Why Workers’ Unions, Equal Wages and Minimum Wages are as bad as Monopolies and Cartels

Here I’ll argue that workers’ unions have similarities to monopolies and that equal/minimum wages have similarities with cartels, and note the difference in how these are dealt with.

Monopolies and Cartels

Monopolies have a bad ring to them.  Nobody likes monopolies, in peoples’ minds manifested as huge, greedy monsters stealing your money.  Cartels are just large companies joining forces and fixing prices to form a monopoly.  Bad.

There’s no doubt that monopoly abuse and cartels are bad.  Many socialists make the error of thinking that liberals like those things, but that is not true.  Cartels go against the very idea of liberalism: they artificially restrict the market and, by putting limits on the free market, inflate prices.  That’s also why cartels are illegal.  Monopolies are not in and of themselves evil.  A monopoly can arise if a company is selling goods or services better and/or cheaper than all competitors, thereby driving them out of the market.  They won because they were best.  As soon as a monopoly starts abusing its monopoly status by artificially increasing prices, decreasing quality or stopping development, though, it becomes evil.  Most of the time, monopoly-abuse in a free market will be countered by the rise of new competitors selling better/cheaper products, thereby minimizing the power of the monopoly.  This is not always possible though, for example if the price to entry of a market is prohibitively high (such as making an independent railroad system).  This is why abusing monopoly power is illegal but monopolies are not.

Workers’ Unions and Equal/Minimum Wages

Workers’ unions, on the other hand are typically regarded as something positive.  They work for decent wages for workers and help defenseless hard-working poor wretches make a stand against greedy companies.  Equal pay and minimum wages ensures that nobody is cheated out of making a decent living out a job. Good.

See the double standard?  When companies band together to get better prices, it’s illegal and bad, whereas when workers band together it’s good.  The difference is solely a matter of size and rhetorics.  Granted, when workers’ unions first started, there was a need for them – the employers were in a de factor union, abusing their power to pay workers much less than they were worth.  This is not so anymore.  Granted, employers are still in unions, but these unions are severely hamstrung by government regulation in most parts of the world.  Aside from the fact that waging a cold war between the unions of workers and employers in the labor market is counter-productive, the shift of power had had some significant and unfortunate effects.

One of the worst things workers’ unions have brought to the world is the ridiculous idea that everybody is equal.  Naturally, everybody should have equal opportunities, but not everybody used their opportunities and end up being equally valuable for an employer. Even from birth not everybody are equal – roughly 50% of the population is significantly better than the rest at giving birth, for example –but more seriously, some are better equipped for physical work than others and some are better equipped for metal work.  We may value everybody equally as human beings, but in the job market, this is just not true.  A person with a relevant and up-to-date education as well as experience is naturally more valuable to an employer than one with no/the wrong education or no experience.  Wages to a certain degree also reflect this.  In addition wages also reflect the rarity/surplus availability of people with a certain skill: a high-ly trained professional get a higher wage than a person performing in a lower-level position, such as flipping burgers, which everybody (almost) should be able to.

Workers’ unions mostly accept these inequalities in wages, but insist that equal work results in equal wages.  Two persons hired for the same position do not necessarily have the same value to an employer, though.  As an example, a saying about computer programmers goes as follows: the best programmer is 10 times more productive than the average programmer and the worst programmer is 10 times less productive.  While the numbers are up for discussion, there is certainly truth to the fact that two persons hired for the same position are not necessarily equal. Equal wages for equal work is in principle nice, but the problem is that workers’ unions enjoy a monopoly on salary negotiations, and they negotiate both on behalf of the best and the worst worker.  This leads to two problems: first, it is not easy to distinguish these, at least not by a union far away from the actual working place, and, second, the union has a conflict of interest between trying to get the best salary for the best worker and trying to get a completive salary for the below average worker.  Both problems can, superficially at least, be solved by simply putting people into boxes: you are hired for this position, ergo your salary is x – equal pay for equal obligations rather than equal pay based on actual performance.  You no longer have to distinguish between the best and worse employee: if they are in the same position, they get the same, and you no longer have a conflict of interest; as you only have one group to cater to, you simply try getting the highest salary for that group.

As an employer, I’d naturally not be content paying the same for the below average employee, who is 10 times less productive than the average, so I’d get rid of him as soon as possible (if the union additionally makes this easy, I’d see about firing him for being difficult to work with or rigorously monitor the person until I find a valid – according to the union – reason for firing him).  As a worker, I’d not really bother being among the best, as I’d only get the same as the rest.  Thus, within the same line of work, equal wages promotes mediocrity and getting rid of the worst employees (if the union requires it, even by vilifying the persons).  Here we punish not only the best, who get lower salary that they could otherwise, but also the less good, as they will not be able to find employment within their field, as their work is not worth the price an employer would have to pay, even though the services may be worth a reduced price.

When looking at multiple lines of work or within lines of work without required equal wages, the minimum wage plays more or less the same role as equal wage plays within a single line of work.  In principle it is a nice idea that everybody should have a certain salary, but the problem is that the minimum salary, at least in some countries, is too high, not only ensuring that you can get the bare necessities (a place to live, food and clothes), but also allows you luxuries (such as smoking, a car, and television).  While I am not interested in entering into a discussion of what constitutes a necessity and what constitutes a luxury, and it certainly seems nice that everybody are able to afford luxuries, it also has problems.  For example, it may no longer be viable to pay others for performing certain tasks, for which the value is below the minimum wage.  As an example form the real world, I had a job from I was 16 to I was 18.  At 18, my employer had to fire me, not because I did a poor job, but because as I turned 18, my minimum wage increased dramatically.  Even though I was at the time willing to continue working at the same rate (my salary at the time was basically for investment in the local beer and gadget industry, so I didn’t need much) and my employer was willing to keep me at the same rate, it was not possible to come to such an accord because of the minimum wage.  While this example is, of course, anecdotical, it it not an uncommon situation, and in times with high unemployment, such as now, I’m sure a lot of people would be happy with a lower paying job instead of none at all, and I’m sure that many employers with lesser requirements would be happy to hire a below-average worker if the price was at the same time lower rather than having to pay for an average worker, whose capabilities may not be fully required, and who will probably apply for another job as soon as the crisis is over due to lack of challenges.

So, really, like monopoly abuse and cartels are the enemies of liberalism, workers’ unions and equal/minimum wages are the enemies of socialism, and they should be dealt with in the same way.  Workers’ unions are not inherently evil, but abuse of their power is, and should be illegal.  Equal/minimum wages are directly evil and should be illegal, as they stifle the abilities of people who are from the nature less gifted.

3 thoughts on “Why Workers’ Unions, Equal Wages and Minimum Wages are as bad as Monopolies and Cartels

  1. Pingback: Tweets that mention Why Workers’ Unions, Equal Wages and Minimum Wages are as bad as Monopolies and Cartels « Michael Westergaard's Homepage -- Topsy.com

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