Monday, September 7, 2009

Can you be pro-market and pro-union?

The belief that labor unions can substantially raise real wages over the long run and for the whole working population is one of the great delusions of the present age...

All this does not mean that unions can serve no useful or legitimate function. The central function they can serve is to improve local working conditions and to assure that all of their members get the true market value of their services.

For the competition of workers for jobs, and of employers for workers does not work perfectly. Neither individual workers nor individual employers are likely to be fully informed concerning the conditions of the labor market. An individual worker may not know the true market value of his services to an employer. And he may be in a weak bargaining position.
That is Henry Hazlitt from his book Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics.

Unions knowing and carrying out their proper function is a critical part of the labor market. It is when they go beyond this true function that that results in bad outcomes, often for both employers and employees.

Hazlitt has impeccable free market credentials. This is from his biography on
If you want to know where American supporters of free markets learned economics, take a look at Economics in One Lesson by Henry Hazlitt. A brilliant and pithy work first published in 1946, at a time of rampant statism at home and abroad, it taught millions the bad consequences of putting government in charge of economic life.
Those within the labor movement would be well served to take Mr. Hazlitt's lesson to heart. And those that support free market principles would do well to remember that unions serve an important legitimate role in a truly free labor market.

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