Sec. 11. #Effects of organization upon general 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 their effect upon the general level of wages; and next, as to their effect in raising the wages of the organized laborers alone.  As to the first, the thought has sometimes been expressed by sympathetic social students outside of trade-union circles that but for the organization of labor wages in America would be no higher than they were in 1850.  This seems to be assumed in much of the argument of labor leaders, for they speak as if all wages, but for trade unions, would be at the starvation level; and they credit everything above that level to the work of the union.[7] This claim is peculiarly effective in America, where wages are and always have been relatively high.  But proof of the claim is lacking.  As we have seen, even now fewer than 1 in 16 of all gainfully employed, and fewer than 1 in 12 of those working for contractual wages are organized.  On no principle of value could the mere organization of one-twelfth of the wage-earners, without permanently withdrawing them from the labor market, explain the relatively high wages of the other eleven-twelfths.  In many lines where labor is not organized, as in teaching, clerical, professional, domestic, and agricultural services, wages have risen as much or even more than in most of the organized trades.  The underlying economic forces determining the general level of labor-incomes in a country are much more fundamental in nature than labor unions or protective tariffs.[8] The trade-union authority already cited seems in another passage to admit a view not essentially unlike that just expressed when he says:  “Capital is increasing faster than population....  It seems therefore merely in obedience to natural laws that wages should rise.”

The only reasons ever suggested for thinking that the organization of one-twelfth (or any larger proportion of the wage-earners) could in any general way raise the labor-incomes of those remaining unorganized are:  first, that organized labor sometimes leads the way in securing favorable legislation; and, secondly, that if organized workers get higher wages this sets a standard which it is easier for the unorganized then to attain.  Both of these suggestions may have some little validity in special cases, affecting slightly a small proportion of the unorganized workers, but neither touches fundamental causes of general high wages.  Whereas, it is clear that when the unorganized laborers constitute the main body of consumers for the products of organized labor (and this unquestionably is in large measure the case) any increase in wages that can be secured through organization by a portion of the workers must, in part, be subtracted from the “real” incomes of the unorganized workers.  The employer is middleman, not to a great degree the ultimate consumer of labor.[9] Some part, it is true, of the higher wage might be taken from profits or from wealth-incomes, but this would still leave the unorganized workers the losers.