he occasion of Labor Day tends to be accompanied by an increase in the circulation of pronouncements from union leaders and politicians that workers are made better off by powerful unions and government regulations that "protect" workers from rapacious businesses. This narrative is widely accepted by the media and the general public, but it is not supported by basic economics.

The main economic confusion in the view that unions and regulations produce a net gain for workers is that employment is zero-sum—that is, that workers are made better off by making employers worse off. However, the real explanation for the rising incomes of workers over the past decades has little to do with either unions or government regulations.

The Harmful Effects of Labor Unions

Workers' incomes can only sustainably increase with a commensurate increase in workers' productivity—in other words, when employers get a compensating benefit for paying higher wages. After all, if employers were not getting an increased output for the increased wages they pay, they would either lose money and stop or make less money, causing them to re-allocate capital to more profitable business ventures.