Jewish World Review March 1, 2006 / 1 Ada r,
Something for nothing, Part II
Government is not the only institution that promises something for nothing. The decline of General Motors is just one consequence of the idea that labor unions can get their members something for nothing.
Workers themselves increasingly recognize the reality that there is no free lunch through unionization and are increasingly voting to be non-union. But the word has yet to reach many among the intelligentsia, who still think of labor unions as institutions that benefit the working class.
You can always benefit particular segments of any society at the expense of some other segment but unions do not benefit even the working class as a whole just those who are current union members at the expense of other workers, current and future.
One reason that General Motors has been losing market share for years going from selling about half the cars in the country to selling about one quarter today is that its union contracts put them at a disadvantage compared to its Japanese competitors.
Even though Toyota has factories in the United States, the American employees in those factories vote to keep their jobs by staying non-union. Toyota takes business away from unionized Detroit car makers, who are forced to lay off thousands of workers while Toyota is hiring additional workers.
There may not be any big difference in pay scales but unions can create higher production costs in many other ways. Fringe benefits are just one. Work rules are another.
In some industries, employers pay their workers as much as, or more than, unionized workers receive for the same jobs, just in order to be free of red tape restrictions on how they can organize their business or discipline employees who aren't doing their jobs right.
Toyota, for example, takes fewer hours to produce cars with fewer defects than Detroit cars.
While unions are declining in the private sector, they are expanding among government employees. Government agencies are usually monopolies, so competition is no threat to their jobs.
Taxpayers get hit with the high cost of these monopolies. There is no such thing as something for nothing.
Teachers' unions fight desperately and ruthlessly against vouchers, because they must maintain a monopoly of school children under the compulsory attendance laws. Their members stand to lose jobs if forced to compete with private schools.
Monopoly is the key to unionized teachers' job security at the expense of children's education as well as the taxpayers' money.
Labor unions in the private sector have long been in the forefront of those pushing for higher minimum wage laws. Usually union members already make much more than minimum wages but they need to safeguard their jobs from others who could do the same work for less.
People on the inside looking out benefit at the expense of people on the outside looking in. Losers include not only less experienced and lower skilled workers, whose output would not cover the cost of the minimum wage, but also future workers who may find fewer job opportunities in the unionized industries.
Minimum wage laws are like protective tariffs insulating unionized workers from the competition of other workers. It is robbing a less affluent Peter to pay a more affluent Paul all the while using noble rhetoric that appeals to the uninformed and the unthinking, which includes many people with fancy degrees and even fancier illusions about their own higher sense of compassion.
Some people may believe that unions benefit their members at the expense of employers and that big corporations should be paying a "living wage."
That may be possible in the short run. But think about it: If unionized workers producing widgets get higher pay by reducing the rate of profit of widget manufacturers, do you think investors are going to continue to invest as much in the production of widgets when they can earn higher rates of return by investing elsewhere?
The rate of return on widgets cannot remain permanently below rates of returns in other industries. Widget prices will have to rise and that means lower sales and lower employment. There is no free lunch, no way to get something for nothing.
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