The news in F. A. Harper’s lucid Why Wages Rise (Foun­dation for Economic Education, 124 pp., $1.50, paper) is that we’ve all been had. Virtually every class, group, and individual in America has been listening to bad advice and following false leaders. The re­sult is that, prosperous though we are, we are nowhere near as prosperous as we might be.

The bad advice is that the way to get ahead is to work less for more money. Though individuals may obviously better themselves by forcing this prescription on somebody, it can’t work for the totality of all of us. The reason is that wages are paid out of produc­tion, and it is obviously impossible for an economic system to pay out more than it can produce. If every­body were to work less, there would inevitably be less to go around.

Well, then, so the unconvinced worker might say, let wages rise at the expense of dividends. But this doesn’t work out either. For the truth is that it is tools that make the worker’s productivity —and it takes dividends to create the tools. Without dividends — or rewards for saving — nobody would bother to put his money into tools. That would leave the worker at the mercy of a low-grade economic system, and there wouldn’t be much coming out of it to pay him his wages.

Dr. Harper, in some marvelously clear prose, rams home his basic theory of wages, and there is no gainsaying him. First, he proves his points with logic. Then, for the benefit of those who may suspect a trick in logical discourse, he proves his points all over again by a use of comparative statistics.

Unions and Wages

Do you believe, for example, that unions have caused wages to rise? If this were true, the real wage should have risen hardly at all in the period stretching from the Civil War to 1900. During this half century, union membership was negligible. The fact is, how­ever, that during this period real wages (pay measured in terms of actual purchasing power) doubled. They continued to rise with amaz­ing consistency during the next half century, both in times of in­tense union activity and in times when unions were having hard sledding. Looking at his charts, Dr. Harper comes up with a sage observation: "The evidence would be that rising wages cause union membership to rise, not vice versa." If this suggestion is true, then the labor leaders of America have been getting a free ride. They have been taking credit for something that has been as inexorable as the rising of the sun, and have been singing out like so many chanticleers.

But if wages have risen inex­orably during the past century with the fivefold increase in the individual’s hourly economic out­put, it might be argued that the chanticleer pretensions of the union leaders are harmless. Chanticleer’s singing has no effect on the sun either way, so why not let him enjoy himself?

Fringe "Benefits"

The trouble is, says Dr. Harper, that the labor chanticleer, unlike the rooster of fable, is in a posi­tion to exact tribute. He hasn’t been able to stop productivity from rising — at least, not yet. But, just to make himself seem in­dispensable, he has cooked up the idea of "fringe benefits." He has written all sorts of insurance and medical and pension gadgets into union contracts. Sometimes these work out well for individual work­ers, but the point is that they are a form of wage increase that doesn’t go uniformly to every worker. The man who doesn’t get sick, or who quits his job before retirement age, is gypped out of some money he would have re­ceived if the "fringe benefit" had actually been a general pay rise. Thus what is one man’s "fringe benefit" is likely to be another man’s "fringe detriment."

Unemployment

There is also the possibility that chanticleer, by singing real loud, may bluff the employer into pay­ing an uneconomic wage. Dr. Harper proves that if the price of labor is set too high, unemploy­ment must be the inevitable re­sult. Simply because Dr. Harper’s charts are so clear on the point, I would doubt very much that chanticleer has actually succeeded in bluffing many employers in the past century. (If large unions are a consequence of high wages, they can’t also be the cause.) But where unions have kept wages from fall­ing in bad times to the point where it would be economically profitable to employ everybody, they have undoubtedly helped to prolong depressions. And when wage rates remain stickily high in depressed periods, they provoke monetary inflation as a means of getting prices into profitable alignment with the wage scale.

Another reason why the labor chanticleer is not as harmless as the rooster of fable is that his cocky crowing misleads people about the role of the investor. Chanticleer insists that the incre­ment from increased hourly pro­ductivity should go to his men. But, as Dr. Harper says, it is "teamwork between those who save and those who use the tools" that is the "reason for our high and rising wage rates." The intel­ligent labor leader would endeavor to make it clear to his followers that to attack savings and invest­ment is tantamount to saying that the worker has no interest in in­creasing the efficiency of the tools at his disposal. But chanticleer rarely goes out of his way to praise the investor.

Instead, chanticleer is often to be heard singing a siren song that if dividends to private investors aren’t sufficient to bring new tools into being, then the government can step in and create the tools. But government can hardly create the tools out of nothing; it would have to tax everybody to get enough to make up for the deficiencies of the private investor.

The trust which chanticleer re­poses in government has been en­dorsed by his followers, who are, of course, footing the bill for it. Dr. Harper has assembled some in­teresting statistics on this point. Before the Civil War, he says, the cost of being governed took three minutes out of every hour of work. Today, the cost has risen to nine­teen minutes out of every hour.

During the past half century alone the cost of government has taken almost half — or 48 per cent — of the increased productive ca­pacity of an hour of work. If tool users and tool owners had only been permitted to share that 48 per cent, think how much richer we would all be!

It may be argued that the gov­ernment spends for us what we might otherwise be spending for ourselves, but this is another case of the "fringe benefit" turning in­to a "fringe detriment" for those who don’t fancy the government’s choice of what constitutes a bene­fit to the individual.

Wages Are a Price

Dr. Harper is careful to say that he doesn’t consider "labor" —meaning the worker — to be a com­modity. Nevertheless, what the worker sells in the market place is subject to economic laws. Work­ers taken as a totality can’t sell their skills and muscle for more than is produced. And the man who saves money to invest in tools must be cut in on the produce of the system or he will go on strike, to the ultimate detriment of labor.

Because "wages are a price," they should be allowed to find their level in a free market. Says Dr. Harper, "There is a point of equality at the free market price where the supply of labor and the demand for labor find a balance." Any attempt to force the price above the market must create a surplus of labor; conversely, any attempt to depress the price below the market must create a shortage.

All in all, Dr. Harper has writ­ten a most persuasive book. It is good because it eschews the gabble of fashionably "difficult" economics and gets down to first principles. If it has a shortcoming, it is in its failure to discuss the con­nection between uneconomic wages and the spread of automation. By keeping the wage price too high in periods of falling profits, unions must be agents in forcing the pace of investment in labor-saving ma­chinery. Dr. Harper has not as­sessed the role of the uneconomic wage in bringing into being a type of machinery that enables a manufacturer to get by with fewer men. One would like to see the implica­tions of this explored by a mind as lucid as that of Dr. Harper.

Involuntary Participation in Unionism By Philip D. Bradley. Washington: American Enterprise Associa­tion, Inc. 47 pp.

Reviewed by Paul L. Poirot

"Involuntary participation in un­ionism" is a polite way of refer­ring to the closed shop. And Dr. Bradley politely asks how come the closed shop has gained such wide acceptance under the Wagner Act, inasmuch as Senator Wagner himself had testified that "the terms of the bill do not compel or even encourage a man to join any union."

Dr. Bradley, formerly a profes­sor of Economics at Harvard, traces the growth of compulsory unionism in large measure to union-initiated complaints against "free riders." The argument runs that unions obtain economic bene­fits, that members and nonmem­bers alike enjoy these alleged benefits, and that nonmembers ought to be made to share the costs of acquiring them. These propositions have seemed so persuasive that the general public as well as legislators and judges have come to believe them.

The trouble, concludes Dr. Brad­ley after scholarly examination of the facts, is that unions have neither raised the general level of real wages in the United States nor increased labor’s share in the national income. The economic benefits presumably obtained by unions are primarily attributable to other causes. Much of what union leaders claim to have gained from the companies has actually been taken out of what otherwise would have been in the worker’s pay envelope. These facts and conclusions are well supported by the independent studies undertaken and reported by Dr. F. A. Harper in the FREEMAN series of articles on "Why Wages Rise."

In some detail, Dr. Bradley ex­amines various union claims to have raised the level of real wages for its members "above that which would have prevailed in the Union‘s absence." In the case of the Photo Engraver’s Union, high wages were maintained through­out the depression. But for a time only 16 per cent of the members were fully employed, and their earnings were subject to a 20 per cent union assessment to help those deprived of employment by the arbitrary wage level.

All told, the argument for the closed shop as a curb on "free riders" is simply another attempt at totalitarianism. And this well-documented exposé deserves the thoughtful attention of all who prefer a free society.