§ 11. Competitive aspect of organization and particular wages. The crucial economic problem in connection with trade-unions is not as to their methods (that being rather a political problem) but as to their effect upon wages. There must be distinguished two questions: first, as to the influence of organization upon particular wages, and primarily upon the wages of organized labor; and, next, as to their influence upon the general level of wages.

As to the first, it may be seen that the wages of workers who are organized are generally (though not always) higher than those of unorganized workers in the same trades and neighborhoods. An English trade-unionist, Trant, says; "Where there are no unions wages should be lower. This is exactly the case." And he quotes: "Wherever we find union principles ignored, a low rate of wages prevails, and the reverse where organization is perfect." (1) But he later explains in part this difference: "The union men are the best workmen and often employers pay a man more than union wages. This is not surprising, as no man can be a union carpenter unless he be in good health, have worked a certain number of years at his trade, be a good workman, of steady habits and good moral character." If this be true, as doubtless it is to some degree in many trades and places, it is in accordance with competitive principles that, as the elite of the trade, the organized laborers should get higher wages than those outside the unions. (2) Moreover. the unions exist mainly in the more populous places, where costs of living as well as wages range higher than in the small towns and in the rural districts. A comparison merely of wages in money in such cases is misleading as to the conditions of real income. (3) Further, a higher standard of output prevails in the cities where organization is greatest, and older men and the less efficient, who are unable to "keep up the pace," drift away into unorganized shops or to villages where no standard union rate is in force. (4) As far as unions help to develop the intelligence and promote the sobriety and efficiency of their members, they are a positive economic force making for higher wages. (5) Organization may help to raise particular wages, inasmuch as it helps to restore to the laborers a truer equality in the making of the wage contract, by creating two-sided competition.

The book before quoted expresses, somewhat vaguely, an opinion in accord with these facts and principles when it says: "It is an error to think that the trade-union seeks to determine the rate of wages. It cannot do that. It can do no more than affect them." With organization as well as without it, the wages of individuals and of classes of laborers are determined by the general principles of competitive price as applied to their services, where neither the employer has a monopoly of employment nor the organized laborers have a monopoly of the labor supply.

§ 12. Monopolistic aspect of organization and particular wages. The action of organized labor is not, however, limited to the competitive field. "Wages in particular industries may, by the action of trade-unions, be raised and maintained above a true competitive rate. This, of course, can be done only in accordance with the principles of the service value to the consumer and of service price in the employment market. The supply of labor is in a variety of ways artificially limited by the efforts of the unions. (1) It may be done temporarily by striking when a failure to fill orders will cause the employer exceptional loss. (2) Violence in strikes and boycotts is often the desperate attempt to create and assert a measure of monopoly power where of itself it does not exist, i. e., where other workers stand ready to take the jobs at the prevailing rates of wages. (3) It is created if apprentices are limited to fewer than in the long run would be attracted into the trade by the prevailing wages. (4) It is created if the unions artificially limit output to less than is consistent with the health of the worker. (5) It is created if unions strong enough to keep "scabs" from getting work, fix their dues high or put other obstacles in the way of increasing the membership. Probably the most striking cases of high wages for organized labor are of this kind. The element of labor monopoly evidently is mingled in all degrees, from the slightest to a very great amount, in particular economic situations.

§ 13. Open vs. closed shop. The question of labor monopoly is involved in the very crucial question of the closed vs. the open shop. A closed shop (or union shop) is a shop in which no non-union men may be employed, even at union wages. Unions usually assert that the closed shop is essential to the existence of the union, although some strong unions, notably the Railroad Brotherhoods, have not urged this point. The existence of a closed shop is evidence that the union is strong enough to compel the employer to act on this principle and thus virtually to force all his employees into the union.

The refusal of a demand for the closed shop is often the ground for a strike. If union and non-union men work side by side there are so many ways in which the employer is able to discriminate so as gradually to break down the union. If business slackens, the union man may be the first to be discharged; if any preference is given it is to the non-union man. Therefore, most spokesmen of organized labor believe and declare that efforts of employers to secure or to maintain the open shop are disguised attacks upon the very principle of organized labor. Labor leaders ridicule as hypocritical the employers that say they are trying, in keeping their shops open, to protect the workmen's liberty to join or not to join a union, which in the eyes of the law is a voluntary organization.

While these accusations may too often be true, it would seem, on the other hand, that an unmodified closed shop, with the conditions of membership in the control of the union, creates a distinct monopoly of labor, leaving the employer helpless in any wage dispute and enabling the union to enforce its every demand, regardless of the competitive conditions of the labor market for that class of services. The employers, in their more moderate claims, profess to aim at an open shop only in the sense of the principle laid down by the governmental Anthracite Coal Commission of 1902, as one where no person is "refused employment, or in any way discriminated against, on account of membership in any labor organization"; and where there is "no discrimination. against or interference with any employee who is not a member of any labor organization, by members of such organization." Such an open shop, with its conception of two-sided duty, fairness, and toleration, nearly commands public approval, acquiescence, and acceptance by both sides. But unfortunately, in practice, whichever side chances to get the upper hand in the situation is too often tempted greedily and ruthlessly to push its advantage far beyond the ideal point of toleration.

In the war and after-war boom period from 1917 to 1920 the greater bargaining power of organized labor enabled it to push not only for higher wages and shorter hours, but for the closed shop, which made great headway. The railroads, under federal control by the Railway Administration, were almost completely unionized, and great numbers of manufacturers conceded the closed shop to the unions. In 1920, with the onset of unemployment, began a most active propaganda in favor of the open shop. This produced, probably, an exaggerated effect upon the public mind, seeking a scapegoat for the high cost of living, and finding easy explanations in "profiteers" on the one hand, and on the other in the unreasonable demands of labor, excessive wages, and reduced output. The effect was to neutralize in large part within the year the gains made by the closed shop, and to produce alarm in circles of organized labor.