Ari Armstrong, Business/Economy, Exclusives, Uncategorized

Armstrong: Strike a reminder you can’t get something for nothing

Recently United Food and Commercial Workers Local 7 declared a strike for multiple King Soopers grocery stores in Colorado. The union called for higher wages, better health and pension plans, and improved store security. Various left-leaning politicians endorsed the strike; for example, State Representative Brianna Titone of Arvada Tweeted, “I stand with the workers of @UFCW_7. Please do not cross the picket line . . . and respect these workers.”

I’m agnostic about the appropriateness of the strike, not having studied the store’s employment policies or the broader market in detail. And I cannot comment on many of the complex legal issues surrounding strikes. What I can do is offer a few basic points of reference for understanding strikes concerning costs and benefits, productivity, voluntary association, and the prohibition of force.

The first lesson is you can’t get something for nothing. Higher employment costs mean higher grocery costs, at least in the short run. Ultimately people buying the groceries pay all the expenses. There is no Scrooge McDuck somewhere who is going to pay workers more by dipping into his mountain of hoarded gold. No doubt Kroger executives tend to make more money than do entry-level clerks or even experienced employees, but running a complex business is difficult work that few can do well. So dipping into executive compensation would risk putting the stores at a competitive disadvantage.

Longer term, if labor costs get high enough, stores can compensate by employing relatively fewer people. Stores can provide less service to customers and cut back on the most labor-intensive offerings. Stores can turn increasingly to automation, as we’re already seeing with self-checkout lanes. Amazon has experimented with clerk-free stores. It’s possible that some competing stores could move away from walk-in altogether and shift to delivery-only models. High wages help those who keep or get the jobs, not those priced out of the industry.

I’m not claiming here that King Soopers shouldn’t pay its workers more. I have no position on that. I’m just pointing out the obvious that someone has to pay for higher costs.

The second lesson is that, contra common claims from the left, labor organization is not the fundamental driver of rising real wages. In addition to increased knowledge, increased capitalization is. A carpenter can build more with power tools, a farmer can grow more with tractors and synthetic pesticides, a car maker can produce more cars with robots and assembly lines. Wealth ultimately is the amount of goods and services to which we have access. We get wealthier mainly by producing more wealth for our work, by making a bigger pie, not by slicing up a fixed pie differently.

That said, labor unions can play an important secondary role in labor markets. Henry Hazlitt’s free-market classic Economics in One Lesson is instructive. Hazlitt points out, “The power of labor unions to raise wages over the long run and for the whole working population has been enormously exaggerated. This exaggeration is mainly the result of failure to recognize that wages are basically determined by labor productivity.” Yet Hazlitt concedes an important role for unions: “The central function they can serve is to assure that all of their members get the true market value of their services.” He goes on to discuss how the single worker may be at a disadvantage in negotiations relative to an organized group.

The third lesson is that people who work for others have a right of free association and hence a right to form unions, to threaten to quit a job if certain conditions are not met, and to quit. At the same time, business owners also have a right of free association and hence a right to disassociate with employees at will, subject to employment contracts.

The fourth lesson is that government’s proper role with respect to labor contracts and negotiations is to bar the use or threat of physical violence, not to tip the scales for either side.

I came across a curious line in Colorado’s “Labor Peace Act” (statute 8-3-102): “While limiting individual and group rights of aggression and defense, the state substitutes processes of justice for the more primitive methods of trial by combat.” Why do our state’s labor laws refer to such violence? You need look no further than the Wikipedia entry on the Ludlow Massacre to get an idea. In 1914 government and business agents attacked striking coal miners and their families, killing “approximately 21 people,” Wiki states. We can be thankful, at least, that we’ve learned something from the past and that strikes these days are mostly civil affairs.

A just government prevents both owners and employees from initiating force. A company’s owners and agents cannot rightly prevent people from walking out (although, depending on preexisting employment contracts, some tort remedy might be in order). And members of a striking union cannot rightly harass, harm, or threaten with violence a business’s owners, managers, customers, or replacement workers. The government’s proper job is to keep the peace.

Passions run high when people’s livelihoods are on the line. Different people will disagree about this particular strike and about the general state of union laws. But hopefully we can agree that the proper path involves discussion and voluntary ascent.

Ari Armstrong writes regularly for Complete Colorado and is the author of books about Ayn Rand, Harry Potter, and classical liberalism.  He can be reached at ari at ariarmstrong dot com.


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