Prosperity produces labor unions.
Labor unions do not produce prosperity.

There is a popular myth that labor unions produce an increased standard of living for working people. This myth is especially popular among labor union crusaders.

There is no way to prove or disprove this myth. But two facts are definite:

1. The more prosperous countries have stronger labor unions.

2. Union workers generally have higher incomes than non-union workers who are working in the same industry or job category.

Let's look at point 1. Why are labor unions stronger in the developed countries? Is it because unions have been a great asset to the economies of those countries and have driven up the standard of living and made everyone more prosperous? Hardly.

Of course, there is no way to prove with empirical evidence that unions cause an increase or decrease in the standard of living generally, i.e., of all the workers or all the population.

But we are left with the fact that the prosperous or developed countries all have strong unions compared to the poor countries. Why is that?

Prosperity causes labor unions to come into existence.

The pattern historically is this: First there is poverty, then there is change that improves production and creates industries and raises the standard of living to everyone, and then this higher living standard triggers a new psychology among wage-earners which drives them to form labor unions in order to increase their bargaining power and wrest even higher wages from their employers.

The higher standard of living came first, to everyone including the workers, then came the crusade to form labor unions and fight for an even higher standard of living through higher wages. In some cases a particular category of workers is successful in securing for themselves a higher wage, but this comes only by driving up the cost of production to their employer, i.e., the cost of labor, and thus driving up the prices to consumers of the product.

So if unions become widespread in the economy, the prices generally are driven up, and it is questionable whether the workers have experienced a net higher living standard, because along with their higher wage has also come higher prices, and these cancel each other out.

In some cases the higher wage is enough to overbalance the higher prices and the worker gains a net higher living standard. But in other cases the higher prices are greater and the worker experiences a net loss. Also, the higher cost of production and higher prices can dampen consumer demand for the product, and a company or industry will experience a decline in the competitive marketplace, and workers are laid off.

So, while you may gloat over your higher wage and temporary higher living standard, your gloating will come to a quick end when you are issued your pink slip. But if you're competitive enough to escape this fate, then congratulations! Being more competitive than the other guy is what makes the free market capitalist economy work. Just get a good pair of ear muffs to protect your ears from the loud whining of your less competitive co-workers who were expendable.

But where is the proof that prosperity came first, followed by unionization? How do we know it wasn't the strong labor unions that produced the prosperity? How do we know the historical pattern is not: first, poverty, followed by the formation of unions, followed by a higher living standard, followed by even stronger unions, followed by an even higher living standard? That is certainly the story that the labor movement wants to believe.

What are the historical facts? Can history answer this question? Is this an example of a theory that cannot be proved or disproved by historical or empirical facts?

There can be no definite proof one way or the other. But there is historical evidence that prosperity produces labor unions. And there is no historical evidence for the reverse. You cannot go back into history and find a historical trend showing a period of poverty followed by unions sprouting up and then a period of prosperity being produced as a result of the higher wages being paid to workers. It just has not happened that way.

Rather, there was exploitation of workers, very low-paid and non-unionized, and when new technologies were introduced, the production levels went up and caused an increased standard of living, including higher wages to the more skilled workers, and then, finally, unions began forming.

When the standard of living goes down, historically, then so does the strength of unions. Even just a tapering off of the living standard causes the unions to weaken. It is only as the living standard continues to rise that the unions become stronger.

There is no indication historically that a sudden new fervor for unions, during bad times, causes an increase in the general living standard to take place. But there is plenty of indication historically that a new rise in the living standard is followed by more labor unions forming and becoming stronger and gaining concessions from employers.

The Historical Beginning of the Labor Movement

The following is all taken from Wolfgang Abendroth, A Short History of the European Working Class, copyright 1972, New Left Books (originally Sozialgeschichte der europãischen Arbeiterbewegung, copyright 1965 Suhrkamp Verlag, Frankfurt am Main). Abendroth was a professor of political economy at the University of Marburg/Lahn.

First off, the labor movement began in Europe, in the early 19th century (or late 18th, in its primordial form).

This tells us something right off. Why Europe? In the 18th and 19th centuries Europe was the most prosperous region of the world. If the labor movement comes first, before prosperity, why not Latin America, or Africa, or the Mideast, or India or China? No, it began in Europe.

If you have any doubt of this, here's what Abendroth says:

The working class movement began as a product of European history. It is therefore logical to start by limiting our study to Europe, although it should not be forgotten that the revolutions beyond its confines are now putting into practice ideas which have their origins in the European working-class movement.
(p. 8)

This seems to say that even if there is a 3rd-world country today with a strong labor union movement, it inherited its ideas from the Europeans 100+ years ago. In all likelihood those union movements would not even exist if the leaders of them had not been influenced by the early European labor movement.

So globally, the union movement began in the most prosperous region. And the labor movement that sprouted there seems to be a product of the prosperity that was taking place already.

But within Europe, where did the labor movement begin? Did it begin in the poorer countries such as Spain and Portugal, or Greece and Bulgaria and Romania? or Poland? Italy?

No, the labor union movement in Europe began in England, which was the most prosperous part of Europe.

Of these three great population centers of Europe -- England, France, and Germany -- the most prosperous in 1800 was England, then France, then Germany. But by 1900 Germany had surpassed France and, though still behind England in overall standard of living, was starting to edge out England in industrial production. What happened during those hundred years?

Of the three, Germany had the weakest labor union movement. At the beginning of the 19th century it had virtually no labor movement. England took the lead, followed by France and then Germany. The labor movement was basically founded by Karl Marx in England, and there it became strong and was successful in wresting higher wages and benefits from employers, and it also succeeded in pressuring the government to enact labor legislation.

The movement had less success in France and less still in Germany. But by 1900 all three countries had higher labor standards, legalized unions, and more favorable government programs to protect workers.

But somehow Germany prospered at a faster rate than England and France and was becoming the leader in industrialization. The presence of labor unions had nothing to do with this, because England had a stronger union movement than did Germany, and so did France. Why did the least unionized country of the three make such gains on the other two? With a stronger labor movement in France, why didn't France stay ahead of Germany, if strong unions make an economy stronger and the people more prosperous?

Was Germany really the least prosperous of the three in the first half of the 19th century? In the following paragraph by Abendroth, you needn't try to decipher his main point if you don't want to. Just notice how he clearly says Germany was "backward" to France and England economically and also in terms of its labor movement:

These two analyses of the situation in France were the work of a young intellectual [Karl Marx] in the process of creating a new method of studying the philosophy, history and economics of contemporary Europe. At the same time they reflected the initial experiences of the German working-class movement which, because of the industrial backwardness of the states of the German Union, could only develop by joining the working-class movements of England and France. The contradictory conjuncture of the economic and social backwardness of Germany and the social and intellectual development of its more advanced European neighbours turned out to be highly significant for the revolution of working-class ideology. It was a conjuncture parallel to the one which had already led to the dominance of the French Enlightenment over English philosophy and, a few decades later, would lead to the dominance of German classical literature and idealist philosophy over French intellectual life. It was this unevenness of development that produced the necessary conditions for the intellectual flowering of the European bourgeoisie. In the same way, it was the insignificance of the German working-class movement in the first half of the nineteenth century which enabled Karl Marx and Friedrich Engels to become, on the eve of the revolutionary uprisings of 1848, the theoreticians of the consciousness and ideology of the whole European working class, and to formulate its aim -- the supranational classless society.
(p. 22, underlines added)

The reason for quoting this entire paragraph is to note the several references to Germany's backwardness to England and France. Abendroth's point is to explain why the foremost leader of the European labor movement happened to be a German, rather than an Englishman. The whole paragraph is quoted here so you can see Abendroth's context.

But between the lines he is telling us two clear points about the difference between Germany and the other two: Germany was more "backward" or less "advanced" economically, and it had a much weaker labor union movement.

Yet, Germany passed up France economically by around 1860-70, and also made gains on England and was challenging England by 1900 for the lead in industrial production.

It is important to point out that Abendroth does not say Germany was backward intellectually or culturally. It's clear he's talking about economic backwardness, or lower vs. higher living standard. He seems to believe Germany was superior to France and England intellectually.

There is one phrase which needs to be clarified -- "The contradictory conjuncture of the economic and social backwardness of Germany and the social and intellectual development of its more advanced European neighbors" could better be translated "The contradictory conjuncture of the economic and infrastructural backwardness of Germany and the cultural and intellectual processes of its more advanced European neighbors" etc. The point is that the backwardness of Germany was totally economic, not cultural or intellectual. The term "intellectual development" could be misread as "intellectual progress" or "intellectual improvement" which is not the meaning. The word is Prozessen or "processes." So there is no implication that England was more advanced than Germany other than economically.

One could make the argument that Germany was more backward intellectually, and that this is the reason why the labor union movement was stifled there, but not in England. Germany was less tolerant toward dissident political movements at this time than England was, which is the reason why Marx left Germany and ended up in England.

But no one seems to seriously argue that if Marx had stayed in Germany, then the labor union movement would have sprouted up there just as quickly as it did in England. The clamor from the masses of workers really did not exist in Germany as it did in England. There is a general consensus that Germany simply lagged behind England and France in industrial development (1800 and earlier) and thus had to wait longer for the union movement to take root there, and that this is the main reason why unionism was slower to develop in Germany.

The higher standard of living is the best factor to use as an indicator of what causes the labor movement to take hold and become strong. As the workers become better off and enjoy a better living standard, and as they see that the investors and the corporate directors do so much better than themselves, they become restless and begin demanding more still. This is the persistent pattern.

Why did unionism take so much longer in the coal mining operations than it took in manufacturing? Factories unionized sooner. There were coal mine disputes, but the miners had little success compared to the factory workers. Why? Because coal-mining always paid less, because they were less skilled and could more easily be replaced. But as their standard of living increased, they too organized and succeeded in gaining some concessions. It just took them longer, because of the lower value of coal-mining work.

One cause of the lower value of coal mining work was psychological: the coal-mining operations were more isolated and those workers tended to become fixed to their location near the mines and lived in virtual company towns, and so after several generations the coal-mining families became virtual prisoners, at least psychologically, and mobility and choice of changing jobs or seeking better opportunities was less a reality for them. So the companies could simply pay them less without much fear of losing workers, whereas factory workers had more options and could seek better employment elsewhere.

So, the pattern is that the lower-paid or lower-skilled workers took longer to become unionized. All this points to the general principle that a higher standard of living for workers leads them to form unions, and so unions are a byproduct of prosperity, while on the other hand, there is no indication that unionism leads to prosperity.

And thus, the connection between unionism and prosperity is a causal one, i.e., prosperity tends to cause unionism, but not the other way around.