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Strangulation by Union

A Commentary by John Stossel

Wednesday, September 26, 2012

The Chicago teachers strike is over, but the public didn't win. Schools will still transfer bad teachers to other schools because it's nearly impossible to fire them. When bad teachers go from school to school, principals call it "the dance of the lemons." It would be funny if those teachers didn't slowly wreck children's lives.

The basic issue is: Who decides how to manage a workplace? Unions say it's good that they protect American workers from arbitrary dismissal and make sure everyone is treated equally.

But it's not good.

Rules that "protect" government workers from arbitrary dismissal and require everyone be treated equally are bad for taxpayers and "customers" -- and even union workers themselves.

But this is not intuitive. Union workers certainly have no clue about it.

At a union rally, I asked union workers if it bothered them that slackers are paid as much as good workers. The activists actually said, "There is no slacker," and that union rules mean less productive colleagues are helped, "brought up to speed."

C'mon, I asked, aren't there some workers who are just lazy, who drag the enterprise down?

"No!" they told me.

The union activists were also quick to say that unions built the middle class, that without unions, greedy bosses would lead a "race to the bottom" and pay workers next to nothing. "There would be no weekend, or eight-hour day!" they told me. "All that came from unions!"

Nonsense.

Workers' lives improved in America because of free enterprise, not because of union rules. Union contracts helped workers for a while, but then they hurt -- even union workers -- because the rigid rules prevent flexibility in response to new market conditions. They slow growth. And growth -- increasing productivity, which leads to higher wages and new opportunities -- is what is best for workers.

In 1914, Henry Ford doubled his employees' wages to $5 a day and cut their workday to eight hours. He then hired more people. He didn't do this out of benevolence. As Adam Smith wrote in "The Wealth of Nations," "It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own interest." It was in Ford's interest to increase his company's profits, and to do that he needed to attract the best workers he could find. When companies compete for workers, they get higher wages and better working conditions. Ford shortened the workday to better compete. Then GM and Chrysler matched Ford's deal to keep up. Workers won.

All without a union. It wasn't until 30 years later that the UAW appeared and unionized the workers. Union membership gave them good benefits for a while, but then growth slowed and stopped. That sure didn't help workers. Consider what happened at GM. Over the past 20 years, much-less-unionized Toyota created 15,000 jobs -- in America, not in Japan. Over that same period, GM lost 400,000 American jobs. One reason GM shrank was union rules. How's that good for workers?

Of course workers have a right to unionize -- it's part of freedom of association. But to be effective, that right needs a free-market environment. That means no compulsory membership -- free association, not forced association. Second, enterprise must be truly free and competitive, which means no privilege or favoritism from government -- no bailouts and crony capitalism.

When enterprise is competitive, workers acquire more bargaining power because multiple employers bid for their services. Also, self-employment is a real option because no government barriers to entry prevent it (like licensing, zoning orcomplicated taxes and rules). As the great economics writer Henry Hazlitt pointed out, free unions can play a constructive role when they have to attract members by offering valuable services, such as information on the latest market conditions. But the market must be free in all respects.

Today, workers should know the downside of unionizing. It's not just the cost of their union dues. It's the opportunities lost in union shops because the rules limit entrepreneurs' ability to change, adapt and grow. It's that freedom -- free enterprise -- that gives America and workers the power to prosper.

John Stossel is host of "Stossel" on the Fox Business Network. He's the author of "No They Can't: Why Government Fails, but Individuals Succeed."

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