Boyd Blundell, in a debate with Walter Block, with the arrogance and fanaticism of a social justice warrior, calls Walter’s stance on unions “not even wrong.”

In fact, it is Blundell’s article that is preposterous. For example, he claims that the only reason why working conditions would not “revert to the horrors of the 19th century industrial factories” is that “the gains in working conditions and wages that were made by unions have now been codified in law. It is laws that guarantee basic workplace safety, minimum wages, and so on.”

Now presumably, we still have private enterprise as the main employer. But laws force a person or organization to act in a certain way, threatening punishment for disobedience. Therefore, employers would, if left to themselves, exploit workers all the way to their Marxian-style immiseration. It is the state, as some knight in shining armor, that comes to the rescue of workers by commanding entrepreneurs to pay more, either in safety, etc. or in money wages.

I’ll just leave this “argument” for anyone even slightly conversant with economics to marvel over and contemplate Blundell’s stupidity or naïveté.

I think it would have been useful for Walter to make explicit the distinction between real wages and nominal wages. Real wages are just prosperity per capita; what an average worker can buy with his wages. The state of affairs in which there are numerous goods at low prices is preferable to one in which there is only a limited selection of goods at high prices.

It is true that real wages depend on “how hard and how intelligently people work and the amount and sophistication of the tools and capital equipment they are given by their employer to work with. This, in turn, depends upon how much saving occurred in the previous periods and even before that, how economically free and law abiding is the populace.”

But I think that Blundell’s main concern is nominal wages, in particular, the distribution of income to factors in the form of wages, interest, rents and to entrepreneurs in the form of profits.

His argument seems to be that a worker is usually specialized in a particular area. His human capital is specific to a line of work. As a result, for example, a quality NFL player Smith can either play football and make millions or work at McDonald’s and make $8 per hour. There is no intermediate job for Smith that would provide him with even middle-class comforts. Even if Smith’s productivity is $10 million per year, Smith can easily be blackmailed, since it is “bargaining” that will determine the exact wage that will fall somewhere between $16K and $10M. Smith would then benefit from joining a union in order to gain bargaining power and push his wage higher at the employer’s expense.

That might be so, if there were no competitors for Smith’s talents. Thus, Walter replies:

Shaq’s productivity would be roughly the same for the Knicks, the Lakers (his previous team), the Hornets, or his present team, the Heat. Apart from that he could play in a European, Asian, or South African league, with only a slight reduction in (second best) MRP, and hence wages. If unlikely to the extreme, all of these firms tried to pay Shaq and his fellow athletes far less than that, they could always borrow a leaf from the old American Basketball Association, and set up their own new league in competition with the NBA and all these others.

Theoretically, it is enough that there be just two firms competing for a worker to start the process of auction on this worker that will culminate in his being paid a wage close to his marginal productivity. In practice, this condition is almost always fulfilled in abundance.


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