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Jobs and income security: another union myth
Gerard Jackson
The wealth of any country is its productive capacity, meaning the size of its capital structure. It therefore follows that if we wish to raise living standards we must expand the capital structure. From this we deduce that it is impossible for unions to bring about a permanent increase in real wages for everyone. Only by raising the amount of capital invested per head of the population can this be achieved –– and certainly not by the Australian Council of Trade Unions.
Now the vast majority of journalists who reported or commented on the wharves dispute were undeniably partisan, even to the point of brazen dishonesty (Mike Steketee of Murdoch’s Australian immediately springs to mind). They willingly conveyed the impression that the mass sacking of wharfies somehow posed a threat to the jobs of other workers. This made as much sense as asserting that the lawful arrest of criminals poses a threat to the liberty of law-abiding citizens.
The belief that unions can guarantee job security is a cruel misconception. Market economists have never denied the dismal fact that because of their ‘strategic’ position ruthless unions can extort extraordinary pay and conditions. But these economists always stress that these so-called workers’ gains can only come at the expense of other workers. These gains always resolve themselves into a forcible transfer of income from the rest of the community.
In short, they are wealth transfers the main burden of which falls upon the weakest members of the community, especially the lower-paid. (I was particularly nauseated by the pious cant of clergymen, union activists, journalists, Labor politicians, etc., who asserted that ending the wharfies’ rackets was really an attack on the welfare of low-paid workers). By raising the cost of their labour above their market values, powerful unions lower the economic welfare of other workers by raising the cost of products, retarding and distorting investment, pricing others out of work (this only happens if the union-induced cost increases cannot be factored back into lower net wages) and forcing some workers into submarginal occupations. These are facts, incidentally, that the vast majority of journalists refuse to publish or even acknowledge.
Another equally cruel misconception that many journalists, politicians, etc., foster is that labour market regulations safeguard jobs and incomes. This is not true and never has been. How can this be when less regulated economies have lower unemployment rates? Where labour regulations raise the cost of labour above the value of its product, widespread persistent unemployment will emerge.
And that is indisputable –– except to ideologically motivated journalists like Mike Steketee, Geoff Barker, Brian Toohey, Rosemary Neill ad nauseam, who have expended considerable energy and abuse in attacking free labour markets without once providing a credible case for their own leftwing beliefs.
The National Union of Workers recently picketed the Kemalex plant in Dandenong for 65 days. This picketing amounted to nothing but a blockade, not that our journalists would ever concede this fact. After the union claimed victory over the company the firm simply closed the factory and moved to South Australia. Some victory. The union is now screaming bloody murder. It never occurred to these union apparatchiks, whose own jobs were never at risk, that when you raise the cost of doing business above the benefits business will cease operating.
Then there is the question of labour market regulations. Where these regulations raise the cost of hiring people while suppressing, through more regulations, the ability of the market to overcome their job-destroying impact by factoring these additional costs back into lower net wages unemployment will emerge. One needs look no further than France to see the truth of this statement.
Of course, a reduction in wages can manifest itself in the form of a significant increase in part-time and casual employment. This is the price a great many Australians are paying for regulatory interference in the market place and union price-fixing. Unfortunately this simple insight eludes most of our media commentators
Economics as well as history teaches us that no individual, government or organisation can honestly guarantee job security and real incomes. Only economic growth can guarantee a continual rise in real incomes. And only economic growth can guarantee jobs. Naturally, I don’t mean that growth can guarantee that a person will always have the same job, only that it guarantees that there will be a general and continual rise in real wages and sufficient jobs to employ everyone who is willing and able to work. This is something no union can guarantee without being guilty of false advertising.
The conclusion is unavoidable: if people want their living standards to rise then they must vote for politicians who will implement policies conducive to growth.
Gerard Jackson is Brookes’ economics editor
BrookesNews.Com
Monday 14 November 2005