Unions are Trusts

And they're not a good way to support the working class

“Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.”

—Sherman Act 1890 §1

Unions aim to get better compensation for their members without requiring them to produce more, and often shooting for decreased production, as with the Longshoremen’s anti-automation demands. But paying workers more or less than their marginal product is unstable in any reasonably competitive market. A small union that all agrees to set their price of labor higher, for example, will simply be outcompeted by other sources of labor.

The only way to get stably higher union pay is through monopolization. Unions need to get most or all producers of labor in a market to act together and fix their prices at a high level. That way, the consumers of labor have no other option but to accept lower output and pay higher prices.

This is a monopoly or trust in exactly the same way as when US Steel, Carnegie Steel, and Federal Steel all agree to set their prices high, forcing customers to pay more. If you think that goods sellers colluding to set prices is bad, then you should think that service sellers colluding to set prices is also bad.

The common response to this is something like “businesses are already strong but laborers need the extra power.” The Clayton Anti-trust Act formalized this saying:

The labor of a human being is not a commodity or article of commerce

In a way, this concedes my argument. The only way that unions can be separated from other restrictions on commerce like monopolies and trusts is by defining the thing they are restricting as not commerce at all. When this was written in 1914 there may have been a clearer separation between labor and other forms of commerce but in today’s economy that’s dominated by the service sector the distinction is not that clear. What does McKinsey & Company sell if not labor?

What I think these counterarguments reveal is that most people aren’t actually against “restrictions of commerce” for their own sake. Restrictions of commerce are fine when they benefit the needy and punish the greedy.

Insofar as this is the case, we can do better to improve the lives of those who need it most than by supporting labor unions. The Longshoreman’s union negotiator makes nearly $900,000 dollars a year and owned a 76-foot yacht, and the modal longshoreman makes north of $150,000 a year. There are some longshoremen in worse financial positions but in general “membership of the longshoremen’s union” is a terrible form of means testing.

The negative downstream effects on other poor consumers is also particularly important in this case. Poorer Americans spend a higher portion of their income on consumption goods like clothing and food, many of which are imported. The price increases on these goods that are the inevitable and intentional result of the longshoremen’s strike will hurt them the most.

Anyone making a principled case against “restrictions of commerce” would obviously see unions as an example of these restrictions, alongside monopolies and trusts. The true motivation for unions is greater support and security for the working class. This is an admirable motivation, but it is not well-served by unions. A better strategy would support the working class by taxing the rich and directly transferring money, goods, and services to the needy e.g through healthcare subsidy, food stamps, and welfare.