“Wage Push” and Labor “Pull”

A currently popular theory has it that the inflationary prices of recent years have grown out of something known as the “wage push.” The theory is plausible on the face of things. Witness what happens in steel: first, the steel union insists on an increased wage — and gets it; then, with the “law of cost” breathing down their necks, the steel companies feel they must incorporate wages in final prices. Otherwise their profits will sag to the point where they will not be able to pay for new steel capacity at the present inflationary rates.

The seemingly definitive time sequence of the wage-price spiral is such that it is hard to argue against the “wage push” theorists. It is hard to argue against Edward H. Chamberlin’s recent The Eco­nomic Analysis of Labor Union Power (American Enterprise As­sociation, Inc., 46 pp. $1.00), to pick one specific example.

A Harvard professor who fathered the theory of “monopo­listic competition” some thirty years ago, Chamberlin believes in the reality of “administered” prices. He also believes that cal­culated “product differentiation” plays a significant role in the maintenance of “market power” by big firms which presumably set prices at arbitrary high points and make them stick there by artificial means. Believing as he does in the power of organized Bigness to dictate to the customer, Professor Chamberlin is quite logical when he attributes to Big Labor its own “market power” to “administer” the price of work.

Just how is the Chamberlin theory compatible with F. A. Har­per’s beautifully lucid — and quite conclusive — study of the secular trend of wages since the Civil War, Why Wages Rise? On the surface it is not compatible at all. What Harper demonstrates is that wages have tended to rise with produc­tivity, as a “reflex” responds to a “condition.” The state of union or­ganization has had nothing what­soever to do with the broad under­lying generality. Labor, whether Big or Little, can’t get more than there is — and it must always leave something for the entrepreneur and the investor, or it won’t be able to command the use of the more productive machinery. The price of labor has been determined competitively, both in periods of strong organization and weak.

On a deeper level, however, Chamberlin and Harper have their moments of compatibility. For, with political help, it is entirely possible for some wage earners to gain, at least for the short run, at the expense of other wage earners. Harper does not deny this — and it is as a gloss on the phrase, “with political help,” that Chamberlin’s little book has its validity.

One does not have to believe at all in the “wage push” explana­tions of high prices or in the reality of “administered” prices to credit the truth of much that is in Chamberlin’s extended pam­phlet. Quite obviously, the “wage push” and the “wage-price spiral” take effect within the far more fundamental reality of a de­bauched currency-cum-credit sys­tem.

Responding to pressures, the government has been busy for a generation expanding the money supply without regard to any cor­responding increases in produc­tivity. Naturally, with more money in his pocket for use in bidding up the price of products, the cus­tomer provokes an increased ac­tivity among producers. Since a producer, in a time of inflated de­mand, doesn’t have to worry par­ticularly about price, he will tend to give in to union demands and then turn around and charge it to the customer. It all works very nicely, just so long as the State is willing to add to its periodic flush­ing of the money supply.

A Response to Inflation

The “wage push,” coming as a reflex of the money flood, is a re­sponse to inflation, not a cause. And the “administered” prices which anyone can collect in certain phases of the supply-demand cycle are a normal competitive expres­sion of a “seller’s market.” Why should anyone lower his prices when his plant is working at full capacity?

Does this invalidate Chamber­lin’s “economic analysis” of labor union power as something that reaches monopolistic proportions? No, for a union which has the power of organized politics behind it can defend a privileged position by political means at the expense of those who lack political power. Where a union has a closed or union shop understanding, it will tend to keep its own members em­ployed at high hourly rates, even though a decrease in manufactur­ing volume may cut into total take-home pay. The main sufferers will be nonunion men who are excluded from employment at lower rates. And the customer will not get a quick price cut as long as the em­ployer feels able to recover high wages in the final price.

Professor Chamberlin obviously intends to include the pricing of labor within his larger theory of the administered price. But the two things are not aspects of the same basic problem. In a union shop industry it is impossible for a man to get a job unless he will agree to accept the union as his bargaining agent. He has no power of making an alternative contract; and the arm of the State stands ready to discipline him if he tries.

If a man is in the market for a car, however, he has a choice of many alternative contracts. True, if he insists on the trade name or the distinctive features of a Chevrolet, he may be compelled to limit his bargain-seeking to getting al­ternative quotes on the trade-in value of his old car, or he may be forced to wait for falling prices at the end of the year. But if the purchaser cares less for “differen­tiated” esthetic or engineering values than he does for basic trans­portation, he can always buy a used car, or a foreign make, or an American Motors Company Ram­bler.

Lacking the political power to seal off the used car market, or to put an excessive tariff on Hill­mans and Volkswagens, or to com­pel the American Motors Company to cease making a cheap car, no member of the Big Three in auto­mobiles can use an “administered” price to compel anybody to pay a fixed amount for basic transportation. The illusion of the “admin­istered” price may stand. But in any period of declining business the reality of price “administra­tion” will be exposed as hollow.

Influence of Teamsters

Not so when we come to the power of the Teamsters Union, for example, to gain its ends. The teamsters’ slogan is: “If you got it, a truck brought it.” In New York City, as Professor Chamber­lin points out, the Teamsters Joint Council has the power to grant or withhold strike sanction to the fifty-seven teamster locals. But more importantly, the Joint Coun­cil also decides on the validity of requests from other unions, not teamsters, for recognition of their picket lines. On the West Coast the power of the Teamsters Union has been used most sweepingly against other unions. By refusing to carry an employer’s products, a Teamsters Union local can effec­tively put an entrepreneur out of business, or dictate the type of union with which he must deal.

In all of this it is political power — not economic power — which is the crux of the matter. The streets over which the Teamsters Union members drive their trucks belong to the public. Yet the servants of the public — whether in Washing­ton, or in the state capital, or in the city hall, or merely in the local police precinct — do not protect the unorganized individual in his right to use the public thoroughfares which he pays for with his taxes.

Professor Chamberlin’s little book is suggestive. It is also sound in its suggestion that legal im­munities which enable a union to deprive people of the right to make alternative bargains should be thoroughly reviewed. There should be “a body of law appropriate to the labor market,” just as there is a body of law designed to protect people against “monopoly power” in the product market.

Coercive Power

The only flaw in Professor Chamberlin’s analysis lies in his frequently implied confusion of economic and political power. He sometimes speaks of the economic power of unions as if it were a mere reflection of numerical Big­ness. But labor has no overween­ing or dangerous power that is not political in its origins. Bigness by itself would be subject to the con­trol and the erosion of competition if it did not have the compulsion of the State behind it. It is not the unions’ economic power, then, which is of primary concern; it is the unions’ power to coerce —and make use of — the State.

Only a few short years ago Sena­tor Robert Taft, working in con­junction with Senator Joseph Ball and Representative Hartley, thought he had succeeded in de­signing “a body of law appropriate to the labor market” in the Taft-Hartley Act. Aimed at eliminating a whole host of common compul­sions practiced by unions against workers, the Taft-Hartley Act supposedly outlawed the union shop except in certain specified areas; and it tried to limit the use of the strike and peaceful picket­ing to the legitimate end of gain­ing concessions in wages, hours, and conditions of employment.

Though the language of the Taft-Hartley Act is seemingly un­equivocal, it is Sylvester Petro’s contention, in How the NLRB Re­pealed Taft-Hartley (Labor Policy Association, 140 pp., $2.00.) that the National Labor Relations Board has deliberately misinterpreted much of it, largely by the device of assuming that it was never meant to outlaw “any of the primary means which unions tra­ditionally use to press their demands on employers.” Inasmuch as unions have used many methods both “primarily” and “tradition­ally” which are specifically banned by Taft-Hartley, the result is a wilderness of interpretive and judicial cross-purposes.

Dr. Petro’s pamphlet bristles with many separate instances of muddle, the whole adding up to a terrific indictment of “administra­tive” law in general. The upshot of the pamphlet would seem to be this: let the NLRB be limited in its power to the certification of bargaining units, and let all other decisions affecting the rights, duties, and responsibilities of em­ployers and employees be left to the courts.  

 

“The Man on Your Back: A Preface to the Art of Living Without Producing in Mod­ern Society”

by Wyatt Marrs. (Norman, Okla­homa: University of Oklahoma Press, 1958. 289 pp.)

Reviewed By Charles Boewe

Wyatt Marrs, a sociologist, asserts the simple but widely overlooked truth that the funda­mental relationship in society is the mutual interchange of goods and services. He has the blunt hon­esty of Captain John Smith who made the first important economic statement on American soil : the able-bodied who will not work should not eat — a proposition that might stand as a motto for Pro­fessor Marrs’ book. Yet it is evi­dent that hordes of people the world over succeed in violating this simple truth, and it is the pur­pose of this book to aid in the identification of them for what they are: social parasites.

Concerned primarily with our own society in its present state, Mr. Marrs nonetheless points out that the supposed communist cru­sade against parasitism is itself parasitic, for the communistic society would be made up “of ex­actly what it proposes to destroy: a mass of consumers living di­rectly upon a mass of producers, without supplying them with any­thing of equivalent value in return.”

There are those — like the im­mature, the aged, the chronically ill, and the congenitally defective — who must be considered nor­mally dependent upon the produc­tive members of society. Those able-bodied persons who should contribute to the well-being of their fellows but do not are the ones here identified. Chronic dependents such as beggars — para­sites who take without giving, such as thieves — and those whose contribution serves no special pur­pose, such as drug pushers and prostitutes, form an obvious class. Not so obvious are those who ex­ploit entrenched positions in the interstices of charitable and reli­gious organizations, in family membership, marital status, or political position.

The author points out that “government, with its power to tap the economic resources of each individual through taxation, with its enormous expenditures, and with its vast array of posi­tions to be filled, naturally attracts a veritable army of the parasiti­cally inclined.” But he does not go far enough in analyzing the sub­species of this and other categories.

The man on your back is also the union official who decides the quota of bricks a bricklayer can lay in a day, who limits the size of the painter’s paintbrush, who featherbeds extra brakemen on every train that leaves the station, and who decrees how many boys must stand around watching while a plumber sweats a joint. The man on your back is the executive who entertains his personal friends on his company expense account. The man on your back is the profes­sional manager of charity drives who takes two-thirds of the pro­ceeds as overhead. Of these we hear nothing.

Theoretically, the most valuable part of the book is the develop­ment of the idea of parasitism it­self. Because of custom and tradi­tion, neither the law nor the moral code offer sociological concepts that apply universally to all peoples at all times. But, as Mr. Marrs declares, social parasitism “is a clear-cut and universally valid criterion of antisocial be­havior.” This book is a clear state­ment of many of its dangers.