in bargaining, therefore we have

595
01:09:00.360 --> 01:09:01.360
to do this.

596
01:09:01.360 --> 01:09:03.560
I mean, they just state it as if it's obvious.

597
01:09:03.560 --> 01:09:06.200
But that disadvantage is a hoary myth, says Baird.

598
01:09:06.200 --> 01:09:09.840
A worker's bargaining power depends on the worker's alternatives.

599
01:09:09.840 --> 01:09:14.840
If a worker either works for employer A or does not work, that is if employer A is a

600
01:09:14.840 --> 01:09:19.840
In that case, the worker has little bargaining power.

601
01:09:19.840 --> 01:09:24.840
If the worker has several employment alternatives, on the other hand, he has strong bargaining power.

602
01:09:24.840 --> 01:09:30.840
There may have been instances of monopsony or oligopsony in the 19th century, but they were short-lived.

603
01:09:30.840 --> 01:09:37.840
Monopsony has not been a significant factor in the American labor market since the introduction and widespread use of the automobile.

604
01:09:37.840 --> 01:10:05.840
In fact, Baird on another occasion says that Henry Ford did more for the typical American worker than did Samuel Gompers, who was the head of the American Federation of Labor for a long time, because Henry Ford, by making the automobile affordable, now makes it possible for employees to drive around and to get a variety of employment offers and then to be able to choose between them.

605
01:10:05.840 --> 01:10:10.840
The empirical evidence simply does not bear out the conventional wisdom regarding unions.

606
01:10:10.840 --> 01:10:15.840
If it were true that employers were really in a position to impose whatever wage rate they wished,

607
01:10:15.840 --> 01:10:22.840
then why in the decades before large-scale labor unionism, why weren't wages heading towards zero?

608
01:10:22.840 --> 01:10:26.840
In fact, real wages were increasing dramatically at that time.

609
01:10:26.840 --> 01:10:30.840
Or why is it that skilled workers would earn more than unskilled workers?

610
01:10:30.840 --> 01:10:34.840
They should all be earning subsistence, according to the exploitation theory.

611
01:10:34.840 --> 01:10:40.840
I mean, you should be able to just, because, hey, they can't wait, they're going to starve, they've got to take whatever offer you give them.

612
01:10:40.840 --> 01:10:45.840
Why should there be any differentiation in the wages paid to skilled versus unskilled workers?

613
01:10:45.840 --> 01:10:49.840
Why not just pay them both the same pittance?

614
01:10:49.840 --> 01:10:58.840
Well, this has all been sort of a negative overview, sort of first laying out what the basic principles are of American labor law at this point,

615
01:10:58.840 --> 01:11:07.840
and then looking at why it is that in fact labor unions are not responsible for the increased standard of living

616
01:11:07.840 --> 01:11:12.840
and in fact why they helped to depress it, but although I do want to continue on that line a little bit next time

617
01:11:12.840 --> 01:11:20.840
I want to give an alternative explanation, an alternative version of history that explains what in fact does account for the rising standard of living

618
01:11:20.840 --> 01:11:25.840
that American workers have enjoyed from the 19th century to the present.

619
01:11:25.840 --> 01:11:35.840
So I think that will be it for right now, and we'll see if anybody thinks anything about this or has any comments or any horror stories to share with us,

620
01:11:35.840 --> 01:11:40.840
because my father sure had plenty of them, because my father worked because he felt like it was the right thing to do,

621
01:11:40.840 --> 01:11:45.840
and there would be people, he felt there were people who were taking advantage of the unionized situation,

622
01:11:45.840 --> 01:11:49.840
who would hurt their thumb and they'd be out for eight weeks, and that drove him crazy,

623
01:11:49.840 --> 01:11:53.840
and he sort of felt like the honorable thing is to do your day's work,

624
01:11:53.840 --> 01:12:15.840
Are you going to go into any of the initial history of union? My general impression is that the ones that got unionized first were the ones that paid the best to start with, like the rebels.

625
01:12:23.840 --> 01:12:26.840
and the Haymarket incident, and things like that.

626
01:12:26.840 --> 01:12:30.840
But, yeah, it is interesting, I think that actually is a valid point,

627
01:12:30.840 --> 01:12:34.840
about where the actual unionization is taking place,

628
01:12:34.840 --> 01:12:37.840
is where wages are actually already quite strong by comparison.

629
01:12:37.840 --> 01:12:45.840
You asked for an example of a horror story with the board there, the National Relation Board.

630
01:12:45.840 --> 01:12:52.840
This happened in South Carolina, which was a right to work state,

631
01:12:52.840 --> 01:13:14.840
There were unions there, and this guy, who was very conservative, started paying each worker each week in actual cash, so he'd hand the cash to the guy, but after you got the pay window, you couldn't leave, you had to go to the next window, and the first thing they did was take out the Social Security.

632
01:13:14.840 --> 01:13:44.840
Then went to the next window and they took out the federal and then the state and then the union dues and then you ended up with what was left and then at the end of each week they took all the social security and the federal and they had this huge brass thing like a giant aquarium and they dumped it into this and put a sign on it and said this is your money going to Washington and it was garbage and every week you know this thing was just huge and so

633
01:13:44.840 --> 01:13:53.840
Anyway, what happened was, not only that they did, but they said, well, the first thing they knew, they could do much for the taxes, but they knew one thing they could do.

634
01:13:53.840 --> 01:14:01.840
They didn't have to take that union every week and pay that, so they stopped paying the unions.

635
01:14:01.840 --> 01:14:07.840
And the National Labor Relations Board said that was an unfair labor practice and they stopped cold.

636
01:14:07.840 --> 01:14:12.840
Oh, that's like one of the best things I've ever heard and they had to stop it?

637
01:14:12.840 --> 01:14:24.840
I thought of the difference between the non-governmental market and the government.

638
01:14:24.840 --> 01:14:28.840
I used to work for the U.S. government and they were very restrictive on unions.

639
01:14:28.840 --> 01:14:33.840
At the level I was at, you couldn't even join a union.

640
01:14:33.840 --> 01:14:40.840
And in Congress, their employees would have even more restrictions than the executive branch did.

641
01:14:40.840 --> 01:14:49.840
I don't know if you want to comment on that kind of stuff, but that's the difference between what's good for the goose and good for the gander.

642
01:15:10.840 --> 01:15:37.840
I can't give you any specifics, but I know what I've argued is that people that are sympathetic to unions, they would say, yeah, you can sometimes use violence, but that's a very selective interpretation, and that especially in the late 1800s, the miners would go on strike and then the mine owners would call in their doom and beat them up and they paid off the police, and so in the 20th century it was more like making a level playing field in terms of the use of violence.

643
01:15:37.840 --> 01:16:07.840
I think, actually, not really, because I think that, you know, like Bob Higgs, for instance, who is, you know, as small government or, you know, whatever a guy is, you can find, nevertheless, he likes President Grover Cleveland in spite of what a lot of people criticize him for, which is that he, you know, he sometimes did intervene in labor disputes or to try to restore order in the midst of strikes, and that's

644
01:16:07.840 --> 01:16:13.840
and that sort of thing, and Higgs absolutely insisted that case after case, he's totally justified in doing so,

645
01:16:13.840 --> 01:16:19.840
that the violence that's taking place is typically on the part of the Union,

646
01:16:19.840 --> 01:16:25.840
and that intervening or having injunctions were exactly the right thing to do.

647
01:16:25.840 --> 01:16:31.840
In fact, there's a reasonably good discussion of the Pullman Strike, as I recall, in Crisis and Leviathan,

648
01:17:01.840 --> 01:17:08.840
Even though the Pinkertons were hated by people, they were typically hired because the public police weren't protecting the plant.

649
01:17:08.840 --> 01:17:10.840
They had a history of not protecting the plant.

650
01:17:10.840 --> 01:17:21.840
So if you know that the public authorities aren't going to protect the plant, then you really have no choice other than to arm yourself with whatever private organization you can find.

651
01:17:21.840 --> 01:17:27.840
Not many people have spoken on behalf of the Pinkerton Detective Agency over the past hundred years, but that's about the best I can do.

652
01:17:27.840 --> 01:17:31.840
and other, I'll see. Yes, Harry.

653
01:17:31.840 --> 01:17:35.840
This is not going to be a multiple position to take at the moment.

654
01:17:35.840 --> 01:17:39.840
I'm going to be able to do a few minutes for a little bit of fun, but

655
01:17:39.840 --> 01:17:43.840
and then sort of building off of Mr. Sadlerberg's question

656
01:17:43.840 --> 01:17:47.840
about government unions and making a thought experiment

657
01:17:47.840 --> 01:17:51.840
of the socialized countries

658
01:17:51.840 --> 01:17:55.840
of Eastern Europe or something like that where it might be justified for

659
01:17:55.840 --> 01:18:05.840
or someone like Rothbard who would say that the factories are owned by, probably by the workers themselves,

660
01:18:05.840 --> 01:18:15.840
that in as much as government isn't properly owned by the people who direct it,

661
01:18:15.840 --> 01:18:43.840
and certain state affiliated capitalists, like defense contractors, are also illegitimate, that certain actions that are against the employers in those cases, are legitimate, like sit-downs, or even reshifting answers from other workers,

662
01:18:43.840 --> 01:18:48.840
and as much as those workers might own the planet, in certain cases, in certain relationships.

663
01:18:50.840 --> 01:18:55.840
There's one judgment that L5 property is legitimate, but not all of it always is.

664
01:19:43.840 --> 01:20:13.840
In this case, in the case of government unions, then I think you may be able to have a point in saying that maybe the employer

665
01:20:13.840 --> 01:20:43.840
The employees of these institutions are, at least in some way, perhaps more legitimately the owners and so they might be able in fact to engage in things like preventing people from coming onto the property because perhaps it is their property but at the same time there is the fact that these institutions are tax payer funded and so I could just as well say that I'm at least a partial owner of that thing and so couldn't I in fact impose some kind of rule as to how it's going to

666
01:20:43.840 --> 01:21:12.840
This kind of might throw a wrench in this debate as well, in the sense that the current immediate response of government employees in government sectors, which are highly unionized, is a hesitation towards privatization, especially in things like police officer unions.

667
01:21:12.840 --> 01:21:16.840
in the sense that I think that the way in which these

668
01:21:16.840 --> 01:21:20.840
occupations develop

669
01:21:20.840 --> 01:21:24.840
in terms of their entrepreneurial incentives

670
01:21:24.840 --> 01:21:28.840
is kind of thrown out of whack, being that all government

671
01:21:28.840 --> 01:21:32.840
operations are in a sense a subsidy

672
01:21:32.840 --> 01:21:36.840
and throw a misallocation of resources in terms of

673
01:21:36.840 --> 01:21:40.840
in a very curtenarian sense of who capitalizes on a profit

674
01:21:40.840 --> 01:22:10.840
Opportunity is the real entrepreneur. And in the general production process of, say, like, any consumer good, like, if you have a unionized labor force of car makers or something, it's less thrown out of whack without a subsidy in the sense that the laborers recognize, oh, the capitalist is making a killing off of our labor, so we're going to collectively bargain so as to obstruct some of that profit and be entrepreneurial ourselves,

675
01:22:10.840 --> 01:22:24.840
versus an entirely government-subsidized industry like, say, police, security is thrown out of whack right off the beginning from the capitalist investment in the general process is government-subsidized.

676
01:22:24.840 --> 01:22:31.840
So the people who are the employees, there's a misallocation of resources before they even have the opportunity to say,

677
01:22:31.840 --> 01:22:35.840
we're in a production process for something that's profitable that we should profit off of.

678
01:22:35.840 --> 01:22:52.840
Yeah, that's right. And as I got to the end of my thinking that issue through, I was not so certain at the end of my answer as I was at the beginning, I think, for at least some of those reasons. Thanks.

679
01:22:52.840 --> 01:22:55.840
Okay, yes sir, and then we'll go here and then come back to you.

680
01:22:55.840 --> 01:23:07.840
My hometown is the heart of the University of Detroit, Michigan, and I can relay a lot of stories about it, but I'll relay a personal one.

681
01:23:07.840 --> 01:23:12.840
I mean, my background is in the CPA, and I don't do that anymore, by the way. I hate accounting.

682
01:23:12.840 --> 01:23:25.840
But I was engaged in a consulting deal with a company that was a bindery. A bindery is someone who finds books or does something similar to that.

683
01:23:25.840 --> 01:23:34.840
And they had a large contract with General Motors and they lost it. And that was the only annual that went into the catallactics of the Osmobile.

684
01:23:34.840 --> 01:24:03.840
And I was engaged to come in and do strategic planning. One of the things I did was institute statistical process control to be able to guarantee quality as it came out and convince General Motors that we now have a quality product and they scheduled a visit to the plant. There were three plants and writing on it was about a $5 million contract with a company that did a gross of $10 million.

685
01:24:03.840 --> 01:24:13.840
So this was a pretty big deal. One of the employees was not happy with this whole idea of accountability and responsibility.

686
01:24:13.840 --> 01:24:27.840
One person out of about 120 employees had began threatening to bring her brothers and sisters and friends to cause a lot of violence on the day that GM was going to show up.

687
01:24:27.840 --> 01:24:31.840
you had people's jobs and everything else and we were driving them in this

688
01:24:31.840 --> 01:24:35.840
so the day before the threats got really real

689
01:24:35.840 --> 01:24:39.840
we walked out and there were about ten cars out in the parking lot

690
01:24:39.840 --> 01:24:43.840
and these were only people and not related to the

691
01:24:43.840 --> 01:24:47.840
and this is private property again

692
01:24:47.840 --> 01:24:51.840
and this is a non-union shop by the way, it was not a union organization

693
01:24:51.840 --> 01:24:55.840
so I told the president of the company, well what I would do is just fire her

694
01:24:55.840 --> 01:25:17.840
The NLRB found against us that we did not allow for organized labor to protest, to be able to organize on our property, blah, blah, blah.

695
01:25:17.840 --> 01:25:21.840
There was no union there. How could you find against us?

696
01:25:21.840 --> 01:25:33.840
The result was that the president of the company had to assemble the entire organization and the person for back wages, which was about $45,000 right on the spot.

697
01:25:33.840 --> 01:25:49.840
And the NLRB, in their finding, insisted that the president had to publicly apologize in front of the entire organization, that he fired her wrongly, and that it was his heartfelt remorse that he didn't.

698
01:25:49.840 --> 01:26:08.840
It's unbelievable that the National Labor Relations Board must be made up of just ideological zealots who take pleasure in hobbling, you know, a productive, decent, normal human being like this.

699
01:26:08.840 --> 01:26:15.840
I mean, actually writing out what the guy has to say to humiliate himself. I mean, there's something seriously twisted about that.

700
01:26:15.840 --> 01:26:26.840
The referee was almost gleeful in this finding. We're talking about people losing their jobs. There was a huge contract.

701
01:26:26.840 --> 01:26:36.840
There was one individual that was threatening violence. It was amazing. We just sat there and we hired the best law firm in the city of Detroit that was used to labor problems.

702
01:26:36.840 --> 01:26:39.840
Because we couldn't even believe we were in front of the NLRB in the first place.

703
01:26:39.840 --> 01:27:07.840
My question was regarding the 19th century ruling, the one when you mentioned that the people versus Fisher, that the court ruled that trying to get a minimum wage for workers in this industry was injurious to others, and I was wondering, was there any violent action on the part of people trying to get the minimum wage?

704
01:27:07.840 --> 01:27:12.840
How did it change, or was the Court putting a stop to purely social pressure?

705
01:27:12.840 --> 01:27:19.840
Let's see, you know what, let me check on that over the break and just to refresh my memory on it and try to get to the bottom of that question.

706
01:27:19.840 --> 01:27:22.840
Okay, and then sir, then that will be the last one.

707
01:27:22.840 --> 01:27:28.840
I have two short questions, one in more of a common, one of our employees was from a small agency.

708
01:27:28.840 --> 01:27:44.840
He constantly was an inventor and he constantly was an employee, got multiple patents and those patents were used widely commercially, so he more than paid for his wages, he probably paid for the whole cost of our agency for those patents because the agriculture industry used them.

709
01:27:44.840 --> 01:27:54.840
How would one treat a U.S. government entity getting patents and those patents basically paying for the whole operations of this agency?

710
01:27:54.840 --> 01:28:05.840
We had, our agency was smallest in the department of agriculture, second smallest, I think we had like 60 employees, so that was one question.

711
01:28:05.840 --> 01:28:17.840
The other was, I know for a fact the guilds in the Middle Ages, they didn't allow Jews to join unions, or guilds, and that was restrictive.

712
01:28:17.840 --> 01:28:23.840
In the United States, were the race or religious restrictions on unions? I don't know if you can comment on that.

713
01:28:23.840 --> 01:28:34.840
Well, I mean, certainly, the Union sort of had a reputation for having, for racial discrimination, you know, throughout, I think, they had that reputation.

714
01:28:34.840 --> 01:28:37.840
I mean, even into the late 60s, you could still see that.

715
01:28:37.840 --> 01:28:45.840
Yeah, the medieval guilds are sometimes pointed to as wonderful examples of what we need,

716
01:28:45.840 --> 01:28:51.840
because they had both the workers and the employers in them, and it was mutually harmonious and everything,

717
01:28:51.840 --> 01:29:10.840
But I was just reading the other day that the guilds were so anti-competitive that you were actually forbidden, if you were a seller, if you were actually a master producing some product, you could not even sneeze in front of your store because that might draw undue attention to you.

718
01:29:10.840 --> 01:29:21.840
You weren't supposed to try to outdo, you know, your competition or undersell them or call special attention or advertise, you know, such as that was possible in those days.

719
01:29:21.840 --> 01:29:26.840
But even sneezing might be your secret way of getting people to look over in your direction.

720
01:29:26.840 --> 01:29:31.840
So you have to just stand there like an automaton, waiting for people to come by.

721
01:29:31.840 --> 01:29:35.840
I happen to think that would not be a good model, you know, for the economy.

722
01:29:35.840 --> 01:29:38.840
Alright, let's go eat. Thanks a lot.