Archive for October, 2011

Corporate Unions

In an ordinary employer-employee relationship with a large company, the employer has most of the power. When any individual employee seeks a higher wage, he or she has no leverage; for a large company to lose a single employee makes little difference. In the U.S., unions have been a way for employees to get more leverage. The large company can not ignore the effect of many employees working together.

However, many people dislike unions, because unions are only effective when the union members work together. Many people feel that this takes away individual rights, as indeed it does.

It recently occurred to me that there is a different way to look at the issue. Think of the union as a company itself, a special sort of company which operates as a monopsony. When you join the employer, you are actually joining two companies: the employer and the company which provides employees to the employer. The union company and the regular company have a tight relationship, but this is no different from an ordinary monopsony supplier situation, such as is widely found in, e.g., the automotive business. Union companies tend to be more democratic than most companies, but this is not a fundamental difference.

One can of course have multiple union companies providing labor to the parent company. However, it is perfectly reasonable for the parent company to negotiate only with union companies for labor, rather than with individuals. After all, only in exceptional situations would a company purchase non-labor supplies from an individual. Why should labor be any different? Thus the “closed shop” has a clear support: it’s a matter of efficiency for the parent company.

This perspective may remove some of the traditional complaints against unions. They are replaced by a different issue, which is that every employee has two loyalties. However, in reality we all have multiple loyalties in our lives—to our families, our sports teams, etc.

Try thinking of the matter this way the next time you feel angry about unions. They are just doing what regular companies do.

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