Milton Friedman - The Real World Effects Of Unions

now unions do protect some workers unions protect two classes of workers those of their members who are employed and the union officials who run the unions but if you're going to look at this as a general answer you have to recognize that only about one-fifth of all the workers in the United States are members of trade unions and many of those are members of wholly ineffective trade unions of trade unions that have had very little effect on the wages of their members of the working conditions of their members it's very interesting to consider the actual experience of unions and compare it with the talk about unions and emanates from union leaders Union headquarters and defenders of unions if you listen to the talk you will get the impression that unions exist to protect the workers who are way down on the income scale the talk is always about the necessity of protecting or helping the low-skilled workers against exploitation by employers but suppose I were to ask you which are the strongest unions in the United States which unions in the United States are strongest in the sense of having been most successful in raising the wage rate the earnings of their members the answer is very simply R and very definitely probably the single most successful union in the United States from this point of view is the airline pilots union now this is a union whose members typically receive salary or wages somewhere around fifty to a hundred thousand dollars they are hardly the poor deprived exploited workers of Union literature they have been very successful because I have been able to have a very strongly organized Union which is let and they have for reasons which I will come to later been in a position to limit entry into the Union and into the occupation in my opinion the next strongest union in the United States is an organization that the people in this room will not regard as a union but that's what it is in my opinion the next strongest union in the United States has been the American Medical Association now the American Medical Association is not a traditional Union but it is a union from an economic point of view it is an organization of people pursuing a particular trade which is tried to control the practice of medicine in such a way as to improve the conditions of its members if you ask a union leader what is a function of a union he will agree with you and he will emphasize and rightly that the first and primary function of a union is to improve the working conditions of its members well from this point of view the American Medical Association is on the whole done very well again let me emphasize I am NOT I am not sure I do not mean in any way to be invidious I am not criticizing the airline pilots I am not criticizing the members of the American Medical Association I am only trying to understand and analyze the situation Adam Smith in that great book on the Wealth of Nations brought home to all of us that the way in which the world runs is mostly by people seeking to pursue their self-interest and there's nothing wrong with it that's the way in which we run and he pointed out that in the right kind of a structure in the right kind of a world people in pursuing their own self-interest would also promote the general interest so I'm not complaining or criticizing at the moment but only analyzing if there's any fault to be found it is not to be the fault is not to be found with the members of the pilots union or the members of the AMA but with the rest of us for letting them get away with it now thus the third strongest groups of unions are undoubtedly the craft unions the carpenters the plumbers the plasterers and the line and they again are a group that have always been extremely high paid that have always been among the elite of the working community and finally as my fourth class and this is a newly developing class the strongest unions have in recent years in the past decade in particular become the municipal unions the unions who have played a considerable part in reducing New York City to its present state of bankruptcy the garbage workers unions the school teachers unions all of the union's of municipal employees now these municipal unions of course are illustrate a very important general case that we will expand or why are they so strong because the people who arrange employment with them are not the people who pay their salaries it's the taxpayers of New York who pay the salaries of the people but it's the officials of New York City who make the deals with the unions now that illustrates a general principle which has reached its most extreme form in Great Britain unions are much stronger in Great Britain than they are in the United States and one of the major reasons they are stronger is because the government of Great Britain has nationalized a great many more industries in particular coal mining railroads elect public utilities telephones are all nationalized industries and the worst labor problems in Britain have almost invariably been in those industries which are nationalized by the government just as in the New York City and other municipal cases the growing role of government has tended to expand the importance in the role of the unions one of the strong unions unions in the United States for the same reason or the postal workers unions and so we go down the line but the most important thing about all of these is that the strong unions tend to be among the high paid workers now you have to ask yourself are they high paid because they are strong unions or are they strong unions because they are high paid it's a very important distinction and the fundamental answer is the people who are in a high paid position are in far better position to have a strong union and the strong unions then reinforce their position so both things are true part of their high pay in position today derives from their union existence the existence of strong unions but they have been able to have strong unions because they are highly ski people relatively few in number and therefore far more effective in being able to organize in such a way as to raise their pain because you must recognize that the only way in which any group of workers through union organization can increase the amount of its pay is to make sure that there are fewer jobs available there is no way in which a union can simultaneously increase the number of jobs and the pain the law of economics the law of demand and economics is inescapable you can't get out of them raise the price of anything and fewer people will want to buy it make labor more expensive in any area make carpenters more expensive the number of jobs available for carpenters will be less make physicians more expensive the number of jobs available for physicians will be less make airline pilots more expensive the number of jobs available for airline pilots will be fewer as a result the gains of the group of workers I've been talking about our other union workers are at the expense the union workers gain at the expense of other workers the only way as I say in which they can get a higher pay is by arranging things so that their end up paying fewer jobs and that means that other people who might be perfectly competent who might be perfectly available for such jobs or denied their job those jobs as concealment not only is so the effect of the higher pay of unions is lower pay for all other workers I once made the estimate this was 20 odd years ago but since there have been a number of studies that have confirmed this judgment that on the average about 10 to 15% of the workers in this country had been able through a union organization to raise the level of their pay by something like 10 to 15% that this had been look at the cost of a roughly 4% reduction in the wages earned by the other 85% so the effect has been to raise the pay of high paid workers and lower the pay of low paid workers

Channel: LibertyPen

Views: 394,363

Keywords: workers, labor, unions, incentives, wages, history, economics, American Medical Association (Organization), low-skill workers, protection, collectivism, union leaders, collective bargaining, self-interest, politics, government, muncipalities, cities, public employee unions, AFL--CIO (Organization), teachers' union, taxpayers, politicians

Id: xzYgiOC9cj4

Length: 11min 1sec (661 seconds)

Published: Fri Mar 14 2014