The Theory Of Collective Bargaining: 1930-1975

by W.H. Hutt

In 1930, W.H. Hutt demonstrated several spectacular labor unions cannot lift wages overall; their earnings come at the expense of the consumer; their effect is to cartelize business and reduce free competition to the detriment of everyone. He demonstrated these points with intricate logic that took on the main economic arguments for labor unions. In 1954, this little volume was published in the United States, with a very complimentary essay by none other than Ludwig von Mises, who saw Hutt's work as valid for the ages. Now this great essay is back in print, and all his points still hold true, particularly the least intuitive one that unions actually benefit some producers at the expense of others, and always harm the consumer. The brevity of this essay is as notable as its power to persuade. 153 pages, 6" x 9", paperback 2007

Genres: Economics

133 pages, Paperback

First published January 1, 1930

Reviews

[Steven H · Rating 5 out of 5]

A CRITIQUE OF UNIONS AND COLLECTIVE BARGAINING IN GENERAL

The Foreword to this 1980 book by Charles W. Baird explains, “Few ideas are so deeply engrained in the minds of most people in the Western world as that labor unions have been beneficial to those who main incomes derive from the sale of labor services. Labor unions are popularly credited with all, or most, or the improvements in real wages and working conditions that workers have enjoyed in the last 100 years… In [this book] W.H. Hutt explains why these common beliefs about labor unions are wrong.” (Pg. xi) He continues, “bargaining power depends on alternatives… The best friend workers have had in terms of their bargaining power is the automobile. The automobile greatly increased the mobility of labor and therefore increased the number of employment alternatives effectively available to workers of all types. Hutt argues that gains to labor in hiring contracts can only come about by the expansion of the flow of incomes that originate out of production… it is to the advantage of workers that real productive activity expand.” (Pg. xiii)

Hutt states, “To sum up our main conclusions so far: we have seen that combined labor cannot be said to exploit the cooperant factors of production possessed by the capitalist, and that labor combinations do not enable workers to general to exploit capital in general. The ultimate gains of workers by combinations when not at the expense of excluded competitors are obtained by exploiting the consumer; for the extent to which capital will be excluded by decreased supply of labor at a higher cost per unit will depend upon elasticity of demand for the COMMODITY, which will determine the margin which gives the normal rate of return. We have also seen that combined capital not practicing exclusion of those whom COMPETITIVE profits would attract cannot be said to gain by exploiting the workers but by exploiting the consumer. Briefly, the import of these conclusions may be summarized as follows: No factor of production can maintain the cooperation of another factor by offering it or leaving it an amount of the product less than the value of its net product elsewhere. The extent to which demand for the product falls off as its price is raised determines the quantity of one factor that will be driven away by another factor are ultimately obtained by exploiting the consumer, although incidental losses and usually thrown upon other cooperant factors.” (Pg. 65-66)

He argues, “Where managements man SEEM to line their own pockets, they may usually be regarded as operating within the terms of a contract which purposely allows them a very flexible discretion. On this view, the luxurious offices, plush carpets, pretty secretaries, generous leave, travel and expense accounts, and the other perquisites described as illustrations of managements’ independent property rights, may be regarded most realistically as fringe benefits… especially in conditions of a high marginal rate of tax on salaries… And like fringe benefits for wage-paid employees, they are usually tax-exempt… But when managements do abuse their trust, they acquire part of the profits. Hence their incentive to maximize profits and minimize losses remain, even though we can expect unauthorized appropriations of profits to be disguised as costs.” (Pg. 79-80)

He notes, “while it is undeniable that an experienced of skilled worker may be loath to impart his knowledge or skill to others, and that an employee who has subordinates may fear their competition, try to hold back their progress, and perhaps report falsely upon their cooperativeness and technical performance, these are such commonplace possibilities, not only in industry but in government, ‘nonprofit’ activities, the Armed Services, and life generally, that every rationally organized personnel structure in business or elsewhere is designed with a view to minimizing the expected inefficiencies.” (Pg. 83)

He asserts, “It is true that the monopsonistic power of a single seller or oligopsonistic power of a handful of sellers may, theoretically, be abused for investors’ advantage; market values will not then be ‘free market values.’ But if, through such abuse, some managers, can (on behalf of themselves or investors) exploit the workers, the defensible remedy should be sought through antiexploitation laws, not through private warfare. But if the FREE market determination of the price of labor is alleged to leave an ‘unfair’ division of the value of the product, it remains true that the influence of union coercion must be to aggregate, not mitigate, the injustice. For labor costs raised above the free-market value (whether by private coercion or state edict) have regressive consequences from every angle: not only does the strike-threat system formidably repress the flow of wages in total; it also exerts an INEGALITARIAN influence upon its distribution.” (Pg. 86)

He comments, “Excluding managerial ingenuity and acumen, it is doubtful whether human skills relevant to the good and services which contribute to the well-being of mankind have improved one iota since the beginning of the industrial age… the workers’ growing material well-being has not been a consequence of increasing efficiency on their own part, except to the extent that more plentiful nutrition, improved education, and a generally ameliorating environment … have been present.” (Pg. 91)

He observes, “In the course of a ‘dispute,’ unions have acquired legal immunities from civil prosecution and from indictment for what would be criminal acts if perpetuated by others. Rioting, intimidation, physical violence---assaults on nonstrikers, strikebreakers and others---have continued to be a frequent accompaniment of recent strikes … It is hardly surprising that, in a community which refrains from police action against such practices… the right to strike ‘peacefully’ is acquiesced in.” (Pg. 116)

He suggests, “The initial step towards reform could permit the retention of existing union organizations and their officials. ‘Collective bargaining’ would, however, presumably mean that union managements would begin to act entrepreneurially on their members’ behalf, finding better paid employment for ‘underpaid’ members, or jobs with better prospects. Any worker may be held to be ‘underpaid’ if his earnings are less than he could command elsewhere if he were better informed. Unions would have the expert task of taking the initiative in these circumstances. Moreover, in the event of an alleged underpayment of workers by a firm, the union would have the function of warning the management of an imminent gradual outflow of personnel (not to threaten a collusive and simultaneous withdrawal) to superior jobs. The intention of such a policy would be to force the firm to compete effectively with alternative employment outlets. And the unions would retain the right and duty to ensure the effectiveness of their members’ legal rights (such as the enforcement of wage contracts not accepted by management under duress, or suing for damages in the event of an alleged managerial misrepresentation).” (Pg. 117)

This book will appeal to Libertarians and critics of unions.

[Bardhyl · Rating 4 out of 5]

A very good summary of the fallacious ideas related to the organization of labor for greater wages. Hutt was one of the first to eloquently state that unions can only increases wages at the expense of other laborers. The downside is that it revolves around 19th century literature only.

[John · Rating 3 out of 5]

This is really an exercise in the history of economic thought relating to trade unions and wages. It is very interesting for all that, and that central arguments haven't moved on in the six decades since it was written.

[Renegade]

The wisconsin union trouble made me pick up this book. I have learned a lot about unions and their 'collective bargaining right'. Its really interesting. W H Hutt tries systematically to destroy the arguments of union apologists and sets the record clear.