Mirror

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.