In the first place, even though the union is the sole negotiator in a given market there is considerable ambiguity in determining the numbers for whom it negotiates. Not all may be union members and within the union certain blocs of members may have preferred positions that, at the least, may influence acceptance of gradations among wage rates. In other words, the union view of the quantity axis in the familiar diagram that depicts the results of quantity-times-price calculations is not quite the same as the perspective, say, of a seller of cement.
In the second place there is a still greater ambiguity about the nature of the unit of sale, i.e. of labor services. The union presumably negotiates with respect to a bundle of benefits called wages, hours, and working conditions. But "working conditions" in particular have a way of appearing on both sides of the bargain. The terms affecting "working conditions" offered by the buyer of labor services as a part of the "price" for these services may affect the size of the unit of services he in turn receives. In other words, the supply and demand functions for labor services may not be completely independent of each other.
In the third place the union is clearly not in the same position to package, ship and otherwise dispose of its product as, say, a seller of cotton grey goods. In fact, if the union does not handle its material very carefully it is not likely to have any product at all. The necessity to persuade, discipline, cajole and take the other steps required to maintain morale and cohesiveness in the organization clearly sets substantial limits to what the union can and cannot do in negotiating for the sale of labor services. For all these and other reasons the union is not a seller of labor services but a negotiator for the sale of a not very clearly defined product, representing a not very easily determinable number of men, and operating in an environment that pretty seriously limits the application of any maximizing principle.
To say, however, that a union is not a monopolistic seller of labor services is not to say that it is not a monopoly organization. If we are permitted again to draw analogies from the commodity market, the form of business monopoly that most closely resembles the union is a price cartel with sufficient control over entry and output to make its price policy effective but lacking the device of profit pooling and the powers required to make profit pooling effective. Such a cartel can obviously not pursue the price and putput policies that would be followed by a single seller operating in the same market. The prices that would maximize the profit of the various firms constituting the cartel will normally be different and consequently the cartel price has to be some sort of compromise. Since profits are not pooled each firm has an interest in its continued existence as a firm and consequently the cartel cannot do what a single seller would supposedly do, shut down inefficient facilities and attempt to minimize costs for the total output. The union is normally faced with somewhat the same problem of reconciling divergent interests and taking care of employees in high cost locations even though it might be better for the union as a whole if jobs could be concentrated in high profit concerns.
Although a cartel is not a single firm monopoly no one has any hesitation in describing it as a monopolistic organization. Nor should there
be any hesitation in so characterizing a trade union. The exploitation of its market power by a cartel—or similar loose business arrangements—has been characterized by Fellner as "limited joint profit maximization." Any attempt so to characterize a union's exploitation of its market position would probably have to stress the "joint" and the "limited" and play down the element of "maximization." Structural and Performance Tests of Market Power We have now said something about the character of the market confronted by unions and the varying degrees of "occupancy" of the market—if I may be permitted this term—that a union may possibly achieve. We have also considered briefly some of the relations between the union and its membership that might be expected to influence the way in which a market position is exploited. Given the market position and the internal organization of a union, would it be possible to say anything useful about the wages, hours, and working conditions that collective bargaining is likely to produce in that market? Or conversely, given the performance of a union as revealed in the terms and administration of its collective agreements, would it be possible to say anything about the market power possessed by the union? There has been a good deal of examination in recent years of at least one aspect of union "performance"—the effect of labor organization on hourly wage rates—with fairly inconclusive results. Paul Douglas, writing in 1930 found that while in the 1890's, and early years of this century "unionists were able to secure for themselves appreciably higher wages and shorter hours than the mass of the workers," since 1914 "the wages in the non-union manufacturing industries have risen at least as rapidly as have those in non-manufacturing trades." Arthur Ross, on the other hand, after a study of B.L.S. wage data 1933-45 concludes that, "Real hourly earnings have advanced more sharply in highly organized industries than in less unionized industries, in periods of stable or declining membership as well as periods of reorganization." Studies by Dunlop and Garbarino cast doubt on any very strong influence of unionization on inter-industry wage structures. Clark Kerr summing up the results of these and other investigations concludes: "One consequence of contemporary institutional controls in the labor market is evident. They conduce to the single rate within the craft or industrial field which they cover. The best, although not thoroughly convincing, evidence now indicates they have surprisingly little effect, however, on inter-industry differentials, confirming the conclusions of Paul Douglas of a quarter of a century ago." If we turn to the writings of those who have most strongly emphasized the dangers of labor monopoly, we find many ominous statements about distortions of the wage structure, and sabotage of the price system but almost no factual information to support such statements. Are we to conclude that because the factual investigators of union performance have found no striking evidence of significant effect on wage differentials and the theorists of labor monopoly have failed to demonstrate their case empirically, the degree of market power possessed by unions is small? Some writers appear to think so but the conclusion seems to me premature.