Union cartels

September 6, 2010 18:48

Labor unions cannot prosper in a competitive environment. Like other successful cartels, they depend on government patronage and protection. Worker cartels grew in surges during the two world wars and the Great Depression of the 1930s. Federal laws—the Railway Act of 1926 (amended in 1934), the Davis-Bacon Act of 1931, the Norris-LaGuardia Act of 1932, the National Labor Relations Act of 1935, the Walsh-Healy Act of 1936, the Fair Labor Standards Act of 1938, various war labor boards, and the Kennedy administration’s encouragement of public-sector unionism in 1962—all added to unions’ monopoly power.

by Morgan O. Reynolds at Library of Economics and Liberty


‘According to Harvard economists Richard Freeman and James Medoff, who look favorably on unions, “Most, if not all, unions have monopoly power, which they can use to raise wages above competitive levels” (1984, p. 6). Unions’ power to fix high prices for their members’ labor rests on legal privileges and immunities that they get from government, both by statute and by nonenforcement of other laws. The purpose of these legal privileges is to restrict others from working for lower wages. As antiunion economist Ludwig von Mises wrote in 1922, “The long and short of trade union rights is in fact the right to proceed against the strikebreaker with primitive violence.” Interestingly, those who are expected to enforce the laws evenhandedly, the police, are themselves heavily unionized.’

‘U.S. unions enjoy many legal privileges. Unions are immune from taxation and from antitrust laws.’

‘Unions are relatively immune from payment of tort damages for injuries inflicted in labor disputes, from federal court injunctions, and from many state laws under the “federal preemption” doctrine. Nobel laureate Friedrich A. Hayek summed it up as follows: “We have now reached a state where [unions] have become uniquely privileged institutions to which the general rules of law do not apply” (1960, p. 267).’

‘In the United States, union membership in the private sector peaked at 17 million in 1970 and had fallen by nearly half—to 8.8 million—by 2002. Barring new legislation, such as a congressional proposal to ban the hiring of nonunion replacement workers, private-sector membership will likely fall from 8.5 percent to 5–6 percent by 2010, no higher than the percentage a hundred years ago. While the unionization rate in government jobs may decline slightly from 37.5 percent, public-sector unions are on schedule to claim an absolute majority of union members within the next few years, thereby transforming a historically private-sector labor movement into a primarily government one. Asked in the 1920s what organized labor wanted, union leader Samuel Gompers allegedly answered, “More.” Today’s union leader would probably answer, “More government.” That answer further exposes the deep, permanent conflict between union members and workers in general that inevitably arises when union-represented employees are paid monopoly prices for their services.’



Some highlights from the 2009 data from the U.S. Bureau of Labor Statistics are:

–More public sector employees (7.9 million) belonged to a

union than did private sector employees (7.4 million),

despite there being 5 times more wage and salary workers

in the private sector.

–Workers in education, training, and library occupations

had the highest unionization rate at 38.1 percent.

–Black workers were more likely to be union members than

were white, Asian, or Hispanic workers.

–Among states, New York had the highest union membership

rate (25.2 percent) and North Carolina had the lowest

rate (3.1 percent).

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