Minor Note on Unions

I want to take a pragmatic stance on unions.  I don’t think the Right needs to be against them; or for them.  Unions have pros and cons. The word “union” refers to a cluster of organizational functions which combine differently in different organizations, so in fact different unions have different pros and cons.

a. Market power.  Fundamentally unions are similar to minimum wage laws, except they work by monopoly power rather than price controls. Pricing low-income workers out of the labor market is bad.

b. Political power.  Public sector unions create a despotic closed power loop in the same way, e.g., state religions or military dictatorships do: the administrative machinery tasked with carrying out the decisions of the political process become a powerful player in the political process. So public sector unions are bad. (The power that all unions have just because they coordinate the clout of workers efficiently is a second-order concern.)

c. Source of labor’s negotiating position. Unions which extract rents by occupying damaging veto points (as opposed to increasing the bargaining power of workers who are, at the margin, easy to replace) deliver economically irrational rents, and threaten huge social losses if a strike actually develops; therefore, they are bad. For example, there is no reason why milk-delivery drivers should be paid that much more than potato-delivery drivers; but because milk spoils faster than potatoes, a milk-delivery union would have a much more powerful strike-threat. Likewise, the power of cleaning staff at hotels as opposed to office buildings has less to do with the actual difficulty of the job than the skittishness of vacationers who are more likely to switch hotels simply to avoid unpleasantness.

d. Organization of vocational trainingOn the other hand, to the extent that unions represent a vehicle for intergenerational skill-transmission and on-the-job training, unions are good. Union brothers are willing to put in the effort to train new members (i.e., to create new competitors) both to repay their debt to older members, and to gain favor from the union in the future, and because the union’s collective-bargaining position prevents the employer from replacing the trainer with his trainee.

e. Guild system. When unions function as a guild system, allowing long-term reciprocity between families in the community, they are also good.  The basic idea is that a man will typically be working for twenty years or longer before his own son needs a job; in the interim there will be many open positions he cannot give to his son.  By creating a shortage of valuable positions and giving people inside the union authority over distribution, value is ensured. (Do I need to make the implications explicit? Consider what happens when someone forces a guild system to include hostile strangers from outside the community to which existing union brothers belong.)

f. Incentive compatibility. Informal systems of discrimination/self-policing are good. Workers don’t want to be punished/fired/fined for incompetence because giving employers the right to do so destroyed labor’s bargaining power. But workers do want to be able to capture some of the gains that come from an efficient labor force. By creating an incentive structure whereby current workers are guaranteed to benefit in the long-term if they identify incompetence and vote it off the island, efficiency can be increased without creating dangerous incentive problems on either end.



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