A labor union is a monopoly

By Dan Popp

Sometimes the first duty of intelligent men is the restatement of the obvious. — George Orwell

There are lots of reasons to dislike labor unions. They artificially increase business costs, leading to higher prices for goods. So the few (the members) lower the standard of living for the many (the consumers). This above-market price tag for unionized labor also makes Made-in-the-USA products less competitive in the world, again hurting Americans. Though unicorn hunters might put their fingers in their ears when we say it, no company can survive indefinitely by overpaying for its inputs, including labor. Eventually it will have to automate jobs that humans used to do, find workers who will sell their services for market rates, or close. That often translates to "moving American jobs overseas." Yes, you can thank your union (as well as its hired politicians) for a lot of that.

By standardizing wages a union pulls up the compensation of less skilled and less diligent workers, and drags down the compensation of more valuable workers. Unions protect incumbent members at the expense of those who would like a job by dividing the available pay and benefits among fewer folks. Cutting the pie into bigger slices doesn't create more pie; it just means that fewer will be fed. Rookies may be financially unviable anyway, as their value might be less than the inflated cost of employing them. And, as the French have discovered, regulations that make it difficult to fire people can make it too risky to hire people.

Much has been said (but little done) about the political influence of organized labor — the socially acceptable "special interest group." The funneling of dues to politicians, who then have an incentive to see that unions grow and give them more money, is surely as big a corruption problem as that of Wall Street fatcats influencing politics. And I'm against both of those, by the way.

The whole premise of the labor union is a falsehood. As we've seen over the last century, the universe is not divided into bourgeoisie and proletariat. Workers' interests overlap the interests of management, as any entrepreneur knows intuitively. The adversarial "you lose/we win" model of organized labor seems childish and antiquated in the "win/win" world of business today. Greedy workers, via their greedy union bosses, have crushed more than one greedy capitalist company, putting their own greedy selves out of work. Well, nobody said that the green-eyed monster is a rational creature.

But in all of our recent conversations about labor unions, I haven't heard the most basic argument against them: a labor union is a monopoly.

No one likes a monopoly. Except the monopolist, of course. And sometimes the government. You might think that everyone else is opposed to cartels in principle. But — say it with me — conservatives have principles; leftists have an agenda. Imagine local business owners getting together over brandy and cigars at the Country Club and deciding what all of them would pay as a uniform hourly wage. Restraint of trade! Collusion! Unfairness! Yes, of course, All Of The Above. But a labor union doing exactly the same thing is a champion of American values?

In a free market, employers bid against other employers for workers, and workers bid against other workers for jobs. The results are mutually beneficial contracts; flexibility and efficiency, which translate to better products at lower prices for consumers; and powerful incentives for self-improvement for both business and labor.

The goal of a monopolist is to short-circuit the free market. He wants to make himself the "only game in town" for a certain item. If you want a drink of water, you have to come to my well. That's exactly what a labor union does, or tries to do. The fact that most unions aren't successful in recruiting every worker, or in making every shop a union shop, is beside the point. It isn't for lack of trying. What a labor union does, in essence, is to take job seekers who would ordinarily be competitors, and turn them into colluders. Once they've cornered the market on human capital, in theory they can charge any prices they like. But this view is shortsighted. As we're seeing with the Postal Service, even a government-protected monopoly can't withstand market forces forever.

The reason that union leaders aren't put in jail for their anti-competitive practices is that industrial-age laws explicitly exempt labor unions. The difference between a labor monopoly and a management monopoly is that Congress approves of one, and not the other.

This, by the way, is how we know that collective bargaining is not a "right." A right is something that everyone has. The practice of collective bargaining depends on labor having something that management does not: the ability to conspire to set the level of compensation. Since one side may legally monopolize and the other may not, we're talking about privileges, not rights. Though barbarians may babble on about "fairness," the privilege of collusion must be granted unfairly, or the union's scheme will fall apart. There is one industry in which both owners and workers are allowed to "organize" to some extent: professional sports. Watched any good NBA games lately?

As long as there are employee unions but no employer unions, unfair trade practices will exist, by definition.

There may have been a time and a place when labor unions were necessary. When one super-dominant employer could dictate terms to an immobile population of unskilled, uneducated workers, the only just solution might indeed have been to fight monopoly with monopoly. But workers have options now — even now. In the age of the internet, information about job openings and job training is readily available. We have the most mobile population in history, and supposedly the most educated. (If it isn't the most educated, thank the teachers' union.) The only reason to hang on to the blunt weapon of a labor monopoly is that the few have found a way to take unfair advantage of the many, and they aren't willing to give up that advantage.

© Dan Popp