How many times have you been in an economic discussion with someone, discussing the benefits of competition, the power of markets, and the overall benefits of capitalism when someone blurts out that in any competitive system, unions and regulations are necessary, for without them, without their interference, we wouldn’t have a middle class, we wouldn’t have a five day work week or eight hour work days? I hear this all the time, I see it on bumper stickers, and it is so often repeated that I thought I’d blog on it and give the readers of my blog an edge on what really happened, and how to respond if they encounter the same topic.
So, who gave us the 5 day, 8 hours per day, work week? Was it really the unions, was it really higher regulations? No, the historical answer is that it was Heny Ford who gave us the 5 day, 8 hours per day, work week. Ford was tired of continuously losing good employees, he was trying to increase employee retention and at the same time increase profits, so he basically doubled wages and implemented a 5-day work week, and in the process effectively invented the modern weekend. It is Henry Ford who is widely credited with contributing to the creation of a middle class in the United States.
In addition, if you look at why Henry Ford did this, you will see that his reasons had nothing to do with charity, and everything to do with increasing profits and dealing with the forces of competition.
What makes those who believe it was unions look even more ridiculous is the fact that Henry Ford despised unions. The tensions were so strong, that Ford hired a former Navy boxer to help him stop the unions from unionizing Ford Motor Company.
Many of those who hold the view that it was unions - or regulations - who gave us the middle class, often hold outdated fears against ‘unfettered markets’, still repeating the now fully debunked Karl Marx view that capitalism, through competition, will bring exploitation of workers, will be a ‘race to the bottom’, and will eventually, atleast according to Marx, result in class warfare blah blah blah blah. However, if you come back to the real world, you will see that competition does the exact opposite, it increases the standard of living, it increases working standards, it increases pay, and it is overall the working person’s best weapon, not its enemy. This is why unions and the minimum wage have the opposite result, since by reducing competition they don’t make the working person’s standard of living better; on net balance, they make it worse.
So in conclusion, it wasn’t because of unions or regulations that we have a middle class, it was in spite of them that we do, and the next time you hear otherwise, correct them immediately, the working class will thank you.
…he was the exception to the rule though (or is it the exception not the rule?). Anyhow, you didn’t mention the kids he employed
Whether he was the exception or the norm, it remains a fact that he did it based on market pressure, not good will (he was, afterall, anti-Semitic and a supporter of Hitler).
Also, child labor was outlawed in the late 1930’s, which is, again, one of the benefits of a capitalistic society, since, it is primarily capitalistic societies that have the luxery of banning child labor.
Well, needless to say I do NOT agree with your conclusion - “So in conclusion, it wasn’t because of unions or regulations that we have a middle class, it was in spite of them that we do, and the next time you hear otherwise, correct them immediately, the working class will thank you.” Let me give you an example - I have a cousin that works on the line at a Ford plant. She probably makes about $22 an hour and pays at least $20 for health coverage for the whole family. The last contract the UAW negotitated she received a yearly raise and a bonus if sales were up in the 4th qtr. Now I’ll give you the example of my cousin. Currently works for a CONTRACT company @ a auto-supplier office. These contract companies have sprung up due to the fact that companies want to save money by not hiring workers directly. The majority of these auto suppliers will either hire those with a HB-1 visa, send work to another country or hire a contract worker. My cousin has been lucky to still have a job. However, it’s been five years since he’s seen a raise and has to pay about $140 a week for health insurance. Who do you think has a better view of the middle class? Due to those unions other industries have benefited in the area. When you take away those jobs from the area the economy suffers.
Well that is exactly my point, unions on net balance take away jobs from the area, and the economy and the poor do suffer.
Nobody is arguing that unions don’t benefit anyone. They certainly benefit those in the union, and especially those with the highest seniority. But that is not all to the story, unions, by making labor costs more expensive, also reduce the total amount of employment out there in the market. So they directly hurt those poor workers who are not in the union and who are usually much poorer than union workers. This is how economist Milton Friedman explained it,
“If unions raise wage rates in a particular occupation or industry, they necessarily make the amount of employment available in that occupation or industry less than it otherwise would be — just as any higher price cuts down the amount purchased. The effect is an increased number of persons seeking other jobs, which forces down wages in other occupations. Since unions have generally been strongest among groups that would have been high-paid anyway, their effect has been to make high-paid workers higher paid at the expense of lower-paid workers. Unions have therefore not only harmed the public at large and workers as a whole by distorting the use of labor; they have also made the incomes of the working class more unequal by reducing the opportunities available to the most disadvantaged workers”. — Milton Friedman in “Capitalism And Freedom”
So on net balance unions are bad. In other words, unions - not the market - help create circumstances like the one your cousin at a contract company is in.
And all of this without even counting all of the other costs that unions inflict primarily on the poor, things like reducing the competitive edge of companies to compete with others (just look at the Wal-Mart versus Ralphs debates), force companies to artificially raise prices on goods (an act that primarily hurts poor people), increase unemployment (another act that hurts the poor), and, something often overlooked, create incentives for companies to go overseas.
Just take the example you gave, do you honestly think unions have been good for Ford? Ford has been losing business, year after year, to companies like Toyota and others, companies that have a much more direct labor cost. In addition, Ford has been closing plants every few years or so. This is not unique to Ford either, just look at the loss all private industries where union representation is high are taking, for example, the airline industry.
In addition, just look at parts of the country that have high union representation, and you will see, almost one to one, areas where growth is stagnant, where companies don’t want to go because of the high labor costs, and it is unions that artificially increase those labor costs.
All in all, this primarily hurts the poor. The rich CEO’s and managers of all of these companies will easily find a job somewhere else, but the reduction in employment, the loss of factories, the higher prices on goods, and the overall environment of joblessness that the unions create, is something that directly hits the poor where it hurts them most, in their pocket book. So instead of having one forklift operator earning a six-figure income, we could have, maybe three forklift operators earning, maybe 40K/year, and with that a company that is more competitive, and an environment that is more conducive to more employment, and cheaper products for others etc.etc…
There are really only two ways to increase the wages of labor, and these methods are mutually exclusive. There is the conservative free-market approach, which focuses on increasing competition, and than there is the regulation, pro-minimum wage, pro-union liberal approach, which tries to artificially increase the wages of labor, but in the end, reduces competition. I support, and history has shown to be superior, the free-market competitive approach.
Henry ford was an antisemite who helped build the Nazi war machine. Oh and he was down with Hitler. See for yourself.
http://en.wikipedia.org/wiki/Henry_Ford#Anti-Semitism_and_The_Dearborn_Independent
Hey Nebur,
I know, I mentioned that above, in comment #2.
Which further proves my point, this guy did not do this because he was a kind hearted person who was following some ’social responsibility’, he did it in response to market pressures, market pressures that work on everybody else just as much, and could even push an evil, anti-semite, hitler sympathizer like Ford to create the middle class.
i, i think i agree with you on this one hp. i don’t like unions because as you quoted above:
“Unions have generally been strongest among groups that would have been high-paid anyway, their effect has been to make high-paid workers higher paid at the expense of lower-paid workers.”
i couldn’t have said it better.
i was a teamster for a brief period in my life. i always felt like it should have been an option not a work requirement. it was also easy to dislike them when they looted my wages every payday–for that alone i should have seen more leadership that was representative of me. the money they took could have paid my books for a semester or two.
Irasali,
It’s interesting you bring that up, my dad has been a member of a union for more than 20 years. He works off of the port in Long Beach. He has no option in the matter either, since everybody that works on the port must be a member of the union, by union policy.
My dad is around 55 years old, he doesn’t speak english very well, is an immigrant to this country, is ‘brown’, and has no education except for the few classes he took for his training, and even he tells me that unions are bad. He always tells me, “están para la gente huevona”, yet my dad fits the profile perfectly, of someone who one would think needs unions the most.
But like he said, if you’re a hard worker, you don’t much need unions anyway, since the company already has an incentive to keep you on.
I think we need unions…yeah they’re corrupt and they really just pocket your money…but the working class also needs a lobbying group that will kinda watch out for them.
Most of the middle class lives just fine without unions, remember, less than 8% of the private industry has union representation.
In addition, if you look at areas where the middle class does have problems, as I mentioned above, they are primarily areas where union represention is high. Just look at the auto industry or the airline industry to see what I am talking about.
With that said, I don’t think unions are completely worthless, there are some things unions would be good at doing, and they do help in certain very limited circumstances. I just think they are not the good everybody makes them out to be.
Wow This kind of thinking is what has this country in such a mess.Walmart? Walmart is hurting this country! Buying product overseas .Putting Americans out of jobs.Not to mention the lead and God only knows what else in their products.I wish walmart would become unionized.They pay their employee’s nothing.And hey wow if your there 10,15 years you might become a manager and make what?OH way below poverty level!
I do agree union paid employees do raise company cost.But shouldn’t we get a little bigger piece of the pie.Instead of working for walmart making them millions and getting paid 7.50 an hour?
The company I work for is union.Guess how they are cutting cost? On excessive management.Who still make twice as much as us hourly employees.We make a great product.We take pride in our work.unlike overseas company he treat there people like they are not human.How well would make something being treated like a work horse and getting paid nothing?
It’s time for America to take a stand and buy what we make even if it cost a couple more dollars.Unions help make sure we get a little more of the that back.
Yeah, we all can see what unions are doing to GM and Ford….
I think you overstate your case given your dependence on one example. I’m not as familiar with the USofA, but if you look at what happened in many other companies, it was clearly the power of people unifying that changed working conditions.
Strikes in Toronto led to the legalizing of unions in Canada, and after that point they succeeded in reducing the work hours to 6days*9hours, and later added things like employment insurance and universal health insurance.
Without the time of social forces unions brought (whether it was actually unions or not) children were the cheap workers instead of third world nations. People were whipped and beaten if they didn’t make quota.
I really don’t like 90% of what unions do today, but historically they were necessary when our politics was run by a few elitist rich men.
In answer to the “if you work hard, there will always be work for you,” line—that’s great if your health lasts. Most employers would still fire someone who got hurt at work if it wasn’t illegal—after all they can’t afford to pay someone who isn’t working.
Personally, however, I don’t understand the requirement to join a union—it’s completely undemocratic. I think that you should have the choice to opt out of a union, and I think that unions should not have a monopoly—if 30% of the workers join one union, and 40% join another and 30% opt out, that should be fine. It will make for chaos during contract talks, but eventually people will either get behind the more effective union or get rid of it altogether.
If you opt out, though you should not automatically benefit from union contracts—you should have to set up your own contracts with your employer. Obviously, one of your arguments can be—”if you don’t treat me well I’ll go join the union.”
Can you please read Karl Marx’s Capital…I am so sick and tired of people saying they have an understanding of Marx by just reading the Communist Manifesto … guess what he wrote another text where he refines his argument and shows his admiration of capitalism but also its pitfalls. I know if is a big text (volume 1 over 1000 pages) but since you seem so interested in Marx and capitalism maybe you should check this work out. Also, think abut re-reading Adam Smith’s Wealth of Nations, I think you missed some of his points.
If you believe in milton friedman you should read the shock doctrine by naomi klein. i think you will see that miltons extreme views are very harmfull to the middle class.
Melissa,
Did you actually believe alot of what Naomi Klein wrote about Milton Friedman? Have you ever read Milton Friedman? Because anybody with even a cursory knowledge of the guy knows it was a gross misrepresentation. See this review of the book, for example.
Don’t trust its economics either. For example, even liberal economist Dani Rodrik says the book is garbage…see here.
You seem to forget that it was Ford’s bad management decisions that have caused it to become uncompetitive with other automobile companies like Toyota. A case in point is Ford’s recent decision to hire back laid off workers because they are going to increase the production of those gas guzzler F=150 pickup trucks (seems like some of us are addicted to these monsters no matter what). But this is just one example of how American companies have traded long term profitability for short term gains which in turn translates into lost jobs. Sure, eventually bad CEOs get replaced but unfortunately mostly after they have run down perfectly good companies down to the ground.