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If Labor Markets are Red Hot, Collective Bargaining Cannot Even In Theory Help Some Workers Without Harming Others

I’ve largely stopped reading E.J. Dionne, who is so predictably ignorant of economics that he usually makes me yawn. But the contradiction that infects his recent column praising labor unions is too rich not to engage.


The headline of E.J. Dionne’s paean to labor unions says that they “unite a divided nation,” yet in the text Mr. Dionne offers evidence that unions in fact are divisive (“Unions are on a roll. And they unite a divided nation.” Sept. 6). That Mr. Dionne is unaware of the contradiction does nothing to diminish it.

Collective bargaining can raise union-members’ wages without inflicting damage on other workers only if employers have monopsony power over labor – that is, only if there are so few employers of union-represented workers that these employers need not compete for workers and, thus, have the bargaining power of monopolists over their employees. In this situation, labor unions can, without harming any workers, give their members bargaining power that these members lack as individuals.

But when labor markets are competitive, rivalry among employers for workers gives bargaining power to individual workers. Worker pay gets bid up to reflect worker productivity. In this situation, collective bargaining can raise union-members’ wages only by artificially reducing the number of workers who are able to compete for employment at unionized firms or in unionized trades. When labor markets are competitive, therefore, collective bargaining raises the pay of some workers only by artificially reducing the employment opportunities – and, hence, the pay – of other workers.

And so when Mr. Dionne (rightly) applauds today’s “red-hot labor market” as enabling workers to “feel liberated by the availability of employment,” he in fact applauds competitive labor-market conditions under which unions can ‘succeed’ only by pitting some workers against other workers.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030