The Trade Union Movement and Competition - the Labor Monopoly Question

THE TRADE UNION MOVEMENT AND COMPETITION - THE LABOR MONOPOLY QUESTION* by Edward S. Mason Whether labor unions are monopolies is a question hardly worth asking and, if asked, hardly worth discussion. Whatever else a union is, it is certainly an agreement among workers not to compete for jobs. If unions are not monopolies working men have been deliberately sold a "bill of goods" for many long years by slick operators who have repeatedly promised to "take labor out of competition." The interesting questions would appear to be: of what are unions monopolists; how much market power do they have and how do they use it; are there degrees of power and types of use that call for public intervention; and, if so, are "unreasonable" manifestations of labor monopoly appropriately handled by policies primarily designed to deal with monopoly problems in product markets or is another type of policy required? It is obviously impossible adequately to discuss so broad a range of questions in the time available to us. What I propose to do is to consider some of the determinants of the degree of market power and its use by "labor monopolies" and to do a little prospecting around and about the concept of "unreasonable" power.

Unions in the Market

Monopoly power is obviously a question of degree. In commodity markets a pure seller's monopoly, if it means anything at all, can only mean that buyers confronting this seller, have no alternative except to purchase from him. But since, in some sense, all commodities and services compete with each other for consumer dollars, it follows that, to be "pure," the monopolist would have to control the sales of all goods and services. Even then he might encounter competition from the do-it-yourself contingent. Certainly, if his control falls short of all goods and services offered for sale his market power will be limited by the alternative open to buyers to spend more or less on the products of other sellers. Similarly a pure labor monopoly can only mean the total control of the supply of labor by a single seller or—if you prefer—a single negotiator for the sale of labor services. Anything short of that would confront the seller, or negotiator, with competitive limitations to his market power.

Unions are, of course, organized for purposes other than bargaining advantage. Consequently it is possible—though barely possible—to imagine a union with no market power. Unless, however, its members think there are advantages to be obtained from the employer in the area of wages, hours, and working conditions greater than could be obtained by individual negotiation, the union is not apt to be long lived. If we accept the degree of market power essential to the continued existence of a union as the lower limit, and a monopoly of all labor as the upper limit, the market power of currently functioning unions will fall somewhere between. They are all monopolists to a degree and the degree will be largely determined by their success in controlling the alternatives open to relevant groups of employers.

Each employer with whom a union negotiates must be denied access to alternative sources of labor supply. The number of employers sought to be controlled will depend on competitive relations in product markets. If product transport costs are high it may be sufficient to organize employers in a regional market only. If there exists a national market for the product, the market power of the union will depend either on organizing employees on a nationwide basis or on devising means of excluding cornpeting products from organized local markets. Nor may it be enough to deny all employers in a relevant product market access to alternative sources of labor supply. Under certain circumstances the market power of the union can be increased by denying the employer access to alternative labor saving techniques. Market power is dependent not only on control of the supply of labor but also on control of the supply of jobs. Finally, assuming adequate control of the supply and demand for labor among some relevant group of employers, the market power of the union may be increased if advantage can be taken of elasticities of the demand for the employers' product. This may, on the one hand, involve control of the entry of new firms and, on the other, control of the price of the product sold.