No further proof is required any longer: the trade unions do not understand the reason why it is necessary to raise wages. If they would, they would not fall and spread baseless neoclassical claims.

Unfortunately, I must once again sharpen my polemic of last week’s ‘survival’ of workers (see here): today, the unions are fighting to get a $50 wage increase in other countries – but not in Germany. One used to call it the international labour movement at one point in history.

The German DGB and the International Trade Union Confederation (ITUC) are argue that workers should get $ 50 more. This, our dear colleagues from the developed countries argue, the international corporations can afford (see here). I wonder where there these assertive unionists get the $50 from. And I am asking myself even more why the revindications of workers are progressively being handled in absolute terms. Is this just ignorance or is there a strategy behind it? Even worse, how is it possible to claim the same increase for completely different countries?  Have unions completely given up on the idea that wages have to rise according to productivity increases and inflation rates and are satisfied today with only ensuring workers’ survival? Worst of all, the example clearly shows that unions no longer understand how the labour market really works – or perhaps they do not want to understand it.

$ 50 more in wages

The text of the IGB states that:

“International corporations are making billions in profits with their products. But the workers along the production chain often work under dangerous working conditions – and for wages that do not guarantee decent living conditions. The corporations could easily afford significant wage increases. This is shown by a study by the International Trade Union Confederation (ITUC)” (see here).

The ITUC “investigation” reached the following conclusion:

“The ITUC’s survey of 10 international corporations shows their gross profit per annum (…) and gross profit if corporations pay $ 50 more to labour along the supply chain (especially in Asia)” (see here).

Lo and behold, profits would slightly fall:

“At Apple, it (a $50 increase – HF) would reduce gross profit by just 1.2%, from $ 84 billion to still $ 83 billion. Procter & Gamble (P&G) would show the strongest decrease. This is because the consumer goods group works, in contrast to Apple, with relatively rather low-priced products – but P&G would still make 27 billion US dollars in profit. In addition, the ITUC has scrutinized Samsung, Nestlé, IBM, Coca-Cola, IKEA, Hewlett-Packard (HP) McDonald’s and Inditex (one of the largest global textile companies based in Spain)” (see here).

Such a small decline of profit! Dear corporations, you can surely afford that, when we, unions, ask you very politely and get down on our knees.

$ 50, please!

You have to imagine: $ 50 more! It is not even clear about which period the unions have in mind. Is it for a week, a month, a year or ten years? Companies in countries with completely different levels of productivity should all pay $ 50  Why should that be reasonable? Do the unions want a $50 wage increase as a one-off? Are they asking for this one-time increase from multinationals only, and not from native companies? That too would be pretty absurd. Will ITUC also demand $50 rise in China, where wages have risen sharply in recent years – the only country in the world where this has happened? Jens Berger addressed the DGB, asking these questions on the German critical website Nachdenkseiten (see here). He produced a nice graph that shows the evolution of wages in China in the ten years between 2005 and 2015. According to his statistics, the increase in wages was almost 13 percent annually! These are nominal increases, but it certain that real wages have also risen sharply.

Why – and that is the crucial question – don’t the unions of all countries (and especially in Germany) demand wage increases from all companies, as happened in China which based its wage increases on productivity growth and target inflation rates? The answer to this question is indirectly being provided by ITUC itself. It clearly wants to demand only wage increases from those companies that demonstrably make high profits and can therefore “afford” wage increases. This position shows the intellectual and political bankruptcy of the international trade union movement. ITUC does not even bother to “calculate” how much corporate profits would decline if wages would increase by $50.

What is the purchasing power argument?

If even professional trade unionists do no longer understand that reasonable wage increases do not decrease profits, but increases them because workers spend their earnings so that they ultimately end up back in the pockets of businesses, the labour movement is really at the end.

It can now be seen that the trade unions (the German ones included, as the DGB redistributes the nonsense of ITUC, commenting on it in benevolent terms)  do no longer understand what, in earlier times, every trade union official called the “purchasing power argument” for wage increases. Nor do they understand the effects of the introduction of a minimum wage, as happened in Germany in 2015.

No, they have not understood anything and by now I have to assume that they are happy that they do not understand anything, because then they do not even have to argue with the employers. They just take what they are being offered, show gratitude and rejoice that their members are still not starving.