Front Page Titles (by Subject) CHAPTER 21: ORGANIZED LABOR - Economics, vol. 2: Modern Economic Problems
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CHAPTER 21: ORGANIZED LABOR - Frank A. Fetter, Economics, vol. 2: Modern Economic Problems 
Economics, vol. 2: Modern Economic Problems, 2nd edition, revised (New York: The Century Co., 1923).
Part of: Economics, 2 vols.
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§ 1. Changing relations between employers and wage workers. § 2. Need of common action among wage workers. § 3. Functions of labor organizations. § 4. Types of labor organizations. § 5. Statistics of labor organizations. § 6. Collective bargaining. § 7. Limitation of competition among workers. § 8. Strikes in labor disputes. § 9. Frequency and causes of strikes. § 10. Picketing and the boycott. § 11. Competitive aspect of organization and particular wages. § 12. Monopolistic aspect of organization and particular wages. § 13. Open vs. closed shop. § 14. Political and economic considerations. § 15. The public’s view of unions. § 16. Effects of organization upon general wages. § 17. Future rôle of organization.
§ 1. Changing relations between employers and wage workers. The “organization of labor,” or the “labor movement,” so striking a feature of the world to-day, is of comparatively recent origin. It did not begin and advance pari passu with the beginning and early growth of the wage system as above briefly described.1 In anything like its modern form the labor movement dates from the early years of the eighteenth century. Much of the largest part of its history in all countries, excepting England, is after 1860. Why was organization among the workers so long delayed after wage-payment became common, and why when it once appeared did it spread so rapidly in some directions, and why is it still limited in the main to certain fields of industry? These three questions are but one question in three forms, and to answer one fully would be to answer all.
The modern trade-union appeared in England shortly before the industrial revolution,2 and has extended as fast and as far as the same stage of industrial development has been attained in other countries. The effort of wage workers to organize themselves appears everywhere to result from the separation of the economic and personal interests of employers and workmen. As the control of industry became more concentrated in larger units with the advent of power machinery, the feeling of economic unity among the different ranks of industry was further weakened. The average workman had less opportunity of becoming a master, an employer. In the days of the old hand industry, master, journeyman, and apprentice worked side by side at the same bench. Almost every apprentice might hope to become some time a master, and many a one did so. To-day most wage workers in large establishments have no hope of rising out of their positions. The mere largeness of an establishment forbids also the personal acquaintance of employer and workman. As a result of these changes, the workmen become more “class-conscious” of their position as wage workers, and the employers in many establishments take the attitude of buyers of labor as a mere ware. When the employer then feels the pressure of competition he is more likely to force the lowest wage that is possible and to compel the workers to accept less favorable conditions than if he were in more personal relations with them. Where the immediate direction of an establishment is intrusted to paid managers who are responsible to stockholders, the managers’ success is judged almost exclusively by the dividends they succeed in earning. Hence they are under stronger and more persistent temptation than are active owners to drive hard bargains with their employees. Many examples might be found where managers and resident directors have wished to pursue a more liberal policy than absentee shareholders would permit.
§ 2. Need of common action among wage workers. These same industrial changes caused employers, even earlier than it did employees, to have something of a “class-conscious” feeling, which tempered the spirit of their mutual competition, especially in bidding for the services of workers. The smaller the number of employers the easier it is by an understanding to suppress competition on their side. If there is only one factory of a kind in a town the employer is able at times to drive a harder bargain with his employees. Especially in times of industrial depression is a change of employment difficult for the laborer, involving for him much trouble and loss of time and money in moving. But it is possible to exaggerate the degree to which competition among employers of labor is weakened to-day. In the long run and at many points competition must be felt in all such cases. The notoriously unfair employer will find his workmen drifting away, his working force reduced in number and quality at times of greatest need, and his evil reputation going abroad among workmen. A better realization of this fact has led many employers to pursue a farther-sighted policy that fosters a better understanding and a kindlier feeling on both sides of the labor-contract.
Another effect of the growing size of business units is to give the workers less personal acquaintance with each other. When they are unorganized they have less unity, common opinion, and power than the workers in the old-fashioned shop with its close personal acquaintance and ready interchange of views. In the wilderness of a great modern factory a worker may be unknown in name and interests to the man touching elbows with him. Moreover, in America, differences in nationality and in speech among immigrant workers often effectively prevent a common feeling of their interests and assertion of them. There is an analogy between these conditions and the political conditions that early led simple democracies to give way to representative governments. As long as a community is small and men know each other personally, popular government may exist without complex machinery, but when numbers become larger, public opinion can be concentrated and made effective only by delegating the functions to elected representatives.
§ 3. Functions of labor organizations. Out of these conditions have grown the various kinds of labor organizations. (1) their first object is to maintain and increase wages. (2) Closely connected with this is the remedying of various abuses in respect to methods of payment, measurement of the output, and conditions of work. (3) Almost coordinate with the aim of higher wages of recent years has been that of the shorter work-day. Labor leaders have frequently asserted, when the two demands have been made together, that a reduction of hours is the more desirable. (4) Better conditions of safety and sanitation in their work were not the first thought of laborers when they organized. As a result of habit and ignorance (widely prevalent at that time) they were remarkably unconcerned about this matter. Reforms in this direction at the outset had to come largely from sympathetic observers, the “philanthropists,” often described as sentimentalists. But the modern, more enlightened labor movement has better ideals and policies in respect to the safety, sanitation, and decency of working-places.
Labor organizations have also secondary objects of very great importance. (5) They are nearly always in some measure mutual-benefit associations, and provide in varying degrees insurance against accident, sickness, death, or lack of employment. (6) All unions in a measure serve their members as employment bureaus, and some make this an important feature. Through trade papers, correspondence, traveling members, and in meetings, information is exchanged regarding conditions of employment in various parts of the country. (7) Labor organizations, by means of their discussions and through their special periodicals, are a strong educational force in matters political and economic. (8) The local labor organizations often come to be the center of the social activities and interests of many of their members, and even of all the members of their families. The organizations thus serve the functions of social clubs, of literary societies, and of civic centers for their members.
§ 4. Types of labor organizations. Among the many organizations of wage-earners three main types may be distinguished: the labor-union, the trade-union, and the industrial union, though often they are all spoken of as trade-unions or as labor-unions without distinction. In the more special sense, however, a labor-union is one that admits several classes of wage-earners, sometimes even business and professional men, into the same local chapter. The Knights of Labor is the most notable example that America has seen of this type. The national organization was composed of local chapters, to membership in which every one was elegible excepting bankers, lawyers, gamblers, and saloon-keepers. Organized as a single local chapter in 1869, it grew very rapidly until it attained its maximum membership of 600,000 in 1886. From this point it rapidly declined in membership, and since 1900, although its organization is still maintained, has been of very little influence.
A trade-union is an organization of wage-earners in the same handicraft or occupation. Unions exist among workers in all the old distinctive handicrafts, such as the printers, stone-cutters, cigar-makers, carpenters, and in many others such as musicians and retail clerks. The local chapters in many cases have been long united in national unions (often international, embracing the United States and Canada).
An industrial union is one that seeks to unite all workers employed in the same class of establishments, regardless of their craft or the kind of work they do. The most notable examples are the United Mine Workers, the Brewery Workers, and the Industrial Workers of the World.
In 1881 a number of national trade-unions united, for certain purposes, to form the American Federation of Labor, with a membership of about a quarter million workers, which has steadily increased since that date. The American Federation of Labor now includes also some important unions of the industrial type.3 Several strong national trade-unions (the most important being the brotherhoods of railroad employees) are not affiliated with the American Federation of Labor.
§ 5. Statistics of labor organizations. The ratio of organized workers to the population is estimated4 to be highest in the United Kingdom, being 7 per cent; it is next highest in the German Empire, being nearly 6 per cent; whereas in the United States it is but 2.3 per cent. This difference is largely due to the much greater relative importance of agriculture in the United States.
The total membership of trade-unions in the United States and Canada was estimated (in 1910) to have been about 2,200,000, of which only about 100,000 were in Canada. This was 5.5 per cent of all persons (38,130,000) gainfully employed, or 6.8 per cent of male employees and 9 per cent of female employees. Organization was very weak (less than 1 per cent) among the workers in a group of industries occupying nearly one half of all workers, including agriculture, the hand trades, oil and natural gas, salt, and rubber factories. Organization was not of large extent (1 to 10 per cent) in other groups of industries occupying more than one fourth of all workers, including those engaged in producing quarried stone, food-stuffs, iron, and steel, metal, paper and pulp, stationary engineers, in public, professional, and domestic service, and in clerical work. Organization was of much greater strength, including 10 per cent or more of the workers, in the remaining industries and occupations.
If deduction be made of the employing and salaried classes, about 7.7 per cent of all persons occupied were organized. If, further, deduction be made of agricultural, clerical, publicly employed, commercial, and domestic workers, about 16 per cent of the remaining 13,760,000 persons were organized (of women 3.7 per cent). Among the occupations most highly organized are those of railway conductors (87 per cent) and engineers (74 per cent). In the building trades about 16 per cent were organized, of granite-cutters 69 per cent, masons 39 per cent, plasterers 32 per cent, carpenters 21 per cent, and painters 17 per cent. Similar striking differences appear among the occupations in the printing industry; of stereotypers 90 per cent were organized and of compositors only 35 per cent. These figures point to inherent differences in the conditions favoring organization. Even in the same craft a high degree of organization may be found in the cities and little or none in the smaller towns (e. g., in the case of the printing and building trades in general).5
§ 6. Collective bargaining. The fundamental policy of trade-unions is the substitution, for the individual wage bargain, of collective bargaining between the delegated representatives of the workingmen and the employer, or group of employers, or their representatives. The wage-earners bargaining collectively may be those of a single establishment, or of a group of establishments in the same locality, or of a wider territory, even national in extent. Accordingly, they are represented in the negotiations by trade-union officials with narrower or wider jurisdiction. Employers in some cases had tacit understandings with one another before laborers were organized. But in many cases the individual employer was at a marked disadvantage after the organization of his employees. The result has been the rapid spread of employers’ organizations, so that, in industries where laborers are highly organized, two-sided collective bargaining has become more and more usual.
A large part of the effort of trade-unions is directed toward insuring the use of collective bargaining. This is the purpose of many of their demands, even of some that hardly appear to have any such consideration. Collective bargaining virtually necessitates the use of the “standard rate,” since only with reference to some standard rate, a market price for labor, is it possible for a wage contract to be made by labor officials for a group of men. The standard rate may be a piece price or a time price, and in many cases the unions strive to secure the latter as more convenient for their purposes. The standard time rate usually is but a minimum, and many of the more skillful workers receive wages above the minimum. But the standard minimum tends to become also the maximum in many cases, the more so when the union has succeeded in enforcing a pretty high standard rate.
§ 7. Limitation of competition among workers. In order that the representatives of organized laborers may act effectively in collective bargaining, the first condition necessary is that a large proportion, if not all, of the workers of the trade in the establishments concerned shall be organized. A common sense of wrong is one of the strongest motives to bring workers together, and has prompted the origin of many a local chapter. Then constant and strenuous efforts are made to bring workers into the organized ranks. Experienced organizers knowing all the arts of persuasion devote their whole time to this task, being paid regular salaries. When friendly argument fails, threats may be used, and sometimes personal violence. The public opinion and class feeling fostered among members of an organization in times of difficulty are analogous to the sense of patriotism in the nation at large, and at times may displace it in the hearts of organized laborers, as is seen in opposition to the militia and to the maintenance of order in times of strikes. The most effective of all peaceful methods is petty persecution, rising at times to social ostracism. The individual who declines to enter the union is denounced as a traitor to his fellow workers, and is made to feel their scorn. The use of the union card to be carried by every member to show whether he is in good standing is an effective way of enforcing these measures. Finally, when all these measures fail, pressure may be brought upon the employer to get him to force unwilling workers into the union.6
Further to give control over those working in a trade and to reduce competition among workers, unions often limit the number of apprentices and determine who shall have the privilege of learning the trade. By a variety of regulations they limit the output, and in many cases (though less frequently now) have opposed the use of labor-saving machinery. Further to enforce these policies, they seek to have each special kind of work controlled by a special union. This gives rise to disputes between rival unions, and causes annoyance and loss to the workers themselves, to the employers, and to the general public.
§ 8. Strikes in labor disputes. A strike is a concerted stopping of work by a group of employees to enforce a demand upon the employer. A lockout is an employer’s closing of his shop because of a disagreement with his employees. The strike is, in its direct and indirect, immediate and ultimate, effects the most important weapon of the organized wage-earners in their relations with their employers. To newly organized laborers the union appeals mainly as an instrument for striking, for threatening the employer, or for making him suffer to compel him to accede to their demands. The effectiveness of a strike lies in the loss it threatens or occasions in the stopping of machinery, the ruin of materials, the loss of custom, and the failure to complete contracts that have been undertaken.
The employers will often, to break a strike, pay to others for a time more than the current rate of wages. The success of the strikers being dependent on their ability to keep the employer from filling their places, their energies are bent upon that end. The losses that strikes cause to workers in stoppage of wages, to employers and investors in destruction of plant and in suspension of profits, and to the public in the interruption of business, aggregate an enormous sum. The direct losses to employers and strikers in the twenty years between 1881 and 1900 were estimated to have been nearly $500,000,000, a large sum, but amounting to less than 1 per cent of the wage-earners’ incomes. It is, however, impossible to estimate at all exactly losses that in many cases are indirect and intangible. The strikers are concerned in each case, not with the balance of total losses and total gains to society as a whole, but with the net gain that they expect to accrue in the long run to themselves. Viewed in this way, it is true that there are various indirect benefits in strikes that are not easily calculable, particularly the advances of wages made by employers to avoid strikes which they know will otherwise occur. In regard to the wisdom of any contemplated strike, opinion is always somewhat divided, as it is in regard to the value of strikes in general.
§ 9. Frequency and causes of strikes. Strikes were relatively decreasing in number from 1880 to 1900, but from 1901 to 1905 the annual average was more than twice as large as in the preceding decade. On the whole, strikes have been more numerous in periods of business prosperity, when there was a better chance to get concessions from the employers. But they occur also in the periods following crises, when the workers seek to minimize cuts in wages and to prevent the depression of working conditions. More broadly viewed, strikes appear to accompany readjustments to dynamic conditions. Since wages, as a rule, rise more slowly than general prices,7 it was to be expected that the period since 1900, in which the general price level was rising at the rate of about 3 per cent a year, should have been marked by increasing resort to strikes.
The immediate causes of strikes have been changing in relative importance. In 1881, at the time of the very rapid organization of unions, more than 71 per cent of all strikes were directly connected with wage demands (61 per cent for increase and 10 per cent against reduction). But in 1905 the total for these causes was only 37 per cent, whereas the proportion of strikes for reduction of hours nearly doubled (from 3 to 5 per cent) and the proportion of these concerning recognition of unions and union rules increased fivefold (from 6 to 31 per cent). Ultimately nearly every demand of the laborers is related to the question of wages; but these figures show that when organization is new this relationship is more immediate, whereas later more effort is directed toward securing the stronger strategic position that comes with recognition of the union.
§ 10. Picketing and the boycott. Picketing by strikers or their friends is intercepting and accosting all persons approaching or leaving the place of work, to inform them of conditions and to dissuade them from working there. When peaceable means fail, often there is recourse to violence both against the employer and his property and against non-striking workers. Indeed, many persons declare that peaceable picketing is impossible, and it surely is difficult to attain in view of the temptations of human nature under the circumstances.
Almost always connected with a strike is the practice of the boycott, which is a combination of wage-earners to cut off an employer (or group of employers) from business dealings. The boycott is found in varying forms and degrees, broadly distinguished as simple and compound boycott. In simple boycott only persons directly interested in the trade dispute refuse to deal with the boycotted person. The question arises as to who are to be deemed directly interested, whether only the actual strikers in a particular establishment are included, or whether organized workers in sympathy with them are included. The latter case is presented when an “unfair” list is published in labor journals. It seems that only the former case is a really simple boycott. The use of the simple boycott, the refusal of a person, or even of a conspiring group of persons, to deal with a person with whom they have an industrial dispute, appears to be a part of the elementary rights of personal liberty. Beyond that point the boycott is compound in varying degrees. It is the compound form that is usually referred to in discussion and in court decisions on the subject. It is the compound boycott that has been described as “a combination to harm one person by coercing others to harm him.” The compound boycott, as experience shows, has moral limits as well as legal limits. It is doubtful whether the boycott can be extended at all beyond the first degree of personal relations without becoming anti-social, whether it is the weapon of organized workers or of organized wealth. The endless-chain boycott, a measure of excommunication without limit, pronounced against an offending employer, non-union workers, and every one in any way befriending them, is an effort to drag every one else into a dispute that is primarily a private matter.
The “unfair list” is usually given as a form distinct from either the simple or compound forms of boycott. The “fair list,” published either by labor journals or by a consumer’s league is not declared to be a boycott.
§ 11. Competitive aspect of organization and particular wages. The crucial economic problem in connection with trade-unions is not as to their methods (that being rather a political problem) but as to their effect upon wages. There must be distinguished two questions: first, as to the influence of organization upon particular wages, and primarily upon the wages of organized labor; and, next, as to their influence upon the general level of wages.
As to the first, it may be seen that the wages of workers who are organized are generally (though not always) higher than those of unorganized workers in the same trades and neighborhoods. An English trade-unionist, Trant, says; “Where there are no unions wages should be lower. This is exactly the case.” And he quotes: “Wherever we find union principles ignored, a low rate of wages prevails, and the reverse where organization is perfect.” (1) But he later explains in part this difference: “The union men are the best workmen and often employers pay a man more than union wages. This is not surprising, as no man can be a union carpenter unless he be in good health, have worked a certain number of years at his trade, be a good workman, of steady habits and good moral character.” If this be true, as doubtless it is to some degree in many trades and places, it is in accordance with competitive principles that, as the élite of the trade, the organized laborers should get higher wages than those outside the unions. (2) Moreover, the unions exist mainly in the more populous places, where costs of living as well as wages range higher than in the small towns and in the rural districts. A comparison merely of wages in money in such cases is misleading as to the conditions of real income. (3) Further, a higher standard of output prevails in the cities where organization is greatest, and older men and the less efficient, who are unable to “keep up the pace,” drift away into unorganized shops or to villages where no standard union rate is in force. (4) As far as unions help to develop the intelligence and promote the sobriety and efficiency of their members, they are a positive economic force making for higher wages. (5) Organization may help to raise particular wages, inasmuch as it helps to restore to the laborers a truer equality in the making of the wage contract, by creating two-sided competition.
The book before quoted expresses, somewhat vaguely, an opinion in accord with these facts and principles when it says: “It is an error to think that the trade-union seeks to determine the rate of wages. It cannot do that. It can do no more than affect them.” With organization as well as without it, the wages of individuals and of classes of laborers are determined by the general principles of competitive price as applied to their services, where neither the employer has a monopoly of employment nor the organized laborers have a monopoly of the labor supply.
§ 12. Monopolistic aspect of organization and particular wages. The action of organized labor is not, however, limited to the competitive field. Wages in particular industries may, by the action of trade-unions, be raised and maintained above a true competitive rate. This, of course, can be done only in accordance with the principles of the service value to the consumer and of service price in the employment market. The supply of labor is in a variety of ways artificially limited by the efforts of the unions. (1) It may be done temporarily by striking when a failure to fill orders will cause the employer exceptional loss. (2) Violence in strikes and boycotts is often the desperate attempt to create and assert a measure of monopoly power where of itself it does not exist, i. e., where other workers stand ready to take the jobs at the prevailing rates of wages. (3) It is created if apprentices are limited to fewer than in the long run would be attracted into the trade by the prevailing wages. (4) It is created if the unions artificially limit output to less than is consistent with the health of the worker. (5) It is created if unions strong enough to keep “scabs” from getting work, fix their dues high or put other obstacles in the way of increasing the membership. Probably the most striking cases of high wages for organized labor are of this kind. The element of labor monopoly evidently is mingled in all degrees, from the slightest to a very great amount, in particular economic situations.
§ 13. Open vs. closed shop. The question of labor monopoly is involved in the very crucial question of the closed vs. the open shop. A closed shop (or union shop) is a shop in which no non-unioin men may be employed, even at union wages. Unions usually assert that the closed shop is essential to the existence of the union, although some strong unions, notably the Railroad Brotherhoods, have not urged this point. The existence of a closed shop is evidence that the union is strong enough to compel the employer to act on this principle and thus virtually to force all his employees into the union. The refusal of a demand for the closed shop is often the ground for a strike. If union and non-union men work side by side there are so many ways in which the employer is able to discriminate so as gradually to break down the union. If business slackens, the union man may be the first to be discharged; if any preference is given it is to the non-union man. Therefore, most spokesmen of organized labor believe and declare that efforts of employers to secure or to maintain the open shop are disguised attacks upon the very principle of organized labor. Labor leaders ridicule as hypocritical the employers that say they are trying, in keeping their shops open, to protect the workmen’s liberty to join or not to join a union, which in the eyes of the law is a voluntary organization.
While these accusations may too often be true, it would seem, on the other hand, that an unmodified closed shop, with the conditions of membership in the control of the union, creates a distinct monopoly of labor, leaving the employer helpless in any wage dispute and enabling the union to enforce its every demand, regardless of the competitive conditions of the labor market for that class of services. The employers, in their more moderate claims, profess to aim at an open shop only in the sense of the principle laid down by the governmental Anthracite Coal Commission of 1902, as one where no person is “refused employment, or in any way discriminated against, on account of membership in any labor organization”; and where there is “no discrimination against or interference with any employee who is not a member of any labor organization, by members of such organization.” Such an open shop, with its conception of two-sided duty, fairness, and toleration, nearly commands public approval, acquiescence, and acceptance by both sides. But unfortunately, in practice, whichever side chances to get the upper hand in the situation is too often tempted greedily and ruthlessly to push its advantage far beyond the ideal point of toleration.
In the war and after-war boom period from 1917 to 1920 the greater bargaining power of organized labor enabled it to push not only for higher wages and shorter hours, but for the closed shop, which made great headway. The railroads, under federal control by the Railway Administration, were almost completely unionized, and great numbers of manufacturers conceded the closed shop to the unions. In 1920, with the onset of unemployment, began a most active propaganda in favor of the open shop. This produced, probably, an exaggerated effect upon the public mind, seeking a scapegoat for the high cost of living, and finding easy explanations in “profiteers” on the one hand, and on the other in the unreasonable demands of labor, excessive wages, and reduced output. The effect was to neutralize in large part within the year the gains made by the closed shop, and to produce alarm in circles of organized labor.
§ 14. Political and economic considerations. The question of the closed or open shop has some very broad aspects. Is the closed shop, and are the other policies of trade-unions, morally right; and ought they to be legally sanctioned? Such questions are not for the economist alone to answer. They involve moral and political considerations—not merely existing formal law, but the fundamental issue of personal liberty and of interference with the liberty of some citizens by another group acting without political authority. For example, if a workman is unable to earn the standard rate8 and is not permitted to take less, he is forced to move to a place where there is no union, or is forced out of the trade entirely. In the latter case he probably is compelled to take a lower wage than he could get in his regular occupation. Likewise, this change artificially increases the pressure of competition and reduces the wages of others in the occupation to which he turns. So, in the case of persons prevented from becoming apprentices in a trade, or kept from taking work by threats, or by the dread of boycott, or by the fear of violence, in any degree however slight, there is present an element of personal coercion by the organized laborers. This is the price others are made to pay for a favorable effect on the wages of the organized laborers. Now, the more strictly economic question concerns the part as to the effects upon wages, and hardly extends to a judgment on the moral rectitude (and the desirability in law) of such acts and policies. One who fully shares the feelings of the organized workers will believe that the winning of a strike or the general improvement of the strikers’ condition is so important that it outweighs the evils to other individuals and to society as a whole. Indeed, to one in that state of mind the evils appear very small or non-existent. The economist can only issue the warning that the commonest illusion he encounters is the belief of each class—commercial, banking, manufacturing, wage-earning—that what is for its particular interest is, in a peculiar manner, for the general interest, so much so as to justify favoring legislation or special exemption from the general law, or even sheer lawlessness.
§ 15. The public’s view of unions. We may, however, observe the view of the onlooker striving to be impartial. The attitude of the public in labor disputes, and particularly in regard to the closed shop, is a vacillating one. The general public sympathizes in large measure with the unions in their efforts up to a more or less certain point; but the public does not like to see organized labor with the power to dictate terms absolutely to the employers, any more than it likes to see employers crush the union. The unions are effective in varying degrees in strengthening the bargaining power of the workers, and accordingly the results vary not merely in degree but in kind. The public wishes to see “fair play,” and up to a certain point the union is a device to get fair play. In truth, what is in the public’s thought, somewhat vaguely, is approval of unions as far as they go to establish a real equality in competitive bargaining with the employers, but disapproval where the power of the union gets greater and becomes monopolistic. It is at this point that organized labor loses the sympathy of most of the “general public” outside of unions. When the union tries to force a higher wage than the market will warrant, when it strives not to establish but to defeat competition, the public condemns. It sees, though not quite clearly, that such action makes an unstable equilibrium of wages, which tempts to constant friction and discord with employers and with unorganized laborers. It sees also that if the unions force a wage higher than a fair and open market affords, this is rarely done at the expense of the employer; that in the long run it is at the expense of the purchasing public itself, including the unprivileged workmen.
In accordance with these facts and opinions there has developed, at least in one respect, a pretty definite conviction on the part of the public regarding the closed shop, namely: the closed shop should go only with the open union. A union under the closed-shop policy is exercising a quasi-public function, that of controlling the industrial action of private citizens against their will. The union, therefore, in this view, must, with anything like the closed shop, cease to be a purely private, voluntary organization, and become in some respects subject to public regulations as to its internal rules and administration. This view, however, is very unacceptable to the leaders of organized labor in America, and there the question now stands.
§ 16. Effects of organization upon general wages. A question different from that discussed above is as to the effect that the organization of labor has upon the general level of wages, including those of unorganized workers. The thought has sometimes been expressed by sympathetic social students outside of trade-union circles that, but for the organization of labor, wages in general in America would be no higher than they were in 1850. This seems to be assumed in much of the argument of labor leaders, for they speak as if all wages, but for trade-unions, would be at the starvation level, and they credit everything above that level to the work of the unions. In Trant’s book already referred to, which was reprinted and circulated by the American Federation of Labor as representing its theory and claims, all the advances that have been made in wages are attributed to the trade-unions. This claim is peculiarly effective in America, where wages are and always have been relatively high. But proof of the claim is lacking. As we have seen, fewer than one in sixteen of all gainfully employed and fewer than one in twelve of those working for contractual wages have been organized. On no principle of value could the mere organization of one twelfth of the wage-earners, without permanently withdraw-them from the labor market, explain the relatively high wages of the other eleven twelfths. In many lines where labor is not organized, as in teaching, clerical, professional, domestic, and agricultural services, wages have risen as much or even more than in most of the organized trades. The underlying economic forces determining the general level of labor incomes in a country are much more fundamental in nature than labor-unions or protective tariffs.9 The tradeunion authority already cited seems in another passage to admit a view not essentially unlike that just expressed when he says: “Capital is increasing faster than population. . . . It seems therefore merely in obedience to natural laws that wages should rise.”
The only reasons ever suggested for thinking that the organization of one twelfth (or any larger proportion of the wage-earners) could in any general way raise the labor incomes of those remaining unorganized are: first, that organized labor sometimes leads the way in securing favorable legislation; and, secondly, that if organized workers get higher wages this sets a standard which it is easier for the unorganized then to attain. Both of these suggestions may have some little validity in special cases, effecting slightly a small proportion of the unorganized workers, but neither touches fundamental causes of general high wages. Whereas it is clear that when the unorganized laborers constitute the main body of consumers for the products of organized labor (and this unquestionably is in large measure the case) any increase in wages that can be secured through organization by a portion of the workers must, in part, be subtracted from the “real” incomes of the unorganized workers. The employer is middleman, not to a great degree the ultimate consumer, of labor.10 Some part, it is true, of the higher wage might be taken from profits or from wealth incomes, but this would still leave the unorganized workers the losers.
§ 17. Future rôle of organization. In the light of the principles of wages and of experience, it appears that organization most easily gains results when wages are below the competitive rate; and it gets the most stable results when wages are kept at or little above the competitive rate. Only exceptionally is the control of a labor organization in a trade so strong that it is able to maintain monopoly wages for long periods. An earnest effort on the part of the workers is necessary for them to get the share that true competition would accord them, but the attempt to force wages beyond that point must be the occasion of increasing friction. With so modest an ideal, however, as the true competitive wage, organized laborers and their leaders cannot be expected always to be content.
Aside from its effects upon the wage bargain, unionism finds its greatest justification is in its unspectacular fraternal, mutual-benefit, and educational functions. The chief forces favorable in the long run to wages that can be affected by organization are domestic peace, order, and security to wealth; honesty and good faith between worker and employer, in law-maker and in judge; efficiency and intelligence of the workers; and far-sighted social legislation. Some of these contribute to greater productiveness, others to a fairer distribution. In all these ways organized laborers have made valuable contributions, unfortunately neutralized in many cases by a narrow class outlook. Organized labor is here to stay for a long time to come, and as the élite of the wage-earning class it should, and probably will, be an increasing force for political betterment and for social welfare in the republic.
[1 ]See ch. 20, § 1-3.
[2 ]See Vol. I, p. 459.
[3 ]In the Federation in 1921 were 111 national and international unions, representing 34,000 local unions, 46 state branches, 801 city centrals, and 823 local trade and federated labor-unions.
[4 ]These and the following figures were compiled before the World War; no revised estimates are as yet available.
[5 ]See Quarterly Journal of Economics, May, 1916, article by L. Wolman.
[6 ]See below, § 13, on the closed shop.
[7 ]See Vol. I, pp. 223-224, and above, ch. 6, § 10.
[8 ]See §11.
[9 ]See Vol. I, pp. 227, 439, 466, 504-507; and above, ch. 16, § 8.
[10 ]See Vol. I, pp. 217, 222-223, 352, 356.