How Do Labor Unions Work? What Benefits do They Bring?

Labor unions exist to gain above-market benefits by eliminating competition through coercion. Without unions, any employer who is unsatisfied with employee demands can simply hire replacement workers who are willing to work for less.

Union coercion can either be through formal laws ("closed shops", "prevailing wage laws", etc.) or through informal intimidation (pickets, violence against "scabs", threats to shut down other businesses, etc.) -- but coercion is nevertheless necessary because there are many people who are very willing to work for much less than union wages.

The monopoly-power status of unions enables them to compel employers to pay their members more than they would have otherwise. That is, there's a transfer of wealth from the employers to the employees. This makes for good populist rhetoric, but no one outside the union benefits -- and many people are harmed. Specifically, unions do not create affluence; affluence can only be created by abundance -- and unions do not create abundance. In fact, the reduction in competition reduces abundance and therefore makes everyone outside the union worse off.

Relatively speaking, even union members derive little benefit from unions. This is because unions "re-divide" the wealth pie without making it bigger, and most of our affluent living standards come from the size of the pie, and not how the pieces are distributed. For example, the luxuries that we (including union members) take for granted were all generated outside of unions; in fact, union work rules interfere with such progress. Specifically, central heating, air-conditioning, electricity, plumbing, cell phones, medicines, computers, etc., etc., etc. are the products of innovation and individual initiative, and not of unionized labor forces. And the areas which are union-dominated, such as American-made automobiles, have lower quality than the innovative non-union competition.

Internationally, the recent rise in living standards in countries such as Korea, China, and Singapore was created by free trade -- which is one of the main things that unions try to stop.

But their public-relations is generally very effective. They portray themselves as fighting for the every-man, but the every-man has benefited mostly by the absence of unions, and not their grabbing of a bigger piece of the pie.