Trade Unions

Paul Revere was a businessman, not a wage-earner, having acquired one business from his marriage to his first wife; another from his father; and foundry and copper-plating companies from his own entreprenuership. He built a gunpowder plant. He was a petit capitalist and a pioneer of America's Industrial Revolution. Wage-earners were working for *him*.
That's right. We were talking about globalization and the eventual (theoretical) leveling of wages across economies, however, which is a different subject.
Labor economics is a very complicated subject because there are so many variables and few clear-cut controls. Most of the literature that addresses the subject of labor's effect on overall wages is based on cross-industry studies. And the weight of evidence those studies provide supports the conclusion that unions increased wages across the board in their early and middle history, often at the direct expense of profits. Profits got re-distributed by unions.
Well, Milton is. Thomas (no relation to Milton that I know of) is a journalist who writes about economics and the Middle East. He's considered a lightweight on economics by most observers; it's not his area of training. He does sell more books than Milton these days.
But, again, we weren't talking there about the effects of unions. We were talking about the eventual leveling that comes from free trade. That doesn't address what the level will rise to.
We're getting away from macroeconomics and going toward microeconomics, which is about the real lives of real people and real businesses. Our disagreement is over macro issues, which is more theoretical. Micro starts with case studies; macro starts with historical statistics.
Unions certainly are not a big force now. IIRC, only something like 9% of workers in the US are presently organized, which is the lowest it's been since the days of the labor riots at the beginning of the last century. Their effect, which is getting harder to measure, will show up more in terms of developed-country standards in competition with developing-country standards. In other words, globalization's evolution will tell us some things, but I don't know how measurable they'll be.
There are plenty of facts behind my opinions, Dan. There's no controversy over these particular facts in the economic history of the US: The modern labor movement started when the industrial revolution had progressed to the point that companies were able to drive wages down because of the extreme bargaining weakness that labor had, in the 1870s and particularly in the late 1880s. Capital was competing on an amoral ground at that time. The owners could justify anything for the sake of competition, and the first big successes of the labor movement were in reducing the hardships of child labor. The Fair Labor act of 1928 was a direct outgrowth of agitating from unions.
Wage trends are harder to isolate but there were two instances in which unions kept wages from dropping. The first occurred in the 1880s, and the second in the period of 1910 to roughly 1925. First, large-scale industrialization, and second, the Taylor system and the "deskilling" of labor made it possible for companies to reduce wages. Strikes, often violent ones, are generally credited with keeping the wage floor from collapsing.
These issues were not the subject of much argument at the time. They've been lost in the historical revisionism of conservative think-tank publications and in the generally vague idea of history that most Americans have today. There's no reason that issues like those should be a subject of disagreement today except that the grain of labor history is pretty fine and broad-brushing it won't yield those details.
The whole thing is an accumulation of details, in fact. As I said, it's also very complex and it's difficult to isolate what caused what. I'll stand behind the point that unions can be shown to have increased the floor of wages, however, because I was once exposed to it on a pretty detailed basis and it would be possible to drag up enough evidence to make the point pretty convincingly.
Not now, however. That's too much work.
Sure. That doesn't require economics. That just requires a little common sense.
-- Ed Huntress

Thanks Ed!
You are right on!
I wasn't going to post to this OT any more but I see that my buddy Harold doesn't mind. He hates it when I post but he doesn't mind it when he posts his thoughts over and over on the same topic. Like you Harold, I can live with anyone?s opinions but YOUR ?preaching? shouldn?t go unanswered. It sounds like you have ?yours? and you couldn?t care less of about the rest of working Americans? Don?t worry, you not unusual. Selfishness has become somewhat of a norm. Unlike you, I care about my neighbors, my family, my friends. I want them to have the real opportunity to enjoy the ?middle class?.
The middle class in the USA is shrinking faster that in any time since our founding. Experts/economists say it's directly proportional to the institutional dismantling of the organized labor movement.
And yet with this pending crisis we have loads of people spouting the same rhetoric... "I don't need unions, I can take care of myself".... "unions were useful once but not now".
They may soon wish that they hadn?t said those things because they and their families may be the first affected by a ?union free? USA.
Reminds me a little of the history of 1930?s Germany. Unions were made unpopular in that time and, YES, history does repeat itself. Especially for the uninformed or misinformed!
Some examples: At one time unions made defined benefit pensions almost a norm. People with these pensions could depend on a secure retirement and a measure of dignity in their old age. NO MORE! These pensions are becoming more and more rare. Management has decided as long as their risk of unionization is low or none existent they don?t have to worry about it. If most workers have any retirement security at all it is in a 401K that shift ALL of the risk to them and lets employers ignore the social promise that was common in the middle of the last century (when unions existed!).
There are a handful of good (academic) books written in the last year or so articulating the pending crisis. Anyone want to read them, let me know and I?ll post a list?
AND?. If no-one replies, I?ll just let it go. I?ve got lots of other projects to work on.

God, You sure can tell some big untruths.

Can you give me a cite on Paul Revere acquiring a business by marrying Sarah Orne? All the things I can google up say that Paul took over his fathers business.
Actually we were talking about wages going up because of increased productivity. The global part came in when I said one has to consider the whole earth now instead of just the US.
You admit is is a complicated subject, yet say that it is a FACT that without unions .................. I at least do not know that. I do know that there were unions and wages did go up, but unions were not the only force changing society. What would have happened without unions? No way to know. But if unions were the only force, and there was no improved productivity, it is obvious to me that wages would not have gone up. I think we were talking about the eventual leveling that occurs from increased productivity considering that now one has to use the whole earth, not just the US.
Sinclair Lewis probably had nothing to do with anything.
I see the deskilling of labor made it possible for unskilled labor to be employed and join the middle class.
I have no disagreement with the actual history. But do disagree with which forces were necessary to create the middle class. If the unions are not necessary to maintain the middle class now, how can you be sure that they were necessary to create the middle class? I see the unions as being created by the fact that "Capital was competing on an amoral ground at that time." I do not see that capital had to compete amorally in order to create the middle class. If capital had not been amoral, the unions would have not been created, and we would still have a middle class.
And a little common sense might also say that it is pretty much impossible to determine how society would have developed in different circumstances, say without unions.

I suppose I could if I wanted to, but a lifetime of checking facts and poking at the conventional wisdom has led me to the much more lucrative and satisfying work of sticking to the facts. It's my reputation as a writer and I intend to keep it.
-- Ed Huntress

Her family had owned a commercial wharf, which collected fees for dockage, loading and so on. She brought it with her to the marriage. No, I can't remember where I read it. It came up when I was studying early American industry for writing my contributions to American Machinist's 100th Anniversary issue. I was more interested in the foundry and the copper mill. I read that in 1977. d8-)
Right. And that's what I was referring to with the Friedmans: the great leveling that Milton talked about when he said there's nothing to worry about from low-priced foreign labor, and that Thomas talked about when he said everyone is going to benefit from globalization. So maybe we were thinking of different things at the time.
Of course not. We've already been over that. But a close study makes it pretty clear that wages were in many cases going DOWN before unions, even as productivity was climbing sharply. And unions, in incrememtal and uneven steps, got their wage increases and their improvements in working conditions.
Given the historical evidence, Dan, you have a much higher hurdle to show that productivity drove wages up than the other way around. In fact, that's a major reason that unions got started in the first place. Productivity did improve profitability and it created a bigger pool of profit from which to draw, but that by itself did not drive wages up. It took coercive force to squeeze it out of the owners.
I find it curious that I'm catching it from both sides, from people who dislike unions. Harold has been claiming that unions' "greed," and their acquisition of unfairly high wages, are the cause of America's loss of industry to underdeveloped countries. You're saying they had no little or no effect on increasing wages. I'm having a hard time following both of you guys around the block. Maybe you should be arguing with Harold. d8-)
Yeah, I know, you've said that. But you haven't reacted to my statement that unions, in the early days, got their wage increases from the pool of profit. That's what the fight was about in the beginning: who was going to benefit from profitability. Unions wanted some of it, and they got it.
See above. I was thinking about Milton Friedman's theories. If you've read him (_Free to Choose_ will do), you see that the leveling comes from a decline in the value of the dollar, to be followed later by increases in wages of foreign workers. You could (and some people do) read the current decline in the value of the dollar as a vindication of his theories. It's been a long time coming, but perhaps it's true.
Without looking it up, I associate Lewis more with the Pure Food and Drug Act than with child labor. Child labor activism was a major union effort going back to the 1880s.
But where did those middle-class wages come from, Dan? I can show you examples of how deskilling put downward pressure on wages, but please, check it out for yourself first. It's in the historical record.
By reading American industrial history, for years and years.
But you can read history and see where it was going before them, where it was going when they lost some battles, and what happened to wages when they were in the catbird seat -- in the 1950s and '60s.
-- Ed Huntress

I expect you remember correctly. I just could not find anything about it. Articles on Paul Revere on the web are likely to stretch the truth toward making Paul look good.
The way I see it is that increased productivity increased profits. And instead of being enlightend and increasing wages, the owners took the short view and tried to keep all the increased profits. Did not consider that labor would organize to get their share of the increased profits. Owners now consider that to maximize profits, one needs to let labor share in the profits. That motivates labor to produce more. Could we have gotten to where we are now without unions? We probably needed experiencing the unions in order to believe that sharing profits ends up with everyone better off.
I am not saying that unions did not have an effect on increasing wages. But I am saying that their role was minor compared to all the other things that were happening.
No reaction because I agree with that. But the bigger pool of profit had to occur first. And was a bigger factor in creating the middle class than the unions. I see this as somewhat similar to taxes. There is an optimum rate of taxation that produces the maximum revenue. Too high a rate and revenue falls. Too low a rate and revenue falls.
In the same way there is an optimum percentage of profit that needs to go to labor. Too high and there is not enough capital investment, so fewer jobs, etc. Too low and there are no consumers for what is produced.
Dan

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Sinclair Lewis was a writer whose books included Elmer Gantry, Main Street, Babbit, Aerosmith and a bunch of others.
C.S. Lewis authored the Screwtape Letters and a bunch of christian writings.
Upton Sinclair is the guy you are thinking about.. authored The Jungle. there are too many Lewis'es in this world that are authors. :)
John

Well I got one name right. One out of two isn't too good, but could be worse.
Dan

Yes, but they also miss his later service as a military officer and some of his industrial projects that had an influence on industrializing the country. His copper rolling mill may have been the first in the US, or at least an early one. Remember Reverware, copper-bottom pots? That's the same Paul Revere. He developed the method and later sold the company. It may still be around.
We should end this right here, because we're in complete agreement...but I'll keep reading.
To really settle this with facts is an onerous project and I am not familiar with the data. As I mentioned in an earlier post to Harold or someone, if I had another career to live it would be labor and trade economics. It interests me a great deal but I don't have enough background to pull the facts from my memory. I have seen curves and conclusions, but not how the economists arrived at them.
Your productivity argument is subject to some less academic scrutiny, however. Krugman wrote a paper recently (I don't have it on hand) in which he points out that income gaps between labor and capital narrowed in the period 1910 - 1970 and then started widening again. It's still widening. Yet, profits have grown through the roof, and we just finished one of the most rapid periods of productivity growth in history. Interestingly, the period since 1970 also is the period during which unions have all but collapsed.
That doesn't address the early history but it does point out that there is no direct connection between productivity and the share of profits that extend to labor, and it suggests, circumstantially, that the ratio is connected to the power of unions. Productivity and the share of profit extended to labor are going in opposite directions at the present time, and that happened also in the decades around 1900.
So, we'll agree to disagree on this one.
Yes, that's one of the classic optimization problems of economics, and it's complicated by many other factors. Note that it draws very different conclusions from the micro- versus macroeconomics points of view: For an individual company, there is no worry about how the wages they pay will affect consumption. That's someone else's problem.
You can look at that as a partial explanation for why wages lag productivity (they almost always do). It's also the basic reason why capital has no incentive, at the micro level, to pay more than subsistence wages. The incentive comes mostly at the macro level, where it had to be kick-started by labor laws and union activism. Henry Ford tried to bridge that gap by doubling his workers' wages, but his idea didn't catch on. d8-)
All of this assumes a rational market and rational agents, which is the classical position of all economics. We know now that the purely rational view is not adequate. Minds have changed. Managers and owners -- and investors -- are more sensitive to the bigger picture and to workers' welfare. We probably would call the mindset of early industrialists sociopathological in our terms, in this more enlightened time.
But that's the period we were talking about. That's the history of early industrialization, and the importance of labor unions...which many people forget or never knew, and thus wind up saying things as ridiculous and insulting as some of those said by the anti-union people here in this thread.
-- Ed Huntress

Oh, cripes. Thanks, John. Writing too fast, thinking too slow...
-- Ed Huntress

Perhaps you'd understand my position better if you knew the amount of money I grossed annually. My gripe has been, and still is, greediness----those making unearned money----especially when they hold hostage their employer, or the consumer of their products or services.
For the record-----my best year as a machinist, running a one man shop, farming out NOTHING aside from secondary operations (certified heat treat and finishing), was scarcely over $52,000. Bear in mind, I closed the doors on my shop back in '83.
Reason for the modest income?
My bidding was realistic. I calculated my shop rate, which was below the norm, but I was productive on the machine. I didn't routinely make much more than shop rate, which provided a skilled, experienced machinist/toolmaker, equipment, and liability. While It might be nice to boast of having routinely made $200/hr., alas, I can not.
By sharp contrast, several of my acquaintances, shop owners all, were far more greedy, and had incomes in the six digit bracket, one of which bordered on seven digits. They did that by overbidding and skimming what they could.
I still like these guys, I simply don't agree with their method of doing business, or their philosophy. You shouldn't either, for the vast majority of the work these guys did was for you, the tax payer. Get the picture? Where the hell does it stop?
My goal has never been to make a killing--although I have always felt I was deserving of making a living, if for no reason, I was doing more than nothing----including investing hard earned money. I provided a good and valuable service for my time, and I was paid appropriately. Any greater pay would have meant that someone, somewhere--------was getting screwed. Even you. Taxpayer, remember?
With that in mind, you may see me as something less than some kind of monster------or not. I have no idea of your mindset. Frankly, it matters not, for I have a decent standard by which I live and I'm not concerned about the opinions of those that have lost their way.
I have stated on more than one occasion I have not been an anchor on the neck of society. I was gainfully employed from the time I started working after high school until I took my retirement at age 54. I earned my way----although I readily admit that I didn't earn the way of others. It is incumbent upon them to do that for themselves. That includes feeding their children. If their zest for pursuing an agency that is corrupt, and guarantees them unearned wages and benefits, then watching their children perish in the process is very much a part of what they should expect. If the children are but pawns for this individual, why must they become so valuable to me, where I am held hostage by their welfare? That's precisely what would be expected from such an individual, a tool of their trade, so to speak. Ain't gonna happen, not with me.
Harold