Unions line their own pockets while wasting tax dollars, reducing employment and productivity
Governments never need help coming up with nefarious economic policies, yet Canada’s labour unions always stand ready to assist. The Liberal government’s bill to ban replacement workers during labour disputes, which would apply to most Crown corporations and to federally regulated industries, is the latest example.
The policy is said to empower workers, but that is only half the story. It doesn’t empower all workers, only certain privileged union workers. And the power given to them is the power to coerce other workers — those who are more disadvantaged than they — out of jobs by denying them the opportunity to compete for employment against the unions.
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To left-wing politicians and activists, unions’ coercive tendencies are not a bug, but an essential feature. It is a matter of basic economics. The price of labour is determined by supply and demand, but unions cannot increase demand for labour. In fact, they reduce it because unionization lowers the incentive to increase effort and productivity by protecting idle workers and breaking the link between output and compensation.
Because unions cannot increase labour demand, they must try to reduce the supply of labour. The union agenda is therefore always to try to force some people out of jobs. This is not new. Economists have warned of this repeatedly for decades.
“A successful union,” Milton and Rose Friedman explained in their 1980 book “Free to Choose,” “reduces the number of jobs available of the kind it controls.” The basic source of union power, they wrote, is the union’s “ability to keep down the number of jobs available, or equivalently, to keep down the number of persons available for a class of jobs.”
This is an ability that comes from government, such as in the form of a ban on replacement workers that minimizes the number of Canadians available to work at airports, telecommunications companies or other federally regulated workplaces when a union refuses to work.
Notoriously inefficient and uncompetitive, unions do not become powerful by generating economic value. Instead, they use coercive means to achieve their goals, typically at the expense of less advantaged workers.
“It cannot be stressed enough,” F.A. Hayek wrote in his chapter on unions in “The Constitution of Liberty” (1960), “that the coercion which unions have been permitted to exercise contrary to all principles of freedom under the law is primarily the coercion of fellow workers. Whatever true coercive power unions may be able to wield over employers is a consequence of this primary power of coercing other workers.”
Workers who are forced out of jobs are harmed most by union and government coercion, but they are far from the only ones. Unionized Crown corporations are already inefficient, with costs to taxpayers far in excess of the value they provide. Toronto’s Pearson International Airport was recently ranked second-last for overall traveller satisfaction out of 21 large North American airports, and Canada’s big telecommunications companies are not known to offer particularly good prices or customer service.
Handcuffing corporations by empowering unions during strikes will not improve any of these things, and taxpayers and consumers who already pay through the nose for substandard services as a result of big government and powerful unions will undoubtedly pay even more as a result of the new Liberal policy.
Notably, even many unionized workers are not helped in the long run by union antics. Industrious employees often do not benefit from working in an anti-competitive environment where the benefits of increasing productivity are muted. And as is often the case with economic coercion, whatever short-term benefits the coercing party can extract are more than offset by long-run losses.
By reducing productivity and encouraging work stoppages, unions discourage investment. Indeed, “the long-term effect of replacement worker bans,” a 2010 C.D. Howe Institute study concluded, “is to increase strike length and duration while reducing investment, wages and employment.”
With harmful effects to workers coerced out of the labour market, along with consumers, taxpayers and shareholders of companies in federally regulated industries, it’s fair to ask: who benefits from all this? The answer is clear: union leaders who expand their power and whose salaries are funded by union dues, the idle workers that the unions protect and NDP and Liberal politicians looking for union support.
The ban on replacement workers benefits a privileged few, and imposes much larger losses on the rest of us.
National Post
Matthew Lau is a Toronto writer.
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