Trade unions should be subject to the same competition law principles as
businesses. Societal attitudes towards “scabbing” create a non-economic
anti-competitive barrier to entry during strike actions.
The fundamental
mathematics of welfare economics is such that a sufficiently competitive market
will feedback on itself to converge on a Pareto efficient outcome in terms of
prices and quantities. Pareto inefficient anti-competitive practices such as
monopolies benefit the few at the cost of a larger harm upon the rest of
society in the form of deadweight loss. Thus, vendors are regulated in terms of
trade practices, mergers, etc (qv, Competition and Consumer Act 2010). Workers
and trade unions should be modelled as vendors of labour service and therefore
be regulated similarly; the “mirror principle.”
Individuals should
have the right to unionise as a means to pool leverage to achieve equitability
against a more powerful employer. However, this leverage pooling becomes
undesirable if it results in “inverse inequitability.” There should exist measures
to prevent unions, like vendors, from attaining and exerting monopoly power
(consider for example the UAW and the debate re their role in the recent US
automotive industry crisis) and holding the rest of society to ransom.
Unions should have to right
to strike (without monopoly power). In a Walrasian market, the employer can hire
new workers (“strikebreakers”) at equal or increased wage, decreasing the
leverage of the strike until the union settles at equal or decreased demands,
such that a new Pareto efficient equilibrium is possible. In reality,
strikebreakers are governed by inconsistent legislations across different
countries. Legislation notwithstanding, strikebreakers additionally face social
(and at times physical) retaliation for their role and are commonly labelled in
derogatory terms such as “scabs,” resulting in a significant non-economic
anti-competitive barrier to entry. Under the mirror principle, such abusive
actions are equivalent to an outlaw vendor blockading the shops of a competitor
and fomenting popular outrage against discounts.
If persecution of
strikebreakers is unethical under the mirror principle, this raises the
question of why it is so accepted in reality. It is largely desired in society
that wealth be equitably distributed. While wealth should be allocated
according to merit, in reality, it is unavoidably allocated according to a
combination of merit and pre-existing wealth. This, in addition
to marginal utility principles, justifies “Robin Hood” measures that
redistribute wealth from the rich to the poor (such as progressive income
taxation to fund public services) to maximise opportunity equality (rather than
wealth equality per se). Strikebreakers face persecution because trade unions
enjoy the superficial appearance of “Robin Hoods” fighting for the underdog.
However, trade unions are actually “false Robin Hoods,” benefiting their own
members at the cost of deadweight loss, decreased wages of non-unionised
workers and increased unemployment1, while employers pass on the
cost of higher wages in the form of higher prices for the consumer. In summary,
trade unions arguably give to themselves by unreliably taking from the rich and
reliably taking from the poor. Trade unions and strikes should exist, but not without
some restraints.
References:
1. Friedman M. Price
Theory. New Brunswick, NJ: Transaction Publishers, 2007.
