On Labor, and the holiday thereof.

Once a year, America celebrates the end of summer with a national holiday dedicated to dubious economics: Labor Day. Organized labor, we are assured, lifted the working poor out of poverty, allowing us all to escape wage-slavery by redistributing wealth from the greedy fat-cats to the working classes. Why, without unions, we’d probably still be working sunup to sundown just to provide food and rent! Clearly, we need a holiday to celebrate our excellent standard of living, brought to us by trade unions. So in honor of this auspicious occasion, I bring you a parable.

Off hidden away in the wilderness is a village you’ve never heard of before. In this village are one hundred families, who each send one member to work each day in the town factory. In this factory, villagers build boxes-of-stuff. Each box is filled with the necessities and basic niceties of life: food, clean water, medicine, fuel, clothing, and a number of other sundries. At the end of each day, the factory produces about one hundred crates and ships them off to the market.

After being paid, all the village men head off to the market to supply their households. Each day, the headmen find that they’ve been paid enough to purchase a single box-of-stuff, which they take back to their families. Now, a box is good enough to keep a family from dying of starvation, but it’s not exactly high luxury. Families are fed, but not quite to their satisfaction. Houses are heated, but you’d still want to keep a sweater on. People have sweaters, but they’ve all seen better days.

Eventually, the town workers are quite fed up. “Every day,” they protest,” we work and work, but our wages are never high enough for us to buy two crates, not one single day of the week!” A union is formed. Demands are made. A general strike is called. “Workers of the village, unite! Two boxes for every house!” As no one works, no one gets paid, and people grow thinner while houses grow colder, but everyone is assured that eventually the factory must give in, and new, higher wages will make up for this current suffering.

After two weeks, the factory gives in, and wages are doubled. After their first shift back, the workers rush to the market with more money than they’d ever dreamed of before. The first man in line buys two crates and heads home, as does the second, the third, and so forth, until the fifty-first man. For, you may recall, the factory only makes one hundred crates a day. After the first fifty men bought two apiece, there remained nothing more to sell to the last fifty. Half the village feasted, while the other half starved. The next day, those who starved decided not to risk the same thing happening twice, and made a dash to the market after work in record time. Each of these bought two crates apiece and feasted, while the other half found the market oddly sold out before they arrived.

By the third day the shopkeepers realized that the workers had more money, but were competing for the same number of resources, so they doubled the price of a crate of goods. After all their trouble, the villagers found themselves unable to afford anything more than the one box apiece they had to make do with in the beginning.

We in the modern world often make the serious mistake of confusing currency for wealth. Currency isn’t wealth. Currency buys wealth. Real wealth consists of the goods and services people actually consume. If we increase the amount of currency people receive in wages, but do not increase the quantity of goods manufactured, it doesn’t make anyone richer, it just makes the same finite quantity of goods more expensive to purchase, stimulating inflation. Instead, if through industrial and technological advances we increase the quantity of goods we can manufacture per capita, we’ll find that the purchasing power of our wages will increase. In America, the drastic increase in standard of living over the past century cannot be explained as a consequence of unions fighting for higher wages. No level of wage would allow the masses to consume goods which weren’t being produced in sufficient quantity. Instead, as technology improved in the 20th century, things like mass production and free trade made market prices drastically cheaper, and the working poor found they could suddenly afford luxuries previously afforded only to the rich.

So, this Labor Day, enjoy the ability to live a comfortable life and still take a three-day weekend, brought to you by capitalism. Not unions.

Photo Credit – www.bilerico.com