[luk_hol]

"This is only true insofar as the market is inefficient."

I think you are right. Unions are by definition all about a (a kind of external) negotiating power. Such things have no place in ideal and fully efficient free markets where the prices are dictated solely by the demand and the supply.

Either such a market would be robust enough (as in your example) and the union would not be in a longer term viable, or the union would be viable (e.g. some kind of monopoly) thus turning the market into a non-ideal, non-efficient and non-free.

However I am yet to see (or realize that I see) a labor market that would be in any meaningful way close to being efficient and free. The labor markets I see have low liquidity (it is difficult to search and change the work, it takes time to adjust your skills), huge information asymmetry and low transparency, and the most actors are not very "free" (debt, no alternative options...).