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Jan. 5, 2006 - Freedomain Radio - Stefan Molyneux
32:20
42 Unions (Part 1)

An initial analysis of two kinds of clubs

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Good morning, brothers and sisters!
It's Stefan Molyneux.
It is Thursday, December the 6th, 2006.
And this morning, my brethren, it is time to talk about the union of a man and a woman in the dark with some butter.
Actually, no, it's not going to be quite that exciting.
What I'd like to talk about this morning is unions, political unions.
Economic unions, collective bargaining unions, however you want to shake a stick at it, that's the unions we're going to chat about.
Now, of course, it's always important to start with a definition and a little personal history because I don't want anyone to think that these ideas just come out of nowhere.
They are in fact sent by the devil himself.
So, a union, of course, is a group of people who have a monopoly over hiring in a particular economic circumstance and in return for that monopoly they are given the power to tax employees.
It's really not a whole lot more complicated than that.
Unions grew out of, you know, a fairly, I think, a fairly noble tradition in which you wanted, as a worker, You know, if you were new to a city or whatever, then you wanted to make sure that you weren't being taken advantage of when you went to a new job, right?
So, if you step off the boat at Ellis Island and, you know, you're from Poland or wherever and you have to get a job, you have no idea what the prevailing rates are, what the prevailing circumstances are.
What are the labor conditions?
What are you obligated?
You know, I mean, you could get off the boat at Ellis Island speaking almost no English and somebody could just tell you, well, you know, you have to give me 40% of your income because that's the law of the land, right?
And you might work for a couple of months before you find out that that's not the case.
So, education about the local laws is a pretty important part of entering into a new economic arrangement.
I mean, we all face this, you know, if you do any traveling.
We all face this when we get off the plane in a foreign country and, you know, we're not sure about the currency.
We don't know the distance to our hotel.
We don't know what the local taxes are on cab fares.
And so, you know, one of the things we would like to know is Well, how much is this going to cost me, and are you charging me a fair price?
And where you don't know that, and you have no possibility of a refund, then you kind of need knowledge in advance, right?
So I think that's, I mean, that to me is a perfectly valid and useful circumstance.
I mean, I feel comfortable buying from Walmart because I know that they hammer their suppliers like crazy in these little box rooms of negotiating hell.
And so they're getting me a good price.
And, you know, they have a price guarantee.
And if I don't like it, I can return my goods to any Walmart.
So I don't feel any particular risk there.
But, you know, in certain situations, I just don't know how much stuff is going to cost.
Like I just have no idea.
And so, you know, it's important to have some sort of collective knowledge of these things.
So one of the things that happened, and of course there are exploitive capitalists out there.
I mean, it's not just a stock character from central casting, but it's also true that, you know, in capitalist circles and people who own factories or people who own businesses, you know, they They'll cheat people, right?
I mean, it's not like they'll cheat people any more or less than anyone else, I don't believe.
I don't have any statistics but, you know, there are people who cheat others and just because of the nature of the requirement for economic information socially, you know, just sort of think back on your own experience and you can recognize this, that when you have a good experience with a company, You are not so likely to tell people.
I mean, it just isn't human nature to communicate good information as readily as bad information.
And it's not because we're depressive as a species or anything like that.
It simply is because good information is not economically as valuable to us as bad information.
I'm not talking about the nightly paranoia of the local news.
I'm just talking about you generally, when you're out hunter-gathering with your Stone Age buddies, you don't sort of point all over the place and say, well, no leopard there, no leopard there, no leopard there.
Oh!
No, wait, no leopard there.
I thought I know.
I didn't.
No leopard there.
You know, what you do is you say, well, that's the leopard, right?
Because that's the most advantageous information to be passing around.
So, the need for information about harmful characteristics or harmful people within the economy is very high.
So, you are going to hear a lot about, you know, bad stories about people, right?
If you get cheated by a store, you're going to be outraged and upset and tell everybody.
And if a store refunds your money, you're much less likely to tell people and they're much less likely to care.
I mean, I do want to hear about a store that has cheated you.
I don't really care a huge amount about a store that's treated you well.
I certainly don't care as much.
So this need to gather information about hiring practices and the good and bad employers and so on.
I'm not talking about any sort of organized unionism at the moment.
I'm just talking about the general social patterns of the need for collective information about economic circumstances.
And the need to know the laws, right?
I mean, what are the laws of collective bargaining?
What are the laws of what is allowable, and what is reasonable, and what are the general market... What is the general market information?
I mean, if you're going to go for a raise at your job, there's a couple of things that you need to know.
Some of which you can know yourself pretty easily, and some of which I'm going to require a lot more specialized knowledge.
So the thing that you're going to know immediately on your own is, you know, kind of how well have I been doing.
Assuming you don't have one of these horrible bosses who doesn't ever give you any feedback, then you're going to say, OK, well, how am I doing?
I mean, if I'm going to go for a raise, it's going to be somewhat contingent upon how well I'm doing.
That's the first thing you need to know.
Now, the second thing that you need to know, which is harder to know, is how important is is what I'm doing to the organization as a whole right I mean so to take a silly example just say I'm a janitor at a hospital and I'm really excellent at polishing floors so I'm doing really well at my job and I you know please I understand there's a lot more to being a janitor than that I take my knowledge of the janitorial arts from scrubs so excuse me if I'm being simplistic
So, you're doing a great job at polishing floors.
The only problem is that they've closed the wing six months ago.
So, you're polishing floors that nobody's working on.
So, you may be doing great at your job, but your job may not be valuable to the employer.
You know, this happens in software all the time, of course.
Right?
I mean, you get an expert on a particular architecture and then, you know, usually within four to six years, that architecture is just in sort of decaying maintenance mode and you have to go and get retrained in all the new stuff.
And I mean, I guess I could say that I liked that a little more when I was younger and had more time to fool around with new architectures.
But now it's quite a burden to get all up to speed on, you know, .NET 2.0 and all this kind of stuff.
So that's the second thing that you don't have as much knowledge of.
And the third thing, which, and again, this is all prior to the Internet, right?
Well, the second one you can't get from the Internet anyway, but the third one you can, which is, what are the general market conditions for your job skills?
I mean, if the market for your job skills has increased significantly since you last went for your wage, then you can go for a much higher raise than if it's dropped, right?
So, if you're a computer programmer in 1998 or 1999, then you can go for a pretty significant raise because the demand for computer programmers is very high, just in North America.
But if you're a computer programmer in sort of 2002 or 2003 after the crash, then you are not going to do as well.
I mean, I myself took a pretty significant pay cut from my sort of giddy high as a chief technical officer at a sort of very fast-growing startup.
I took a significant pay cut after... I mean, I left the workforce in 2001 for about a year and a half, and I sort of wrote books and thought and, you know, came up with all the stuff that I am communicating now, and then I went back to work.
And it was very hard for me to find a job.
And I took a pay cut of about 25% from where I was previously.
And, of course, I mean, in my current job I have no stock options or any ownership.
I'm simply an employee.
But, you know, that was the best that I could do, given the market situation.
And I have no complaints with my employer, because it would be economically foolish for that person to pay higher than the going rate.
And if that person did pay me higher than the going rate, it would be a short-term gain proposition, because they then wouldn't be economically savvy enough to keep the company running and growing.
So, I would rather have a less paid job for a longer period of time than a higher paid job for a shorter period of time, because that way I get to avoid the economic loss of looking for work.
So, I mean, these sort of three general things, right?
How am I doing?
How well does the company value what I'm doing?
And how much in demand are my job skills as a whole?
These things aren't easy to figure out.
And they're certainly not easy to figure out.
In fact, they're probably pretty impossible to figure out if you're not a native English speaker, right?
Given that a lot of people came to North America in the 19th century in particular, of course, they needed collective bargaining agencies.
It all makes perfect sense.
Who could ever have a problem with people banding together to put forward a common front to their employer to gain the best conditions that they possibly can?
I mean, it would be ridiculous to say that they couldn't.
I mean, obviously I've been on both sides.
I've run a company and I've also been a peon.
And I mean, there's no difference.
I mean, everybody tries to maximize their advantage.
You wanna make sure that you make things as win-win as possible.
So, I mean, for instance, just things like if you can't get a raise, what you can do is negotiate to work from home once a week or you can ask for a car allowance, which is tax deductibles.
So, you know, there's things that you can do to make it win-win.
But the point is that, you know, everybody tries to maximize their advantage and, you know, obviously everybody is perfectly free to associate with whoever they want.
All right?
Freedom of association is a pretty fundamental attribute of human beings.
Now, freedom of association is one thing.
Forced association is quite another, which we'll get to in a minute or two.
So, you know, collective bargaining, perfectly valid process, and unions who get together.
I mean, unions were, you know, basically originally informal gatherings of people who knew more, right?
So like the elders of your factory or your community would sort of say, okay, we nominate so-and-so, you know, we nominate Bob,
to speak for us in this collective bargaining process and then Bob sits down with the owner and Bob tries to get everybody the best deal because Bob's been in the industry for 30 years and he knows the market and he has friends and maybe he's you know he's applied for another job or two so he knows what the going rate is for lathe operators or whatever so you know Bob you know goes and represents you and it's perfectly valid right I mean you hire a lawyer to represent you in court you hire an accountant to represent you in your tax matters
And it's perfectly valid to say to, you know, so-and-so, go and represent me in this collective bargaining process and I will accept whatever it is that you come up with.
So, generally what happens, though, the problem that occurs in the sort of general growth of state power is, well, sort of two major things occur that corrupt this perfectly voluntary and perfectly honorable process.
The first thing is that as state power grows, then the state gains monopolies over critical services.
And so the state begins to hire, obviously, more and more people.
And the state then gains a monopoly over critical services.
Because, you know, the question of job interruption is central to the question of collective bargaining, right?
Scabs, as they're called, or replacement laborers are central because they're, you know, based on this principle of can work continue or not.
If you're a factory owner and, you know, Bob is sitting down with you saying, we want 5% more and you say, no, I'm an evil capitalist.
I'm not going to give you a penny more.
Not a penny, I say.
And, you know, all that's going to happen is, you know, either they're going to take it or Bob's going to come back and say, I think we should have a strike.
And, you know, a strike obviously is a perfectly valid, assuming you have no contract against it, a strike is a perfectly valid and healthy way to oppose a bad capitalist.
Or a bad factory owner.
To me, it would probably be the case that if I got involved in a strike, I would start looking for work pretty quickly.
Because even if I were able to bully and go through the stress of a strike and bully the factory owner into giving me better money, then... But still, the same guy is in power and it's going to be kind of a mess and there's lots of capitalists out there who treat their people well, so...
You know, don't bother.
Like, I mean, okay, maybe I'll have a strike because the, you know, I don't have any other job offers right now.
But, you know, it's a very risky thing to do, right?
I mean, you have no money, and you obviously, you can get a bad reputation.
You know, oh, so-and-so participated in this terrible strike which cost his employer hundreds of thousands or millions of dollars, and I don't know that I want such a rabble-rouser in my work crew or whatever, right?
So, A strike is a great blow against a capitalist, like a factory owner or an employer.
I mean, if all my employees up and told me today that they're quitting or they're going on strike, I mean, it's horrendous for me.
I mean, certainly in the software field, it's unthinkable that You could survive it, which is one of the reasons why software people get paid a little more, right?
Because, you know, we got a million lines of code that we're managing, and for me, the idea that I'll get somebody else to come in and start learning that code and be able to maintain the software, I mean, it's just not going to happen.
So, you know, we work to avoid that, right?
And so a strike is a perfectly valid thing and it's going to be very difficult.
Well, it's going to be pretty easy to replace workers to some degree if things are low skilled.
Like if it's pushing a mop, you can get anyone to push a mop.
But if it's, I don't know, like an expert computer programmer with deep knowledge of the industry, the market, and your product, well, that's going to take anyone six months to a year to become expert at.
Well, even a year, maybe a year, they become expert.
Six months, they're just becoming sort of minorly productive.
So to have the capacity to strike perfectly valid expectations, Everybody's got it.
Nobody has any problems with that.
Nobody can force you to work.
And, of course, freedom of association means you can all decide to quit immediately.
So, of course, the capitalist pays your wages and he has or she has A bargaining power in that sense.
However, but if you just threaten to quit as an individual, it's not going to mean that much, right?
But if you all decide to quit, it's going to cost the capitalist a certain amount of money and he or she may then choose to take part of the money that would have been involved in the job, in the losses based on the work stoppage and apply it to wages to keep everyone happy.
I mean, you've really soured the relationship.
It's like threatening to leave your wife.
You might get her to change her behavior, but you're not exactly building a strong foundation for the future.
So nobody has any problem with that.
The problem around work stoppages comes around when you are not allowed to hire replacement workers.
So a union has significant power to harm a capitalist interest and therefore to engage in Soviet-style or brute force negotiating tactics.
And everybody recognizes that as a fair and valid thing.
However, if you have the right to permanently stop the work at a particular factory or a job location.
So you all quit, and then the capitalist is so angry that he says, fine.
You know, he pulls a Reagan and the air traffic controllers thing and says, fine, then you're all fired.
And I'm going to hire, like, there's lots of people out there who want to work for the wages that I've got.
And it may not be because he's a bad capitalist, right?
It may be because you have a bad union.
And that's sort of important to recognize.
If a union says, you know, you just double our wages, well, all that's going to happen is the capitalist is going to bleed his fortune dry, you know, burn up all his capital, and the company's going to go out of business.
And that's not good for anyone, really, except for maybe, you know, the workers in the short run.
So you might have an unreasonable union, just as you might have an unreasonable capitalist.
And so, you know, it may be that the Union's demands are outlandish, and it is economically advantageous for the capitalists to say, you're all fired, I'm gonna spend all the money to hire new people, and, you know, maybe I'll be a better capitalist in the future and not let things get to this state, but, you know, it may not be economically efficient for the capitalists to just, you know, concede to demands based on a strike.
However, if the Union has the power to stop work indefinitely, then it's entirely a one-sided negotiation.
I mean, unless the capitalist just closes his doors and goes to, you know, I don't know, goes to Lithuania for an extended vacation, then the capitalist pretty much is going to sort of fuss and fight, but it's going to have to He's going to have to cave.
He's going to have to submit to whatever demands you make.
Then it's going to become a macho show.
It's not going to become any sort of real negotiation because you simply can't...
You can't run a factory without people, and if you have no capacity to hire new people, then you just have to concede.
You have to accede to the union's demands.
The other way that the union is able to extend a work stoppage is if it has a war chest, right?
If it has a nice fat bank account with which to pay strike members strike pay.
So, I mean, if I'm some guy, I got three kids and I'm living paycheck to paycheck, well, I really am not in much of a position to strike.
Because I'm just going to run out of money, and then I'm just going to go back to work, and the whole strike is going to start to break down, and the evil capitalist is going to win.
So the union, of course, wants to do two things.
It wants to make sure that it has enough money to pay me, to pay me from going back to work, and it also wants to make sure that it can prevent the capitalist from hiring additional workers, or replacement workers, or scabs as they're called.
Now, so the way that it does the former is through union dues, right?
So the union dues go to the union and then the union puts them in the bank.
You know, this is sort of how it's talked about.
The union puts them in the bank, uses them for collective bargaining purposes and uses them for strike pay on the basis of, you know, we have to do a work stoppage.
And the way that the union achieves the second, i.e.
prevents other people from coming to work at the factory where there's a strike going on is, you know, to beat them up, right?
To use violence, to use threats, intimidation, right?
So, I mean, this is why if you try and cross a picket line, You know, at an auto plant you're likely to get, you know, a glass bottle across the head or a pipe to the nose or something like that.
So, you know, you sort of take your life in your hands and, you know, sort of incidentally one of the things that makes it a problem is the police are a union, too, so they don't particularly like, you know, snopping.
There's not much point calling the cops, right, if you're trying to cross a picket line because the cops are a union as well.
And, you know, they're sort of, especially if it's a public sector strike, they're not going to do much, I guess you could say.
So you're sort of in a state of nature with that stuff.
But, of course, union dues are also subject to market forces.
So you have a problem, right?
So, I mean, if you're giving good value to your employees, like, let's just say that the union is a mini-capitalist within the factory floor, or a series of factory floors.
Which is the case, of course.
They're selling their services to a group of people in return for being paid.
So, what you want to do is you want to, obviously, as the union, you want to maximize your profits, so you want your union dues to be as high as possible.
But the problem is that if your union dues get too high, then two things are going to occur.
One is that people are just not, they're going to work for you, but they're not going to join the union.
And they may say, look, I'm going to just negotiate my own pay, or I don't want to pay that much, that's too high, or whatever.
Now, the union has a pretty valid argument and says, look, if we're covered by a collective bargaining agreement, and you don't contribute, then you're a free rider, right?
You're getting the benefit of all of this collective bargaining stuff, and yet you're not paying for it.
So, you know, they have a sort of argument to make.
uh... against the fact that you don't want to pay uh... and so you know a reasonable person but then say okay well you tell me then what i'm investing in right you tell me how much extra pay am i going to get for having you as my collective bargainer you show me the history you show me You know, here's what happened when you weren't unionized, and here's what happens to factory workers with the same skill sets who aren't unionized.
They make like 8% less, and I'm only asking you for 2% of your income, so you're still up 6% or 3% after taxes.
And so, you know, a reasonable person will probably say, yeah, okay, I'm in, right?
Because, you know, if you're working in a factory, the social pressure of refusing to join a collective bargaining agreement is pretty, pretty strong, right?
I mean, you have to be pretty, made of pretty stern stuff if you're going to, you know, take an economic benefit from your fellows while having to work beside them in a dangerous environment day after day.
You know, I mean, and certainly in the factory level, socializing is pretty important because it's not like the job is all too exciting.
You know, if you're willing to avoid joining the union for the sake of getting a benefit that other people are paying for, they're gonna know that and they're going to not speak to you and they're going to, you know, pee in your locker or whatever they're gonna do, right?
And they might key your car, you know, there's...
There's ways that they can get you to conform that you probably are going to want to do.
But if the union dues get too high, so somebody can come and say, well, look, I just don't want to be part of this union.
Keep me out of it.
I'm not even going to... I'll negotiate for myself.
Thanks.
Or there's going to be some other union, right?
Someone's going to say, you know, this union is way too high.
It's going to go to the employer and say, this union is costing you a lot, right?
Because the wages that, sorry, the union dues that go to the union come from the employer's pay, right?
What the employer pays, part of it goes to the union.
And so someone's going to go to the employer and say, look, I mean, the average union charges like 1% of people's salary, and these guys are at 6%.
You know, I'll do it for 1%, you know?
And so get rid of these guys, and then he'll go to the employees and say, look, I've got an agreement with the employer that he's going to honor, you know, the commitments just as the previous union did.
And he's also, you know, but you're going to get, you know, still going to get the extra 5% or 6% from working under a union-protected environment.
But, you know, you're not going to have to pay, you know, 6% of your wages.
You're going to have to pay 5% or 1% of your wages.
So, you know, basically a market situation is going to occur where people are going to be able to offer better deals.
And so unions don't want that.
Now the other option that you have if you're facing a union where the dues are getting too high, is you can just go to work in a factory that's not unionized.
And this is, you know, just part of how the market works, right?
So let's say that Unions give everybody 10% more salary.
Well then, you know, everyone's going to be unionized, and then if it's economically advantageous to the workers, to the union, to the employer, then everybody's happy.
But of course it never stays that way, right?
As soon as there is a profit center, people always try and push the envelope, right?
I mean, you always try and get more money when you go for a raise.
And, you know, your employer always wants to get better deals when he's going to his suppliers.
I mean, everybody wants to push the envelope because, you know, we just like to maximize resources.
And it's also kind of fun.
You know, I mean, I'm not saying going for a raise isn't a little stressful at times, but You know, don't you feel better?
Don't you feel like a cool guy if you get a good raise?
You feel like you... Yes, it's satisfying.
I mean, not only is it satisfying economically, because, you know, it probably only comes out to like 50 bucks a paycheck, But it's satisfying just from, you know, you feel like your worth has been validated and you've taken on a challenge and you've negotiated well and it's, you know, it's satisfying.
So we like to do that.
So everybody tries to maximize their advantage.
So the natural tendency is that the union is going to start to want to provide fewer services and to raise more money from you, right?
So their dues are going to go up and their work is going to go down.
Which is natural.
And so, you know, that's never going to be stable.
So, you constantly need market forces to control both the, you know, predations of the evil capitalists, but also the predations of the evil union reps.
And it keeps them honest, right?
The market keeps everybody honest, because it gives everybody options, and you don't get to use violence, so everybody has to choose you, which means you have to objectively provide them value.
In the long run, if you want to maintain a relationship, I mean, you can be a con man and sort of Do stuff in the short run, but in the free market you have to provide people value in the long run, otherwise you're just not going to stay economically viable.
So the union then begins to provide poorer services and raise its rates.
And so what will happen then is that the economic balance will tip to the point where joining a union now is not as economically advantageous as it is to not join a union.
So, for instance, a capitalist who has figured out that the overhead of a union is pretty expensive, right?
The overhead of a union is expensive because, you know, you've got more paperwork, and it's more expensive because you always have the threat of the strike, right?
I mean, if you don't have a union, a strike is very unlikely.
If you have a union, a strike is always possible.
And, of course, if the union then further tips the balance, By saying not only are we going to have a strike, but we're also going to beat up anybody who tries to cross the picket lines, and our friends the cops won't do much, and so we can shut you down pretty much indefinitely.
Then, you know, having a union is an economic catastrophe for an owner.
And so, owners are going to pretty much figure this out pretty quickly, and they're going to match the wage requirements of the workers without requiring the overhead of a union, right?
So, let's say that a union gets everybody from 20 bucks to 21 bucks, if you have a union.
Well, you know, guess what?
When I start up my new factory, I'm going to pay everyone 21 bucks.
And I'm going to say, look, I'm going to match what the unions do.
But you're not going to need a union, so you're not going to have to pay any union dues.
So you're actually going to do better.
I mean, that's what any sensible capitalist is going to do.
They're going to be, in a sense, be free riders from the collective bargaining process and just pay people money.
That what they would have got otherwise through collective bargaining without the overhead of unions and without the overhead of the threat of strikes and all that.
And that's better for the employees as well, right?
Because then the employees don't have the overhead of unions either.
So, you know, the natural tendency of the free market would be to erase the value of unions, right?
Because wherever you can cut out a middleman in the free market, you want to.
It's more profit for everybody else, right?
You don't have to share the pie as widely.
So unions face a natural decline in their value in a sort of free market scenario.
Now, there are always new bad capitalists coming along.
There are always immigrants coming in who don't speak English or who don't know the local market conditions.
And there are always new fields of industry coming up.
There are always new countries where, you know, people haven't figured all this sophisticated capitalist stuff out.
So, you know, unions always have a place.
They always have a role.
But as an economy matures, right, they are cut out as less important middlemen, right?
So that's sort of the natural progress of union power.
And, I mean, unions are very aware of this, right?
I mean, they're not dumb people.
So, what are they going to do?
Well, they are going to take their money.
As state power grows, as the state has more control of the economy, and as the public sector unions grow, you have a problem with public sector unions, especially if they're providing essential services, because there's no competition.
If members of a car factory go on strike, well, they're probably like half a dozen other car factories that are still producing cars, so, you know, it's not a catastrophe.
But if the doctors in a socialized healthcare system go on strike, well, you can't get any medical services, right?
If the garbage men in a government monopoly go on strike, you can't get any garbage men.
You can't get your garbage collected.
So when you have a public sector monopoly, you have a big problem in that it's such an imbalance of power that you then have to basically take away their right to strike, your essential services.
So it gets all very complicated and messy, but unions will still exist, and they'll pound you pretty consistently to give them better wages, saying, well, you're not even allowing us to strike, so you've got to pay us for that consideration, and so on.
Well, I had a pretty quick drive today.
32 minutes.
I guess this will have to be a part one of two, so I will talk to you soon.
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