Historian and author Thomas E. Woods, Jr., recently released an editorial on the history of the labor movement. Occasionally, it helps to go back to root issues, so as not to become trapped in fallacious arguments founded on false pretext. We thought it beneficial to quote from the article at length, but I encourage you to read the entire piece.

The standard tale that practically every student hears over the course of his education is that before the emergence of labor unions, American workers were terribly exploited and their wages were consistently falling. The improvement in labor’s condition was due entirely or at least in large part to labor unionism and favorable federal legislation. In the absence of these, it is widely assumed, people would still be working 80-hour weeks and children would still be working in mines.

This oft-heard tale is, however, almost entirely false, and those parts of it that are true (the low standard of living that people enjoyed in the nineteenth century, for example) are true for reasons other than those alleged by pro-union historians, who see in them only confirmation of their prejudices against the market economy.

Woods describes how the Norris-La Guardia Act of 1932 exempted unions from the Sherman Antitrust act, therefore also exempting them from behavior that law deemed criminal in any other context! After describing the impact of the Wagner Act in 1935, he quotes Harvard University’s Edward Chamberlin’s attempt to describe the unique legal status that labor unions had been granted by the law:

If A is bargaining with B over the sale of his house, and if A were given the privileges of a modern labor union, he would be able (1) to conspire with all other owners of houses not to make any alternative offer to B, using violence or the threat of violence if necessary to prevent them, (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, and (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 as part of “bargaining” – unless A were a labor union.

Nobel Laureate F.A. Hayek chimed in on this state of affairs, “We have now reached a state where [unions] have become uniquely privileged institutions to which the general rules of law do not apply.”

Addressing the impact of the collective body of labor law, Woods states,

The ways in which labor unionism impoverishes society are legion, from the distortions in the labor market described above to union work rules that discourage efficiency and innovation. The damage that unions have inflicted on the economy in recent American history is actually far greater than anyone might guess. In a study published jointly in late 2002 by the National Legal and Policy Center and the John M. Olin Institute for Employment Practice and Policy, economists Richard Vedder and Lowell Gallaway of Ohio University calculated that labor unions have cost the American economy a whopping $50 trillion over the past 50 years alone.

Unionist arguments are based on unsound economic reasoning, the kind of short-sightedness famed economic journalist Henry Hazlitt addressed in “Economics In One Lesson.” Woods adds to the debunking of union arguments,

The case for labor unionism does possess a superficial plausibility, but it is in fact entirely fallacious. Real wages rise not because of union activity but because of the process that George Reisman describes in his productivity theory of wages… In short, business investment in machinery increases the productivity of labor and therefore the output that the economy is capable of producing, and this greater supply puts downward pressure on prices.

As Reisman explains, “It is the productivity of labor that determines the supply of consumers’ goods relative to the supply of labor, and thus the prices of consumers’ goods relative to wage rates.” This phenomenon is not always easy to see in an inflationary economy such as ours, in which prices of most goods seem to go up consistently. But the point remains: prices become lower than they would otherwise be, and all real incomes (wages included) increase.

Woods concludes,

The vast bulk of the existing scholarship on American labor history is essentially unreadable. It takes for granted all the economic myths of unionism, the essential righteousness of the union cause, and the moral perversity of anyone who would dare to oppose it…

Labor historians and activists would doubtless be at a loss to explain why, at a time when unionism was numerically negligible (a whopping three percent of the American labor force was unionized by 1900) and federal regulation all but nonexistent, real wages in manufacturing climbed an incredible 50 percent in the United States from 1860–1890, and another 37 percent from 1890 to 1914, or why American workers were so much better off than their much more heavily unionized counterparts in Europe. Most of them seem to cope with these inconvenient facts by neglecting to mention them at all.

I suppose the truth can be a bit inconvenient.

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