The argument against unions

A friend's anti-union argument in response to this Twitter thread: https://twitter.com/sonyaellenmann/status/875095909830361089

Shared below with permission.

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unions are always bad

always

a few reasons:

first, the theoretical justification on the grounds of a monopsony employer basically never happens. yeah, at one point in the distant past you had company towns, sometimes. now, like, cmon. labor is very mobile.

Second, unions create a huge disincentive against investment, because they basically expropriate capital. Specifically, the way a union *works* is that a capitalist invests in some kind of very expensive, fixed piece of capital — like a factory. Let's say he spends $5bn to build it, and in present value terms the factory is worth $6bn to him in terms of future profits if he can hire labor at ordinary market-clearing wages. Now say the labor gets organized, and they are perfectly coordinated and able to keep away scabs (or through labor law is able to make the company an effectively closed shop, or whatever). So the union can now make the factory *worthless* to the capitalist. This gives them the ability to extract up to $6bn of value from him in the form of higher wages. (A union with less perfect power would be able to extract less, but the principle is the same.) Any more and the capitalist will finally just write off the factory.

The result of this is, ultimately, capitalists learn not to build factories that are susceptible to unionization. If they do, a union can swoop in and just yoink your stuff.

Third, the effect described above means that a union worker's wage is essentially in two components: the first is the market-clearing wage for his labor, and the second is basically a dividend on his "stock" in the expropriated portion of the company. But if the worker leaves the company, he forfeits that "stock" with no compensation (unless the company pays him a lump sum to fire him!). This means that workers remain inefficiently working jobs that may be better done by someone else (while they may be better employed at a different company, or may even prefer retirement to working for the market-clearing wage). If unions formalized their arrangement by just blackmailing the capitalist until he gave some shares to workers, after which the union went away forever, at least this problem would go away. But of course they don't and can't.

Fourth, the political economy of unions is *always and directly* opposed to economic progress. Unions in America aren't limited to bargaining over wages and benefits; they also effectively negotiate over operational details of the business, such as worker assignments, the very existence of certain positions, hiring and firing practices, etc. For example it's common for unions to negotiate work rules where more senior employees have the ability to choose more plum assignments. This is horrendously inefficient and the interest of the union is pretty much 100% of the time *opposed* to any kind of labor-saving improvement the business could invest in (including simply assigning workers more efficiently!). For example, the California port unions spend a big chunk of their time fighting against automation of the ports — automation that they've brought on themselves through ridiculously high wages relatively easy jobs. For another example, see http://unsuckdcmetro.blogspot.com/2010/12/escalators-picking-losers.html . For a third example, when trains ran on steam they used to have a position called "fireman" who stoked the fire. This position became completely obsolete when railroads switched to diesel; nevertheless, it persisted for *decades* until they started phasing it out in the mid-80s (which itself took something like a decade to finish); the "firemen" basically chilled out and kept the engineer company.