2 min read

Unions and Overlords

Labor and Das Kapital.

What progressive hero neatly summarized a central economic challenge found in free economies? Was it Elizabeth Warren on the stump? AOC on Twitter?

It is essential that there should be organization of labor. This is an era of organization. Capital organizes and therefore labor must organize.

It was Theodore Roosevelt, more than one hundred years ago, describing the ancient arms race between capital and labor. Despite TR's warning, the sides have become unevenly matched. Across many categories, labor (workers) has been losing ground to the forces of capital — especially the alliance between the state and big business — for generations.

The decline is so severe, in fact, labor membership — already cut in half in recent decades — will soon hit single-digits.

Organized workers generate diverse gains

With fewer families connected to unions, most people don't fully understand the vital role collective bargaining plays in a free economic system.

Union members exercise a distinct type of power relative to capital allocators in the market for labor. Unions negotiate terms of pay and benefits on behalf of their (plural) members. In theory, all members — both high- and low-value employees — benefit from the union's collective action. In practice, collective negotiations raise both the wage floor and wage ceiling. By working together, members get better terms than they would on their own.

We can demonstrate the pricing power of unions by comparing average earnings for union and non-union workers. The data is striking: union membership drives up one's wages by nearly 20%!

But who captures those higher wages? The answer is the second vector of unions' power: the socioeconomic and social equalizing effect.

As demonstrated below, nearly all races, genders, and demographics benefit from collective bargaining. In an increasingly unequal society, unions stand apart for equitably distributing gains to all members.

The opposition fears losing power

Total union membership is declining, but wide disparities exist across sectors and geographies.

For example, in Everytown USA, local government workers — historically pro-union — are strongly pro-union (rates ~33%). This collective action guarantees tens of millions of firefighters, police officers, and teachers receive well-earned increases in pay and benefits.

In the so-called free market, though, collective action has cratered. Despite decades of wage stagnation — the exact problem unions can fix — membership in the private sector is shockingly low: 6% total, or one-fifth the rate of their local police department.

What accounts for the extreme divergence? Anecdotally, it appears many of the most successful American companies are actively and successfully waging wars against collective action among their workers. Despite record profits, Amazon, Apple, and Tesla executives have mobilized en-masse to prevent unionization. The responses are so disproportionate — including illegal threats against company workers — it smacks of a boyhood belief in extreme individualism. Ayn Rand would be proud.

At a deeper level, though, is naked self-interest. In this way, these corporate avatars — villains to some, prophets to others — are simply extending the forever war between labor and Das Kapital.

Connecting the Dots

  1. What is Marx's Das Kapital?
  2. Understanding the Marxian Notion of Exploitation