On May 9, the biggest unions in Argentina staged a mass general strike that halted air, rail, subway, and bus transportation. They are against market reforms brought by the new government that could help fix Argentina’s decades-long economic problems, including skyrocketing inflation and sovereign debt defaults. The unions are essentially attempting to use their economic muscle to defeat the democratic will of the people, who rejected the previous government’s failed economic policies.
Everyone would like higher pay and better benefits. But normally, the price of labor, like much else in a well-functioning free market, is decided by supply and demand. When supply and demand are disjointed, low or high prices result. Low prices paid to doctors in Kenya, for example, signal to Kenyan undergraduates that the economy cannot support so many doctors. Students might choose business school rather than medical school as a result, improving the economy and, in the long term, resulting in higher wages paid to doctors. If wealth becomes too stratified over time, progressive taxes can correct the problem.
So it is irresponsible for workers in critical sectors such as rail and medicine to shut down entire industries in pursuit of higher wages, especially when other workers need the jobs and would work at lower pay, thus providing consumers with lower-priced goods. The unions don’t own the industries but act like they do. Through centuries of unions and left politicians becoming interdependent, they have constrained the natural growth and strength of market democracies just when we need that strength against everything from inflation and pandemics to the rise of dictators in places such as Russia and China.
Unions use their collectivist power against the freedom of entrepreneurs, workers, and customers who, by their free association, would otherwise add economic vitality to a country rather than put a drag on it by stopping the normal development of employees and businesses in competition. This competition is key to a well-functioning economy, yet like monopolists, the unions are anti-competition and thus keep prices and inflation high. They don’t allow workers to compete with each other to provide the best work at the best price, as other kinds of sellers must do. If any other seller were to price fix in the manner that unions do, they would be prosecuted.
Why is labor the only productive input allowed to price fix? Unions are better thought of as politically connected labor cartels that erode the free market and, with it, the economic efficiency of the entire economy. When industries and regions become weighed down by unions, entrepreneurs look elsewhere to invest, ultimately decreasing the number of good jobs available and constricting much-needed government revenues for social services and defense. The vulnerability of manufacturing to unions in the United States is one big reason that U.S. corporations moved production to China and Mexico, resulting in U.S. deindustrialization.
