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CHAPTER 19Do Unions Really Raise Wages?1The power of labor unions to raise wages over the long run andfor the whole working population has been enormously exaggerated.This exaggeration is mainly the result of failure to recognize thatwages are basically determined by labor productivity. It is for this reason,for example, that wages in the United States were incomparablyhigher than wages in England and Germany all during the decadeswhen the “labor movement” in the latter two countries was far moreadvanced.In spite of the overwhelming evidence that labor productivity isthe fundamental determinant of wages, the conclusion is usually forgottenor derided by labor union leaders and by that large group ofeconomic writers who seek a reputation as “liberals” by parrotingthem. But this conclusion does not rest on the assumption, as theysuppose, that employers are uniformly kind and generous men eagerto do what is right. It rests on the very different assumption that theindividual employer is eager to increase his own profits to the maximum.If people are willing to work for less than they are really worthto him, why should he not take the fullest advantage of this? Whyshould he not prefer, for example, to make $1 a week out of a workmanrather than see some other employer make $2 a week out of121