Unconventional Wisdom

It's no secret to anyone who stops by occasionally that I detest labor unions.  What I really detest, though, are labor unions protected by state laws at the expense of business owners.  They meddle in the business of the property owner, they push wages above their worth through government-sanctioned thuggery and they keep more people from working than they employ (see New York: Buffalo.)

But mine is a minority opinion around here, even though 75% of us don't belong to one of the benighted things.  The conventional wisdom in these parts is that, even though their day may have passed, they did do some good in the early 20th century.  And smelling the free-market coffee, the unions cling to that interpretation of history like the Knights of Columbus celebrate October 12.

Greg Mankiw illustrates.

In today's Washington Post, Sen. Byron Dorgan and Rep. Sherrod Brown write about How Free Trade Hurts. Here is a telling passage: At the turn of the 20th century, child labor was common; working conditions were often abysmal; there were no enforced workplace health, safety or environmental requirements; no unemployment insurance; and no workers' compensation. Workers were attacked and killed for the sole reason that they wanted to form a union; there was no 40-hour week, minimum wage, job security, overtime pay or virtually any other limit on the exploitation of employees. America was split dramatically between the haves and have-nots. It was a harsh work world for many: nasty, brutish and, too often, short. Worker activism, new laws and court decisions changed all that during the past century. That last sentence is striking. There is no doubt that most Americans have seen dramatic improvements in living standards and workplace norms over the past century.

But should we really give most of the credit to "worker activism, new laws and court decisions?" I don't think so.

I would give most credit to economic growth, which in turn is driven by technological progress, a market system, and a culture of entrepreneurship. As the economy grows, the demand for labor grows, and workers achieve better wages and working conditions.

We'll never know for sure whether it was the unions or America's ever-increasing prosperity that improved worker conditions but Bryan Caplan suggests an experiment.

It's child's play to pick holes in this story. If it were right, then Bangladesh could wipe out poverty just by enforcing U.S. labor laws.

If Bangladesh's economy were to suddenly create a prosperous middle class, we might have some modern evidence that rigid, "modern" labor laws were the fix.  But my guess is that its economy would get even worse.  Children would be spared the necessity of working, but their families would be "spared" their income.  A minimum-wage law in Bangladesh would probably mean that any available work would move to China or India where $1 buys more efficient labor than it does in Bangladesh. 

Now, it may be moral to outlaw the exploitation of child labor, but for a country that depends on it, hunger and poverty could well result.  America's labor laws were passed at a time when we could afford them.  But let's not confuse the result with a cause that can't be proved.  Even without labor unions, it's quite likely that a growing and more prosperous American population would have taken its children out of the labor force and insisted on more worker safety.   

Families in the early 20th century often consisted of six or seven children.  While there were never any laws passed limiting the size of families in the U.S., they're undeniably much smaller now than they were then and most would claim that's been a benefit to children, too.  Society improved without a new law to guide it?  Who'd a thunk?

Comments

[JWFisher]

Thanks, Craig, for a very enjoyable read. That makes several over the past few days. You have one of the best - and most balanced - blogs out there!
-Jeff
http://www.ex-Buffalo.com

[Enoch]

For the Most part It was FDR and the New Deal that changed America. Created The Middle Class.
I think It's time for a 21st century New Deal.We just might get it in 08. :)

Populism! For The People,By The People,Of The People!