John Singleton with Bob Howard, Rip Van Australia (Stanmore: Cassell Australia, 1977), pp. 253-60, under the heading “Unions”.
To repeat what we’ve already said, labour, skills and knowledge are market commodities. Wages are their price. As market commodities, the laws of economics apply to them in the same way as all other commodities, and similar consequences will result if those natural laws are circumvented by Union mob rule or legislation. In addition, because people are involved, moral laws also apply. Specifically, individual rights are involved.
Few people would deny that we have a Union problem in Australia today. However, there is a great deal of confusion as to how solve it. This stems in large part from the fact that very few people have taken the trouble to work out which principles are involved, for it is only be reference to principles that you can determine what is the right thing to do. It can be assumed that it is generally accepted as right that our society should be moral and just. It is also generally accepted that we all possess certain individual rights, such as the rights to life, liberty and property. Can we, then, by applying these thoughts, sort out the issues involved in our trade union problem? When an employer advertises a job vacancy and invites people wanting the job to apply, and the various applicants apply, what is happening?
First, the employer has decided, for reasons of his own, that he is willing to engage in trade with a suitable employee. The employer is willing to exchange a certain amount of his property for a certain amount of work on the part of the employee. He has in his mind an idea of (1) just what work he expects to be done, (2) what it’s worth to him, and (3) what price he expects to have to pay for it. For his part, the prospective employee is willing to exchange his labour, skill and/or knowledge with a prospective employer, at a certain price. He has his own idea as to (1) what he has to offer, (2) what it’s worth to him and (3) what he would like to get for it.
When these two come together they determine whether or not the employee is suited to the job, whether or not he has the necessary skills or knowledge or physical requirements, whether they can agree on a price, and whether there are any other conditions to be met, and if so, whether or not they can be met. If all these can be agreed upon, they both have a decision to make. The employer decides whether or not he wants this particular employee, or whether he can do better. The employee decides whether or not he wants the job, or whether he can do better.
If they agree to do business with each other, the employer hires the employee. The price is the agreed wage and any agreed conditions, such as, sick pay, holiday pay, overtime, amenities, company car, or whatever.
What are the essential points of this process?
- It’s a free, voluntary trade.
- Each trades that which is his to trade. That is, they trade their property, which they own, or in other words, which is theirs by right.
- There is, in the agreement of the employer to hire, and the employee to be hired, at least an implicit contract. This could easily be formalised as an explicit, written employment contract.
- There was, in the discussion before the final decision was made, opportunity to discuss possible future contingencies, such as, wage increases, promotion, what happens if either one decided to opt out. These, if discussed, could form part of the implicit contract, but couldn’t necessarily be enforced. They could also be written into the formal contract, and then they could be enforced.
Because this was voluntary trade, neither the employer forced the employee to take the job, nor the employee forced the employer to hire him. Neither could force the other to do anything. Both could refuse and both could bargain. Both had a right to trade because they were each dealing with their own property, over which they had full control.
If we were to say now that people have a “right” to a job, what would this do to our example? It would mean that the employer could not refuse the employee that job. Or, on a broader scale, it could be said that employers have to provide jobs for all who want them. If you have a “right” to a job, that means someone has to provide you with one, and no one can refuse you one. This is clearly absurd, as it makes one group of people slaves to another group.
The matter is not improved by saying that it is the responsibility of the government to provide the jobs, because the government does not produce jobs. The government can redistribute money, but that will destroy as many (and in the long run, more) jobs as it creates, or it can print money to encourage economic expansion. That will temporarily create jobs, at the expense of accelerating inflation and, in the long run, create periodic recessions followed by catastrophic depression. Finally, whatever the government does, it will involve coercion of individuals, thus violating their rights and turning them into part-time slaves.
There is no such thing as a “right” to a job. We have only the right to offer jobs (as employers) or to seek jobs (as employees). We cannot demand that someone be forced to provide us with a job.
What about wages? Do we have a right to a “fair” wage, an “adequate living” wage, or to any wage at all? This question was answered in the section on Unemployment. Because wages are the price of labour, any attempt to fix them at a “fair” or “just” or “adequate” level violates the rights of both employer and employee to free trade, and, depending on where they are fixed, will call into play natural economic forces which will cause either a labour shortage, a balanced labour market, or unemployment. Obviously, what we all want is a balanced labour market, but that will only occur when wages are fixed at the free market level, in which case the fixing is totally unnecessary — that’s where they would have been anyway.
However, as we all know, the intended purpose of such fixing is to force wages upwards — to get them above the market level. Consequently, we have unemployment problems, and a wage-price spiral as a bonus. The futility of the process becomes even clearer when we realise that if, for example, employees are granted a one dollar a week wage increase, this nets them, after tax, maybe sixty cents a week, but represents an increase in costs of something like $1.20 a week to the company, after increases in payroll tax, workers compensation, are taken into account.1 These extra costs must be either absorbed by the company, or passed on in price increases. They can be absorbed by cutting costs, by laying off staff, curtailing expansion, continuing to use old machinery and plant or cutting profits, which will in turn reduce investment, expansion, etc. The end result is fewer jobs, lower productivity, poorer quality products. The only way the costs could be absorbed without damaging consequences would be if there had been a sufficient productivity increase prior to the increase in costs to cover the increase, but this is not usually the case. If the costs are passed on in price increases, the employees are really chasing their tails, because for every sixty cents they get, prices rise the equivalent of $1.20.
We see, therefore, that not only is the attempt to fix a “fair” or “just” wage immoral, because it violates both parties rights, it is also counter-productive, doing more harm than good. We must further ask ourselves, who is to determine just exactly what constitutes a “fair” or “just” wage, and what criteria they use to determine it.
The final “right” that is bandied around when Unions are talked about is the “right” to strike. Nobody has an absolute right to strike. Whether or not an employee is able to strike depends entirely on the terms of his or her employment. We have seen that the agreement of the employer to accept an employee and the employee to accept the employer’s job constitutes and implicit or explicit contract. If this contract was put down in writing, all conditions, contingencies and undertakings would be stated in it: wage, working conditions, holidays, sickness provisions, term of contract, escape clauses, rise and fall clauses to cover inflation, and so on. This contract would be legally binding on both parties, and disputes could be settled by negotiation or through the courts. No employee could strike if it breached this contract.
In a free market situation such contracts would quickly evolve, and standard forms of them would be available. The Australian Standards Association already has such standard conditions of contract for many business undertakings. Should events change circumstances in such a way that one or the other of the parties in the contract were disadvantaged, they could seek to re-negotiate the contract before its term expired, or failing that, they would simply have to wear it until the contract expired. Most decent people would be willing to re-negotiate if the circumstances were unusual or severe.
Where our industrial situation gets to be messy is in the fact that most employment contracts are implicit rather than explicit. This puts all parties in a fog, because nothing is definite, and nobody can be held to anything. In these circumstances, employees could claim a right to strike — legally. They may be bound by their word, but if there is no legal contract, they can simply walk out. However, while they can strike, they should not be able to forcibly prevent other people from being hired to replace them. They can’t have their job and eat it too. They can’t refuse to do a job, but insist that they still have the job. To strike means to withhold labour. This gives the employer a choice: either submit to their demands, or, negotiate a settlement, or eliminate the job, or hire someone else. It is, after all, the employer’s company, his plant, or equipment, and his money that he’s paying out in wages. If he is not willing to accept the employees demands, there is no way that in a free and civilised society, he should be forced to accept them. This would mean that the employees “right” to strike has precedence over the employers right to his property. All people have equal rights, but some are more equal than others?
Union activity that forcibly prevents other people from taking vacated jobs violates the rights of both the employer and the other people who want the jobs. The Unions may attempt to persuade a person not to take a job. They could even bribe him. But they cannot morally force him. If the Unionist demands his right to strike, this other person can equally demand his right to seek work, and the employer can claim a right to spend his money on whoever he likes, or on no one at all. Needless to say, the issues involved could be put beyond any doubt by using job contracts.
It is questionable whether or not union activity today helps or harms Union members. It certainly hasn’t helped the tens of thousands of unemployed, and it certainly hasn’t helped the economy, thus harming all Australians. Most gains that Unions make are sectional, with one group’s advances being paid for by another’s losses. They do not take the money out of the hands of the greedy rich and distribute it to the “workers”. They take it off their mates.
In fact, the redistribution of wealth is a bit of a myth. In the U.S.A. in 1968, out of a total of 68 million taxpayers, 383,000 or only six-tenths of one per cent, had taxable incomes of over $50,000. Their total adjusted gross income was $37 billion, or 6.6 per cent of the total gross income reported. Out of this they paid $13 billion, or 36 per cent in taxes. If the United States government took all of the $37 billion and redistributed it among 200 million Americans, they would receive the princely sum of $120 each, or an increase of 4 per cent in the disposable per capita income.2
Surveys by Opinion Research Corporation in the U.S.A. have found that the median opinion of people polled was that out of every dollar American corporations divided up between owners and employees, twenty-five cents went to the employees, and seventy-five cents went into profits. It is probable that similar opinions would be held here. The facts however, reveal a different story. In 1970, for example, in the U.S.A., 9 per cent of income went to profits, and 91 per cent went to pay employees.3 Of all personal incomes in the U.S.A. for 1970, 70 per cent was in the form of wages and salaries, less than 7 per cent was in the form of business and professional income, 8 per cent was interest payments and only 3 per cent was in the form of dividends.4
In Australia, for the year 1975-76, total household income was $59,814 million. Of this, $40,510 or almost 68 per cent was in the form of wages, salaries and supplements. Income of farm unincorporated enterprises was 2.2 per cent, other unincorporated enterprises, dwellings, interest and dividends was 18.5 per cent, and government cash benefits 10.6 per cent.5
We can see, then, that employees already get by far the major portion of the money available. Any redistribution that takes place then, is likely to be at the expense of their fellow employees. We have already discussed, under Unemployment, how Union activity and wage legislation harms the old, the very young and the unskilled, by forcing them out of the labour market. Union activity also harms the best workers in any occupation, because with award wages there is a tendency to pay employees in accordance with the award rather than in accordance with their work. This same Union activity harms the unemployed, because it prevents them from taking the jobs of strikers, and from taking jobs at lower wages.
By far the most destructive and harmful aspect of Union activity, however, is what it does to the production process. As an example of what modern production requires, consider this. In the U.S.A. in 1968, business had invested $30,000 for every production workers’ job. In our own iron ore developments in Western Australia, the figure is around $250,000 per job. We stated before (under Unemployment) that wages are paid out of production, and that a man digging a hole with a bulldozer should be paid more than a man using a teaspoon. The man with the teaspoon might work harder and longer, but the man with the bulldozer would do more. The catch, of course, is the cost of the bulldozer — that requires capital investment. In order to buy the bulldozer, the company has first to accumulate the capital. The more capital it is able to accumulate and invest, the more equipment it is able to make available to its employees, and the higher is their productivity and, consequently, their wages.
Union activity wrecks this process all along the line. They demand wage increases regardless of productivity; they reduce profits and hence capital accumulation; they resist the introduction of better equipment; they insist on over-staffing and general feather-bedding; and by striking, they further reduce productivity, production and profits, this triggering off a whole new round of price increases, job losses, business contractions, and so on. In general, Unions seek to reverse the law of cause and effect. Somehow they seek to distribute the cake before they bake it, and to distribute a bigger one than they bake.
Union activity has become political. In particular, communist and socialist Union leaders are using rank and file Unionists as cannon fodder in their efforts to bring about their communist and socialist totalitarian utopias. It is at least consistent that they have chosen to use totalitarian means to achieve their totalitarian goals.
All people have the right to get together to form Unions. That, however, does not give them a right to violate the rights of other people, whether they be employers or fellow employees. Compulsory Unionism, closed shops, job demarcation and industrial sabotage all violate individual rights, and all are counter-productive. Unions should not be used as a bludgeon. There are many things Unions could do for their members that would be of some use. First, they could back members with legitimate grievances against employers. Second, with their numbers, they could provide all sorts of services and facilities for members. They could bulk-buy at reduced prices everything from cars, to refrigerators, to holidays, to food. They could, as previously suggested, run their own businesses, for example, transport services, clubs, hotels. There are hundreds of possibilities, all of which would be helping the rank and file, rather than harming them. (And when their business ventures went broke they might gain a better understanding of business itself. There are no certainties at the race track or in business.)
With non-compulsory Unionism, the Unions’ success at providing real benefits for employees would be reflected in their membership numbers. (Why should I join?)
What is needed to bring all this about is very simply a strong government dedicated to getting itself out of people’s lives and protecting rights. But over the years, government legislation has helped build the power of Unions. And such government legislation should be repealed, along with all the other legislation that is currently strangling our economy. And, of course, if we had a healthy and growing economy, our current militant Unionism would die from a lack of interest.
It will be said, however, that a government cannot repeal these laws precisely because the Unions would stop it. If this is so, then we might as well come right out and admit that the real government of the country is the union movement. The real problem is that the government wants to solve the Union problem without giving up its own power. To do both is impossible. And only an entirely free economy, and a respect for individual rights will give us a real and lasting solution to the Union problem. Or any other problem.
Footnotes
- These figures were quoted by Mr Kerry Packer, The Australian, November 2, 1976. ↩
- Figures from Henry Hazlitt, The Conquest of Poverty, Arlington House, New Rochelle, N.Y., 1973, p. 115. ↩
- Ibid, p. 46. ↩
- Ibid, p. 114. ↩
- Quarterly Estimates of National Income and Expenditure June 1976, Australian Bureau of Statistics, Canberra, 1976. ↩
