Who Benefits from Labor Unions?

Gary North connected some dots for me the other day.

Who benefits from labor unions? Naturally, union members themselves. They forcibly keep out of an industry or a firm some group of workers who are qualified and willing to work at the wage offered. I go into the legal details in 33 Questions About American History You’re Not Supposed to Ask.

Unions, therefore, are not in the business of benefiting “the workers.” They benefit some workers at the expense of others. Those others, to the extent they are acknowledged at all, are dismissed with dehumanizing epithets.

Those others now have to compete in an artificially enlarged pool for other jobs, which means lower wages. These other jobs, moreover, do not match the skills these workers acquired, since the unions have shut them out of jobs where they could use those skills. The effect is the same as if they had never acquired those skills in the first place. So society is impoverished out of proportion to the gains earned by the union workers.

(I am leaving out the countless ways in which unions undermine productivity and thus wages for everyone, including themselves. There’s a pretty good discussion of all this in the labor chapter of The Church and the Market, the introduction to Austrian economics I wrote with an eye to, but not exclusively for, a Catholic audience.)

But the other group that benefits, and this is what escaped me, are of course the nonunionized firms and industries that can now choose from an artificially increased labor pool and can offer correspondingly lower wages. With workers prevented from working where they fit best within the division of labor, they have to seek employment elsewhere.

So there is an unspoken alliance between labor unions and nonunionized firms and industries. Both parties favor the same policies. Labor unions can’t say this, of course, because that would blow their cover and reveal that they are not, after all, the friends of labor per se. They are friends of politically privileged labor. The rest of the working population can eat cake.