Matthew Lau: Who protects the lowly worker? Not unions, not government

Government, like unions, have an overall negative effect on workers. Photo by Blair Gable/Postmedia

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Labour Day is invariably accompanied by pronouncements from progressives about how unions and government benefit workers and protect them from exploitation. However, the reality is the opposite. Even if they sometimes benefit certain privileged workers in the short run, the main effect of unions and government expansion is to harm workers overall, with the most disadvantaged members of the labour force suffering the worst consequences.

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Famed economist Milton Friedman, though he passed away nearly two decades ago, remains the most effective antidote against economic nonsense peddled by union activists and supporters of government expansion. The chapter “Who Protects the Worker?” of his 1980 classic book Free to Choose, co-authored with his economist wife Rose, is still today among the best expositions of basic labour economics. In it the Friedmans dispel the myth that unions and government help workers and conclude free market competition is the real source of workers’ protection.

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One reason the answer to, “Who Protects the Worker?” cannot be unions is that most workers are not unionized. In Canada today, the union coverage rate (the percentage of workers covered by a collective agreement) in the private sector is only 15.1 per cent. Among the industries with the lowest union coverage rates are professional, scientific and technical services at 3.4 per cent, and finance, insurance, real estate, rental and leasing at 8.2 per cent. Does anyone believe lawyers, accountants, engineers, computer systems designers and bankers in Canada are helpless and underpaid workers in need of union protection from their rapacious capitalist employers? If not, it should be clear that unions are not the source of workers’ protection.

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According to the Friedmans, the key to understanding the effect of unions is the most elementary principle of economics: the law of demand, which says the higher the price of something the less people are willing to buy. For example, higher wages for airplane pilots make air travel more expensive, leading fewer people to fly, resulting in fewer jobs for airplane pilots. So how do unions try to secure higher wages for airplane pilots? By reducing the number of pilots. The basic source of union power, the Friedmans write, is “the ability to keep down the number of jobs available, or equivalently, to keep down the number of persons available for a class of jobs.”

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Unions reduce the number of jobs mainly by lobbying government to protect unionized workers from competition and pushing the most disadvantaged workers out of the job market, including through occupational licensing, restricted bidding policies, unbalanced labour relations laws and other anti-competitive regulations. That unions are anti-competitive and reduce productivity and efficiency is best illustrated by this statistic: compared to the union coverage in the private sector of 15.1 per cent, in the public sector it is 77.5 per cent.