[gabemart]

While it's not a position I hold myself, I imagine such people would argue that unions are not the free market because of the legal protections and privileges they enjoy.

I'm no expert, but I know that in at least some jurisdictions a union-endorsed strike carries protections against worker dismissal.

[dalke]

It's odd for you to point out one of the legal protections unions have without also pointing out the things they are prohibited from doing, such as sympathy strikes, mass picketing, and (in some states) the ability to require a union shop.

And the law gives company owners protection against personal liability, and taxes companies different from personal income, while it also prohibits employers from having an unsafe workplace, child labor, and practicing various types of discrimination.

We are far from a free market. I agree with the earlier poster - I think a free market enthusiast should also want unions.

[yummyfajitas]

A union: some sellers of labor merge into a single legal entity, and it becomes illegal for some purchasers of labor to buy from alternate suppliers. To translate to another field: Apple and MS merge, and now consumers can't use Linux.

Laws enforcing a requirement to purchase from a cartel are about as far from a free market as you can get.

Saying free market supporters should favor unionization is like saying free market supporters should oppose net neutrality. In a free market, net neutrality is certainly something to oppose, but in the world we live in it's necessary to counteract the government granted duopoly held by Verizon/Cable.

[dalke]

At issue is the part "laws enforcing a requirement."

I'm hard pressed to think of any advocate of a free market who wants this law in place.

But a closed shop arose not from legal statute but by an agreement between the company and the union. There's no need for government involvement, except to settle contract disagreement.

In fact, it's quite the opposite! Closed shops are illegal in the US, under Taft-Hartley Act, though they are legal in some other countries. Union shops are legal, except where the states have prohibited that practice.

The question to the audience is, shouldn't a free market advocate want to reduce both the laws which give unions specific power AND those which take power away from unions?

If your concern is about monopoly powers, well, 1) that's a restriction of free trade, so our hypothetical free market advocate might not want those restrictions either, and 2) why aren't they regulated under anti-monopoly laws, rather than specific anti-union laws?

As to the net neutrality issue, well, that's a mixture of morality and an abuse of monopoly power. I believe you're only focusing on the latter issue for now. (And I think our government is and has been entirely too closely intertwined with business, and especially big business, for too long, which has allowed these abuses to grow.)

Is an employer a sort of monopolist? I believe they are. While there are exceptions (IT in the Bay Area during the dot-com era being an obvious one), for many people it is not easy to quit and easily find new employment. Otherwise Nevada wouldn't have a 10% unemployment rate. The problem with monopolies though isn't that they are monopolies, but that they can abuse their monopoly power.

You rightly pointed out that unions can abuse their monopoly power. But so too can companies.

So the modified question to the audience is: shouldn't a free market advocate want to reduce both the laws which give unions specific power AND which take power away from unions, so long as there is no abuse of the monopoly power?

Unfortunately, the easy answer by an anti-union person is that unions are, by definition, an abuse of monopoly power, so this question has no real utility. And I can't come up with a better phrasing.

[yummyfajitas]

The question to the audience is, shouldn't a free market advocate want to reduce both the laws which give unions specific power AND those which take power away from unions?

Yes. I'd love to scrap all laws relating to unions and have the law treat them as worker-owned consulting companies.

Is an employer a sort of monopolist? I believe they are. While there are exceptions (IT in the Bay Area during the dot-com era being an obvious one), for many people it is not easy to quit and easily find new employment. Otherwise Nevada wouldn't have a 10% unemployment rate.

Can you explain this claim? What prevents any employee from leaving and selling their labor to another willing party?

Many people find it difficult to leave and find higher paying work, but that just means their current employer is paying them at or above market [1].

Unemployment is (according to Keynesians at least) a mismatch between employee's desired wages and market wages. It has nothing to do with monopoly power. A simple way to test this - is unemployment higher in sectors with a smaller number of firms?

[1] A common reason for this is the accumulation of firm-specific knowledge. That is to say, an employee's value to the employer is X+Y, where X is general knowledge (useful to all employers) and Y is useful only to the current employer. I.e., X is general programming, Y is knowledge of a specific legacy system. This is a situation with both a monopoly and a monopsony - the employer can't find outside employees with legacy system knowledge and the employee can't find outside employers with that specific legacy system.

[dalke]

"worker-owned consulting companies"

There are many organizational forms. I wouldn't choose a company. It should be a cooperative, as described at http://www.sba.gov/content/cooperative . "Not all cooperatives are incorporated, though many choose to do so." And "Democracy is a defining element of cooperatives. The democratic structure of a cooperative ensures that it serves its members' needs."

"Can you explain this claim? What prevents any employee from leaving and selling their labor to another willing party?"

Sure. You mentioned Keynesians. Quoting the Wikipedia section about cyclical/Keynesian unemployment: "With cyclical unemployment, the number of unemployed workers exceeds the number of job vacancies, so that even if full employment were attained and all open jobs were filled, some workers would still remain unemployed."

In that scenario, there are few willing parties to sell one's labor to. How is that not structurally similar to a monopoly? An employer in that situation can abuse their monopoly power, and take advantage that the switching costs for the employee to get another job are so high. In short "you take a 5% cut in pay or I fire you and hire the next person who walks in that door." It doesn't even need to be said: "you will take a 5% cut in pay" implies "or you'll have to quit and find another job."

We don't need to be in a Great Depression for that to happen. Or do you think the 2009-2010 spike to 14% unemployment rate for Michigan was all due to people deciding to stay unemployed while holding out for higher paying work?

Using a similar calculus to your model, the switching cost for an employee includes [1] the difficulty of finding a nearby job, or moving and feeling uprooted (and finding new schools, new job for the spouse, etc.), [2] potentially being called a 'complainer' or 'quitter' or labeled 'unable to handle heat' by members of the community or black-balled by industry, [3] the lost wages/opportunity cost between quitting one job and starting the next, [4] the basic stress of having to get up to speed with a new job, meeting new people, and understanding the new social environment, [5] the emotional impact of looking for a job and getting a bunch of 'no's (My Mom got her EE degree, as a 50 year old woman, and tried looking for a job. The many 'no's she got became quite discouraging. People may stay with a job, with its external torments, than deal with the internal.)

You may object, and saying that if a person stays after a 5% pay cut then it shows that the job was priced above market rates. However, I would consider that practice an abuse of monopoly power.

Further, there's a Gambler's ruin issue to quitting, with the employer taking the role of the casino. It might be that a person has a job lined up, moves across the country, only to find that the position is soon no longer there. If that person's unlucky (as what happened with my Dad when I was little), then that could happen twice in a year. (We moved in with his parents for a few years while my parents built up savings again.)

When someone quits, they take the admittedly small chance that they may end up sleeping in a car or other situation drastically worse than what they would had had, should they stayed. While the likelihood that the employer will have correspondingly large negative impact when an non-key employee quits is significantly, even laughably, smaller.

This too makes the employer/employee relationship more unbalanced, and so open to abuse by the side of the employer.

[yummyfajitas]

First of all, your selective quote deeply misrepresents Keynesian economics. I suggest you go educate yourself in more detail on the theory.

Or do you think the 2009-2010 spike to 14% unemployment rate for Michigan was all due to people deciding to stay unemployed while holding out for higher paying work?

Nominal wages have increased during the recession. If employees were willing to take a pay cut to become employed, that shouldn't have happened.

http://research.stlouisfed.org/fred2/series/ECIWAG

http://research.stlouisfed.org/fred2/series/ECICOM

I'm not actually a Keynesian myself - I tend to subscribe to recalculation theories for this particular recession, though I definitely believe sticky nominal wages definitely play a role. But I appeal to Keynesian theories in this discussion since many union supporters tend to profess support for Keynesian economics (while oddly supporting institutions which create wage stickiness).

An employer in that situation can abuse their monopoly power, and take advantage that the switching costs for the employee to get another job are so high.

Your theory yields no reason an employee can't do the same thing. Replacing a worker also involves transaction costs, and rather high ones (look at the price of a recruiter).

Once a person is hired, there are switching costs on both sides. You have yet to demonstrate any structural difference between them.

[othermaciej]

> In short "you take a 5% cut in pay or I fire you and hire > the next person who walks in that door." It doesn't even > need to be said: "you will take a 5% cut in pay" implies "or > you'll have to quit and find another job."

In practice this almost never happens. Employers are very reluctant to cut nominal wages, even if they could afford to hire more workers that way and get a more economically efficient outcome. This phenomenon is called "sticky wages" and is believed to be a significant cause of unemployment in recessions.

In summary, the relationship between unemployment and labor pricing power is believed, by many economists (most notably Keynsians but also e.g. market monetarists) to be about the opposite of what you said - stickiness of wages causes greater unemployment, rather than unemployment causing downward pressure on wages.

[rayiner]

This is a dishonest characterization of the law in most states re: unions.

[cfn]

"A union: some sellers of labor merge into a single legal entity, and it becomes illegal for some purchasers of labor to buy from alternate suppliers."

I have seen references to this many times. Is this true in the States? I was once a teacher (not in the States) and did not have to sign up to any union. Apart from lawyers and medical personel and maybe a few other "special" professions you don't have to belong to a union to offer your services - at least here in the EU.

[yummyfajitas]

Yes. It is illegal for the employer to fire union workers and replace them with non-union workers. It is illegal to hire new workers at wages lower than the union wage, and in many states to even hire non-union workers.

Unionization is by employer, not by profession, though a few professions (e.g. managers) do lack the ability to gain legal protections by unionizing.

[eli_gottlieb]

Unions don't have a legally enforced monopoly on labor. They obtain a monopoly or oligopoly through market power.

The problem being that without unions, labor becomes subject to oligopsony buying power and Ricardo's Law of Rent kicks in.

[yummyfajitas]

They obtain a monopoly or oligopoly through market power.

So if a union lacks market power, an employer is legally free to fire the union employees and replace them with non-union employees at market wages?

The problem being that without unions, labor becomes subject to oligopsony buying power and Ricardo's Law of Rent kicks in.

Can you explain this claim? While it's certainly true in a few narrow fields (chemistry/biotech, various specialized corners of academia), it's hardly true in the economy at large. In what fields do you believe an oligopsony is present?

[dredmorbius]

In any field in which there is a concentration of employers relative to employees. Which is to say: most of them.

Quoting from Wikipedia: "The Law of Rent states that the rent of a land site is equal to the economic advantage obtained by using the site in its most productive use, relative to the advantage obtained by using marginal (i.e., the best rent-free) land for the same purpose, given the same inputs of labor and capital."

Where "land" is taken as capital, equipment, and/or alternate business opportunities, the employee's wage-bargaining leverage, in the absence of collective bargaining, is what s/he could make by going elsewhere and starting up a new firm. Where no new business opportunities exist, wage bargaining falls to subsistence levels (employers will pay employees the bare necessities for staying alive).

In the economy at large, the situation still remains true. An employer need pay an employee no more than that employee could claim at another job (or by going into business for him or herself), given the employee's skillset.

Given that skills tend to wed to experience, should the employee transition to a different line of work (at which they are less skilled), unless there is a peculiarly high demand for that work, their wages will fall. Also, the employer's surplus (that is, productivity above wages) is governed by the Law of Rent.

Given collective bargaining, through the threat of withholding labor (with skills that, collectively, the employer would be hard-pressed to replace), a negotiation for total compensation (wages, hours, benefits) in which more of the employee's surplus is distributed to the employee may be arranged.

[yummyfajitas]

In any field in which there is a concentration of employers relative to employees. Which is to say: most of them.

This is true not just of the employment market, but of most goods markets. There are far more buyers of cars/computers/cheese than sellers. Does this mean that pizza producers have oligopoly selling power?

Your theory is too broad. It applies to virtually everything.

In the economy at large, the situation still remains true. An employer need pay an employee no more than that employee could claim at another job (or by going into business for him or herself), given the employee's skillset.

Conversely, an employee needs to accept as wages no less than the wage he could get from another employer. This is true of any market - a purchaser needs to pay no more than market price, and a buyer needs to sell for no less than market price.

All you are describing is market pricing. Are you claiming all markets are oligopolies or oligopsonies?

[gabemart]

I don't necessarily disagree with the argument that a free market enthusiast should desire unions. I disagree that a free market enthusiast should desire unions in their current form, which we both agree is far from a free market.

In other words, I don't think it's unreasonable to say "Device X would be desirable in ideal situation Y, but as the current situation is far from ideal, device X currently does more harm than good".

And again, I don't necessarily personally believe that to be true of unions.

[georgefox]

There's also a fair number of union workers who are not allowed to strike at all: http://en.wikipedia.org/wiki/Strike_action#In_the_United_Sta....