More labor union myths

The latest mutual fund issue of Money magazine had an interesting tidbit on labor unions. It claimed that labor unions were primarily responsible for—-get this—-“the expansion of the American middle class.”

The claim was not supported at all. It was merely passed on—-smuggled, really—-as a kind of self-evident fact, obviously requiring no proof or foundation whatsoever.

This type of intellectual evasion happens quite often. Popular political-economic beliefs are presented as fact, for the unfiltered consumption of the mass electorate. No attempt is normally made to explore the deeper issues involved, or its corollary implications. Consequently, popular economic myths emerge.

Foremost among these popular economic myths is the alleged blessing of the labor unions. “Labor unions exist to help the working man and bring about more fairness and greater social justice and equality,” claims the dominant liberal establishment. “They have served to expand the American middle class.”

How interesting, then, that now, during America’s single greatest period of peacetime economic expansion, American labor union membership only continues to decline. Now, during a period of low inflation, record low unemployment, a booming stock market and robust GDP growth—-labor union membership in the United States remains at an all-time low. What a curious phenomenon indeed. Perhaps now that union membership is fast receding—-the American middle class might suddenly shrink.

If labor unions made the difference in expanding the American middle class, then it stands to reason: unions are the ultimate economic solution. Cure poverty. Expand the middle class. Start unions.

After all, unions create wealth and prosperity. They raise worker income. They raise worker living standards. They improve overall working conditions.

Very well then–organize labor unions in every wretched, deeply impoverished, God-forsaken, Third World nation on earth. Expand the middle class in Bangladesh; deploy the AFL-CIO. Expand the middle class in Iran; organize a trade union there. Bring more trade unions to Nigeria.

Obviously, unions are not the ultimate solution. Unions do not create wealth or improve a nation’s overall standard of living. They do not create prosperity or expand the middle class.

Unions merely present an economic demand to capital and management. Such a demand, in and of itself, will never automatically produce wealth. Unions focus their efforts on the redistribution of wealth, not on the creation of wealth itself. In other words, they are good at slicing the economic pie, not making that pie grow much larger.

For example, if a Bangladeshi trade union demands that their Bangladeshi corporation pay each worker $15 an hour, that demand will never alter the fact that the company, given prevailing market conditions, might still never be able to afford such a drastic wage hike.

Can labor unions take credit for expanding the American middle class?

In the immortal words of Guy Gabaldon, my favorite living war hero, “No way, Jose!”