Last week my work place received a visit from a representative of USDAW, the Union of Shop, Distributive and Allied Workers. A booklet was given to us entitled “Young Workers: know your rights”. The introduction to this booklet reads as follows:
“Young workers are a vital part of the workforce but are often unfortunately undervalued, underpaid, discriminated against and even bullied at work. All workers, irrespective of their age should be treated in a fair and consistent manner by their employer. Usdaw works hard to protect the rights of young workers and improve their terms and conditions. Usdaw is campaigning for National Minimum Wage adult rate to paid at 18, and has negotiated the removal of youth rates in many workplaces.”
On first inspection this rhetoric seems to simply paint a dark, Dickensian view of a world full of heartless, ruthless bosses out to exploit innocent young workers, but the use of the word “unfortunately” reveals that this isn’t all that is being asserted. What is also being asserted is that most employers are mistaken in their economic calculations of the value of young workers to their business undertakings and the fact that USDAW recognises this is proof of its intellectual superiority in this regard.
No evidence whatsoever is offered in support of USDAW’s quite astonishing claim that young workers are often discriminated against and bullied at work, nor do they explain further in what ways young workers are discriminated against or bullied. We are simply expected to believe their claims without any further questioning. This baseless claim, which we may rightly call propaganda, is clearly intended to make the young reader feel anxious, afraid and vulnerable; to make them feel that it is highly likely that they will be exploited and treated badly by their employers and that they will be powerless to stop this unless they become a member of USDAW.
Economic ignorance and the delusion of the social good of unions
We shall ignore the assertion that young workers are undervalued because the term is too subjective and therefore it would be senseless to attempt to prove or disprove this claim. However, the claim that young workers are underpaid is a precise economic argument and thus can be proven true or false. To claim that workers are underpaid is to claim that they are worth more, but as economist, historian and author Tom Woods pointed out when commenting on the recent protests by fast-food workers in the US (who made the same claim of being worth more): how can they know?
“…If they were worth more, other firms would have captured their extra worth by bidding them away from the fast-food industry and hiring them themselves. Then we can know they were “worth more”, at least in some other line of production.”
Since no one else seems willing to hire them at their current wage rate, it seems to me that the very last institutions they should be angry at are the fast-food restaurants themselves, the only institutions on earth doing anything to improve their standard of living. Why don’t they protest all the places that pay them $0, having refused to hire them at all?
Articles written in support of the strikers claim the restaurants could increase the workers’ pay by raising the prices of their food. This gives the game away: the real constraint on these workers’ pay, as this concession inadvertently reveals, is erected by the consumers. So the logic here is: we can help some poor people by hurting other poor people.”
The simple truth that must be fully comprehended and which those at USDAW are apparently ignorant of is that the wages of workers are constrained by what the consumers are willing to pay for the products produced by those who employ them. So, to argue that young workers are underpaid is actually to argue that consumers should be willing to pay more, perhaps much more, for the products they buy. But if they have to pay more for the products they buy, then by definition they are worse off. Making one group of people better-off at the expense of others does not result in the greatest good for the greatest number nor does it lead to an increase in the general level of prosperity in society. That we all benefit from workers’ unions lobbying government for higher pay for certain groups of people is an almost universally held misconception, one which often results in a much higher level of public support for the actions of unions than they deserve. Whenever unions leverage government power and lobby government to pass laws relating to wages they are only serving the short-term good of the special interest group each union represents, and in the long-term society degrades.
Economist Logan Albright explains how to understand why society is not better-off when unions succeed in forcing employers to pay more for labour in a recent article in which he discusses the recent call for a $10 minimum wage by US Senator Barbara Boxer.
“…Let’s start with an obvious truth that is all too often forgotten in discussions about labor regulations: labor is a product. The worker is the producer, and the employer is the customer. When you hire someone to cut your hair or paint your house, you think of yourself as the customer, but this intuition tends to break down in office or service sector jobs. If you work as a cashier for McDonald’s, the hungry people who come in and order burgers from you are not your customers. McDonald’s itself is your customer, and your time is the product they are buying from you, just like people buy burgers from them.
Boxer claims that a mandated increase in the price of your labor will benefit you, the seller. If that is true, than a mandated increase in the price of hamburgers should benefit McDonald’s, the seller, right? But there is nothing to stop McDonald’s from raising their prices. If $10 an hour is a good price for labor, why do they not charge $10 for a hamburger? The answer should be clear. At $10 a burger, McDonald’s would have many, many fewer customers. Even if every food product on the market fell under the same requirement so that customers couldn’t substitute to another eatery, people would still eat less in general, and McDonald’s would lose money. An arbitrary hike in the price of a product does not benefit sellers, it drives away buyers. Labor is no different than any other product in this regard.
When we think of labor as a product in this way, discarding abstract and meaningless notions of what is a “fair” wage, it becomes quite easy to see why high minimum wages do not benefit the poor. The price of labor rises, and so people buy less of it. Unemployment rises, and people with jobs find themselves either laid off or forced to work fewer hours in order to reduce costs. Since there will be fewer jobs available at the new minimum wage, production will decrease across the entire economy. Lower production levels mean that consumers must compete more aggressively for available goods by bidding up prices. So even though the workers lucky enough to keep their jobs may see an increase in pay, their dollars will not stretch as far as before.”
The myth of the minimum wage as a force for economic and social good
Albright explains very well the negative economic effects to society in general of forcing employers to pay more for labour, but there’s another unintended consequence of a National Minimum Wage – i.e forcing employers to pay a minimum amount for labour – which directly effects those whom the minimum wage laws are meant to help.
USDAW proudly declares that it is “campaigning for National Minimum Wage adult rate to paid at 18, and has negotiated the removal of youth rates in many workplaces”, but if USDAW’s campaign is successful this can only result in all those 18-20 year-olds who (from the perspective of employers making their own economic calculations) aren’t worth £6.19 an hour being rendered permanently unemployable because The Law forbids it. The current minimum wage for 18-20 year-olds, which USDAW claims is an undervaluation of the economic worth of young workers and wishes to abolish, is £4.98. At the moment any 18-20 year-old who is worth £4.98 an hour or more can be employed, but USDAW wishes for the bar to be raised even higher and render only those worth £6.19 an hour or more employable; thus increasing the number of young people who aren’t legally allowed to work and reducing the pool of labour available to employers. This means all those entrepreneurs and small business owners, for whom the only way to produce their product(s) or service(s) at the lowest price or best quality and to grow their business is to employ an 18-20 year-old for less than the minimum wage, cannot do so because the law forbids it. Producers lose out on an opportunity to produce a lower cost or higher quality product, or grow the business, and x number of young people are prevented by the law from legally earning a wage; not only that but young people also miss out on the much greater long-term benefit of gaining experience of working and learning new skills.
Believing that employers have no incentive to treat workers well
“…the employer appears to have great power over the employee. Whether he engages a man, how he employs him, what wages he gives him, whether he dismisses him — all depend upon his decision. But this freedom on his part and the corresponding unfreedom of the other are only apparent. The conduct of the employer to the employee is part of a social process. If he does not deal with the employee in a manner appropriate to the social valuation of the employee’s service, then there arise consequences which he himself has to bear. He can, indeed, deal badly with the employee, but he himself must pay the costs of his arbitrary behaviour. To this extent therefore the employee is dependent upon him. But this dependence is not greater that the dependence of each one of us upon our neighbour…” ~ Ludwig Von Mises
Each subsequent page of the USDAW booklet consists of a question, statement or accusation by an imaginary boss or a young worker, which is then answered or supposedly rebutted by USDAW. For example, overleaf from the booklet’s introduction we read: “I have been told that the company don’t like staff joining the union and that being a member will stop me getting on” and on the opposite page USDAW explains that all workers have a legal right to join a trade union etc.
Some of the other question and answer pairings are worth discussing. There’s one that says “My manager says I am not entitled to paid holidays”, which USDAW answers by stating that workers are legally entitled to a minimum of 28 days paid holiday per year and that managers must allow their employees to take at least the legal minimum leave from work. With this imaginary manager USDAW paints a picture of a largely malevolent world where the interests of managers are in direct conflict with the interest of their employees; a world where most managers will lie to and deceive their employees in order to gain more from them than agreed. This question and answer pairing also implies that without trade unions and government, in other words without being forced to, employers would not offer any benefits, such as paid holiday, to workers. This implication is based on the premise that it does not benefit employers to offer favourable working conditions, job benefits and ‘perks’ to prospective employees. This is false, there is a strong inventive for every business to offer the best working conditions and benefits they can afford to offer because they are competing with other businesses to acquire labour just like they must for any other resource that is scarce. If you’re the only business in town that doesn’t offer paid holiday, then you’re unlikely to get the quantity and quality of labour you require; and even if you do you might not keep your employees for very long because they will likely take the first opportunity to join one of your competitors. It’s like noted, 19th century liberal economist Frédéric Bastiat once said:
“Life, liberty, and property do not exist because men have made laws. On the contrary, it was the fact that life, liberty, and property existed beforehand that caused men to make laws in the first place.”
Paid holiday and favourable working conditions do not exist because the government made laws to make it so or because unions lobby governments, these things began to appear before such laws were created and they exist by virtue of the fact that employers must compete with each other in order to acquire labour. That employers are free to compete for labour and that workers are free to choose their employer is the result of liberty.
Here’s another example of how USDAW attempts to portray managers as unreasonable, uncaring and exploitative: “Because I’m young the manager gives me the heaviest workload and worst shifts. I feel vulnerable working late nights.” In this statement the fictional worker claims that he or she is being given the heaviest workload and ‘worst’ shifts because they’re young, which could be true but doesn’t necessarily mean the manager is being discriminatory, vindictive or a bully. if the work being assigned to this worker involves lots of carrying and lifting of goods, then it will require a certain level of physical fitness. Therefore it’s reasonable to assume that their manager is getting them to do this work because their youthfulness enables them to complete the work quicker than anyone else in the team could. Also, younger workers are less likely to pull muscles and suffer back strains, and usually have greater stamina than older workers. If the worker simply doesn’t like being given heavy workloads, then they probably won’t be happy until they find another job more suited to their requirements and discomfort tolerance levels, but this isn’t the employer’s fault. The fictional worker uses the term ‘worst shifts’, but this is a subjective term. Different people prefer different shifts depending on their lifestyle and so what the worker is really saying here is that they don’t like the shifts they are being given. Before signing the contract with the employer the worker will have been told what shifts he would and could be expected to work and therefore it’s not the employer that is the cause of the worker’s discontent, it’s the worker’s initial misjudgment of their own future inability or unwillingness to cope with the work pattern.
The good and bad of unions
The unionization of workers and collective bargaining is not a bad thing per se, it can be useful and effective for a group of people with specific common interests, i.e. a workforce, to have a collective voice through which to raise grievances, suggestions and ideas to their employer. Management and owners are more likely to respond favourably to an organised workforce with a representative who presents well-articulated arguments than to the ranting and raving of individual employees.
Not everything that USDAW does and advocates is immoral, misleading or mistaken, some of the advice offered in the booklet is sound. Indeed, where The Law isn’t involved and they cannot reflexively resort to the threat of government guns USDAW sensibly advises young workers to fully understand their contract and to seek advice/support from the union immediately should, for example, the employee change the worker’s contract without due notice, discussion or request for approval, or should they suffer harassment or bullying.
Force or reason
“Force and mind are opposites; morality ends where a gun begins” ~ Ayn Rand
When trade unions such as USDAW resort to force over mind, when they resort to lobbying the government to use force (i.e. the law) against employers to make them pay more for labour or to do anything the union wishes them to, they a force for social evil. When they use only voluntary and peaceful means to support and protect workers with genuine grievances, and provide sound economic advice to workers unions are a force for social good. Sadly, unions today all too often resort to force and reject reason, or at least employ very little of it, which is why I won’t be joining the Union of Shop, Distributive and Allied Workers.