The "Austrian" quiz and labor unions

[afruff23]

Now, I would consider myself a strict right-libertarian anarcho-capitaists with respect to property rights. However, I would likely be classified as left-libertarian for my anti-war, anti-corporatism stands.

When I took the Austrian quiz, I scored 98/100. The only question I had a really tought ime with was regarding labor unions; I chose the “Chicago” answer. Now, can somebody explain the labor unions piece? I imagined I was taking a “Paleocon” quiz or something after seeing the “Austrian” answer to that question. In the true free market, labor unions would likely remain, so I doubt that the State is what creates them. To some extent, the State does empower them, but that does not make unions a creation of the state. To use this logic would be to say that States create capitalism by giving subsidies to corporations.

[jtucker]

To some extent? They pretty much didn’t exist in modern form, and they certainly had no power, until the state came to their aid. I recommend any history of labor unions. There are a number in the Mises store-- see Hutt for example.

[BWF89]

In a truely free market (anarcho-capitalism) would there even be a need for labor unions? Without the state around to protect and prop up big business by allowing them to become corporations would most businesses ever grow to the level where they have the power many of the international corporations do now?

[ayrnieu]

@afruff23

Now, can somebody explain the labor unions piece?

@Austrian Answer

Unions are labor market monopolies because they benefit from government privilege. Unions work to raise wages above competitive levels. This reduces the employment of low productivity workers and decreases the overall production of consumer goods. Union leadership is often corrupt and takes great advantage of union workers themselves. Unions also work to concentrate power into the hands of pro-union politicians in government. The concentration of this power is inimical to free societies.

On assertion 2 and half of assertion 3, Man, Economy, and State:

It is a common myth that only the old-style "craft” unions, which deliberately restrict their occupational group to highly skilled trades with relatively few numbers, can restrict the sup­ply of labor. They often maintain stringent standards of mem­bership and numerous devices to cut down the supply of labor entering the trade. This direct restriction of supply doubtless makes it easier to obtain higher wage rates for the remaining workers. But it is highly misleading to believe that the newer-­style “industrial” unions do not restrict supply. The fact that they welcome as many members in an industry as possible cloaks their restrictionist policy. The crucial point is that the unions insist on a minimum wage rate higher than what would be achieved for the given labor factor without the union. By doing so, as we saw in Figure 69, they necessarily cut the number of men whom the employer can hire. Ergo, the consequence of their pol­icy is to restrict the supply of labor, while at the same time they can piously maintain that they are inclusive and democratic, in contrast to the snobbish “aristocrats” of craft unionism.

In fact, the consequences of industrial unionism are more dev­astating than those of craft unionism. For the craft unions, be­ing small in scope, displace and lower the wages of only a few workers. The industrial unions, larger and more inclusive, de­press wages and displace workers on a large scale and, what is even more important, can cause permanent mass unemployment.

There is another reason why an openly restrictionist union will cause less unemployment than a more liberal one. For the union which restricts its membership serves open warning on workers hoping to enter the industry that they are barred from joining the union. As a result, they will swiftly look elsewhere, where jobs can be found. Suppose the union is democratic, however, and open to all. Then, its activities can be described by the above figure; it has achieved a higher wage rate 0W for its working members. But such a wage rate, as can be seen on the SS curve, attracts more workers into the industry. In other words, while 0A workers were hired by the industry at the previous (non­union) wage AB, now the union has won a wage 0W. At this wage, only WC workers can be employed in the industry. But this wage also attracts more workers than before, namely WE. As a result, instead of only CF workers becoming unemployed from the union’s restrictionist wage rate, more—CE—will be un­employed in the industry.

On assertion 1, MES disagrees:

How can unions achieve restrictionist wage rates on the free market? The answer can be found by considering the displaced workers. The key problem is: Why do the workers let them­selves be displaced by the union’s WW minimum? Since they were willing to work for less before, why do they now meekly agree to being fired and looking for a poorer-paying job? Why do some remain content to continue in a quasi-permanent pocket of unemployment in an industry, waiting to be hired at the ex­cessively high rate? The only answer, in the absence of coercion, is that they have adopted on a commandingly high place on their value scales the goal of not undercutting union wage rates. Unions, naturally, are most anxious to persuade workers, both union and nonunion, as well as the general public, to believe strongly in the sinfulness of undercutting union wage rates. This is shown most clearly in those situations where union members refuse to continue working for a firm at a wage rate below a cer­tain minimum (or on other terms of employment). This situa­tion is known as a strike. The most curious thing about a strike is that the unions have been able to spread the belief through­out society that the striking members are still “really” working for the company even when they are deliberately and proudly refusing to do so. The natural answer of the employer, of course, is to turn somewhere else and to hire laborers who are willing to work on the terms offered. Yet unions have been remarkably successful in spreading the idea through society that anyone who accepts such an offer—the “strikebreaker”—is the lowest form of human life.

Assertions 4 and 5 are clearly historical. Assertion 6 is political. The second half of assertion 3 – “decreases the overall production of consumer goods” – is probably derived from union’s distortion of the scarce good of labor.