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Is it actually true that unions find it easier to extract rents from monopolies or oligopolies than from competitive markets? Imagine that all software without

by gjm11 16y ago

Is it actually true that unions find it easier to extract rents from monopolies or oligopolies than from competitive markets? Imagine that all software without exception is made by Microsoft. Then (near enough) all software developers have to work for Microsoft. That gives Microsoft a lot of bargaining power against its employees, unionized or ionized. The only way in which the Universal Programmers' Union is better off in this world than in the real one is that Microsoft (having a monopoly) may be under less pressure from the market to sell its software cheaper, and therefore may be better able to pay rent to the unionized programmers. Fair enough, but is there any actual reason to think that that outweighs MS's gain in bargaining power over its employees? (Which exactly parallels the gain in bargaining power over its customers that makes it better able to afford to pay what its employees demand, if that seems worth doing.)

VladRussian 16y ago
>Is it actually true that unions find it easier to extract rents from monopolies or oligopolies than from competitive markets? just look at the public employees unions. The GP beautifully explained about "the cut".
yummyfajitas 16y ago
A monopoly and a union have equivalent bargaining power. The union members have only vastly inferior substitutes for employment (e.g. Dairy Queen), and the company has only inferior substitutes for labor (temps). It's in both of their best interests to eventually agree to split the rents. In a competitive market, there is less rent to split (e.g., 5% profit margin instead of 15%) and there is always a third possibility: the unionized employer goes bankrupt and only non-unionized employers remain. So producers (as a class, not any individual one) get to survive, while the union (as a class) is destroyed. But don't take my word for it. Go take a look at the world. The primary bastions of unionization seem to be monopolies or oligopolies: the government, Big 3 automakers (in their heyday, at least), cable companies and the like. Unionization also declined (outside the government) as the country became more competitive. Think about what nearly happened to the auto industry. Consumers suffered with crappy overpriced cars, and the Big 3 + unions enjoyed their rents. Then the market became more competitive, and absent government intervention, the unionized part of the sector would have died. The unions seem desperately afraid of this effect in education which is why they fight tooth and nail against charters/vouchers.

by gjm11 16y ago

VladRussian 16y ago

>Is it actually true that unions find it easier to extract rents from monopolies or oligopolies than from competitive markets? just look at the public employees unions. The GP beautifully explained about "the cut".

yummyfajitas 16y ago

A monopoly and a union have equivalent bargaining power. The union members have only vastly inferior substitutes for employment (e.g. Dairy Queen), and the company has only inferior substitutes for labor (temps). It's in both of their best interests to eventually agree to split the rents. In a competitive market, there is less rent to split (e.g., 5% profit margin instead of 15%) and there is always a third possibility: the unionized employer goes bankrupt and only non-unionized employers remain. So producers (as a class, not any individual one) get to survive, while the union (as a class) is destroyed. But don't take my word for it. Go take a look at the world. The primary bastions of unionization seem to be monopolies or oligopolies: the government, Big 3 automakers (in their heyday, at least), cable companies and the like. Unionization also declined (outside the government) as the country became more competitive. Think about what nearly happened to the auto industry. Consumers suffered with crappy overpriced cars, and the Big 3 + unions enjoyed their rents. Then the market became more competitive, and absent government intervention, the unionized part of the sector would have died. The unions seem desperately afraid of this effect in education which is why they fight tooth and nail against charters/vouchers.