Labour Day: Time to stop worshipping false gods

Labour Day is September 6, and tradition means big crowds in Barnard Park to hear self-serving speeches from leaders of the labour movement, all praising the wonderful work they undertake on behalf of the workers.

The standard tale that everyone learns with their mother’s milk is that before the advent of unions workers were horribly exploited by employers, and their wages kept falling.  Any improvement in the financial condition of workers is due entirely to the BIU and other unions, and had it not been for unions workers would be on starvation wages, doing an 80-hour week, with no vacation pay, and no medical coverage.

This frequently repeated caricature is almost the exact opposite of the truth.

Another misconception is that disputes concerning wages are conflicts between employees and employers. It ascribes to employers the exclusive power to determine the level of wages. This error fails to understand that the employer is not independent in this respect but is subject to the directions of his customers. Paying too much, and having to increase prices means that customers will go elsewhere — as we have seen in the hotel industry.

Such myths have a powerful hold on the psyche of the public and union members, and when they are repeated year after year by union leaders and politicians they gain widespread acceptance. Key facts are ignored in favour of delusions.

Illusions

Indeed, just about everything that union members believe about how wages are determined is wrong – but then muddle-headed notions about economics are never in short supply.  Alas, economics is not an area in which illusions can be sustained for very long.

Unions are simply cartels with compulsory membership that exist to institutionalize envy, impede efficiency, and restrict competition in labour markets – all to the detriment of the general public.

Historically it has been shown that the only way wages can be increased is capital investment and that will occur only when employers are convinced that it is worthwhile to do. The financial fate of employees is always aligned with the prosperity of their employer’s business.

If unions had the power to increase wages it would be a simple matter for the governments of Haiti and Bangladesh to pass legislation empowering unions, and poverty there would be banished instantaneously. Why does that not happen?  For the simple reason that union activities do not lead to increased incomes – indeed, based on studies from all over the world they have the opposite effect. 

In short, the belief that labour unions have benefited workers at the expense of wicked Bermudian capitalists is tooth-fairy economics. It is one of the great delusions of today’s Bermuda. Any elementary economics textbook will tell you that unions cannot raise the wages of their membership; the only way that can be done is for productivity to increase, something unions tend to oppose.

Lest I sound too critical, let me add that unions perform significant social functions for their members such as a credit union, advice on pensions, providing educational opportunity, publicly exposing renegade employers, cooperating on safety, being an informal source of job information, and so on. Without unions life would be made more difficult for their membership. 

However, their main reason for existing is the misguided belief that they can and have increased wages above normal.  That is total nonsense.

What we should remember in response to the orgy of self-congratulatory hogwash on Labour Day are the following four points:

• The belief that unions are responsible for workers’ high wages is a myth.
• Union pressure does not lead to increased wages and benefits.  The only way this can be done is for employee productivity to increase and that can be done largely by increasing the amount invested in individual businesses.
• Compelling employers by threats of strikes to pay wages they cannot afford leads to job losses as we have seen all too clearly in the tourist industry.
• Unions stoke the fires of envy, one of the strongest, ugliest and most destructive of emotions — and one of the seven deadly sins.

Bermudians gave up superstitions with the ducking stool. Is it not time to give up worshipping false gods?

See Friday’s Bermuda Sun for a response by LaVerne Furbert of the Bermuda Industrial Union.