September 03, 2005
Saturday

Organized labor is a wisp of what it once was -- economically and politically. It now represents 12.5 percent of all wage and salary workers, compared with 20.1 percent in 1983. And in the private job market, only 8 percent of workers are union members today, down from about twice that in 1983. In the public sector, 36 percent of government workers -- mainly teachers, firefighters and police officers -- are unionized.

To mark Labor Day weekend, I called Morgan O. Reynolds, an economist at the U.S. Department of Labor in 2001-2002 and a retired Texas A&M University economics professor. Reynolds, who wrote the "Labor Unions" entry in the Fortune Encyclopedia of Economics, lives in Hot Springs Village, Ark. He is an energetic skeptic of the official events of the Sept. 11, 2001, terrorist attacks and calls himself a "9/11 dissident."

Q: Is this going to be a particularly sad Labor Day for the union movement in America?
A: It gets sadder every Labor Day, it seems. Organized labor -- and I take some credit for this -- continues to wane in numerical membership, strength and in most every other index. I notice that we have got some major unions splitting off from the AFL-CIO, allegedly in disgust with John Sweeney's efforts to organize the unorganized. The reputation of organized labor continues to erode and their day has passed. That seems to be a conventional opinion in the workplace.

Q: What has caused the decline of labor union power and importance?
A: The No. 1 thing, of course, is the transformation of the American economy from an industrial employment and occupation mix to a largely service economy and increasingly white collar -- a majority of the work force is actually in professional, managerial and related support occupations. But to get to the brass tacks here, unions ultimately depend on either the threat of violence or actual violence to succeed. Those methods have to organize most of an industry or an occupation before you can get sustainable wage gains, so-called monopoly wage gains. All this business about persuasion and selling and using nonviolent methods ultimately can't work in a dynamic and competitive economy, much less one that is increasingly global. So you've got a lot of forces working against organized labor, but you also have problems within organized labor, where they haven't done a good job.

Q: What's your dictionary definition of a labor union?
A: It's a cartel -- an organized cartel. It's a group of workers, usually led by specialists, in organized labor who try to exclude outsiders -- that means the scabs; the intruders. It's a special kind of cartel. It's a labor cartel. And it has one advantage that ordinary product market cartels don't, and that is unions can use violence -- at least when it's countenanced by the authorities. That's why the reaction of law enforcement is very important -- and the courts.

Q: Do teachers and public service unions today have too many government-granted privileges that give them power they might not have otherwise?
A: Yeah. That's a matter of political opinion, but my opinion is yes. The public sector provides pluses and minuses from an organized labor point of view. The biggest plus is that government is insulated from any kind of direct competition, so if you raise wages and benefits within the government sector, the bill can be passed on to pliant taxpayers. The disadvantage is that organized labor is in a contest of wills and violence against the government, and the government is ultimately going to win that one.

Q: What's the most socially damaging myth about the benefits of unions?
A: The myth is that privileges rendered to organized labor will benefit all of labor. That is just a myth. I tried to explain this in the Fortune Encyclopedia of Economics. If you raise wages and benefits and therefore the cost of labor in the unionized sector, fewer will be employed -- that's the law of demand. And those who are dis-employed or otherwise never employed there seek employment in the nonunion sector, and that has depressed their wages below what it otherwise would have been. Furthermore, because of the misallocation of labor and capital, the whole society is less efficient.

Q: Why did W.E.B. DuBois call unions the greatest enemy of the working class?
A: Well, he was an advocate of improving the condition of black people. And, of course, African-Americans suffered enormously by union barriers to entry. Unions have always been especially well-organized among white native workers and have been the enemy of immigrants and women and blacks and other so-called interlopers.

Q: If you had to persuade the staunchest union man or woman that unions are not economically or morally virtuous, what would you say to them?
A: Well, they are not economically or morally virtuous in the present and historical form. We could imagine nonviolent, non-threatening organizations to aid labor. But certainly in the form of the Anglo-American aggressive union, we need only look at history. We don't need much economic theory to see how they can't compete -- and we're in a competitive world. There is nothing wrong with that. I am an advocate of competition. Most of us are in our role as consumers. We want competition for our dollars and we want high value for our dollars. We want choice and we want freedom, and that's what we ought to want really in our role as producers as well. Here's some wisdom from the great gymnastics coach Bella Caroli: "No competition? No progress." And what we need is progress. I think some union members are receptive to that. Others know it, but they cling to their current privileges. They fight change. But change has been overtaking organized labor and will continue to overtake it. It's a matter of the dinosaur story.

Q: Will things only get worse for organized labor?
A: Yes. There's no way out here that can work, given their approach to the labor market. The only thing that can rally turn the tables, at least temporarily, is government intervention on their behalf. You could go to a more Canadian-type thing or a European thing, which would impede the ability of management to resist union organization. You can have various kinds of laws, but the ability of unions to influence the political outcome, while still very potent, doesn't seem sufficient to hasten such a change. It's hard to see that politics would change in a pro-organized labor direction.

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