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In the absence of unions most employers and governments will pay employees as little as they can. That may be "efficient," but were sweatshops just?

We could also get rid of child labor laws and laws that require a safe workplace. That, too, would be "efficient," but would it be just?

Now it's true underfunded pension plans were and are a problem. But who underfunded the plans? Was it the unions or the corporations and governments? Let's not excuse those who ignored their responsibility.


Hey Rcfwilmette,

Don't come on this law and economics blog and use weasel words like "just" and "sweatshops". Your conception of "just" may be different than someone else's. It reminds me of the saying "patriotism is the last refuge of a scoundrel."

So employers will pay as little as they can and employees will seek as much as they can. So what? And how do you jump from that to "sweatshops" - another weasel word with no meaning.

Child labor laws are a perfect example of unions restricting competition. In modern society, child labor laws prevent a man-sized teenager from carrying a piece of paper in an air-conditioned office building. Is that "unjust" or a "sweatshop" - whatever the hell those words mean.

Yes, it was the governments who created the problem - the same politicians who received union support to get elected and then turned around and bargained generously with those unions for their pensions and benefits. Talk about a conflict of interest.

an observer

1) Unions are not cartels any more than the shareholders who own a corporation are a cartel.

Efficiency has nothing to do with the subject (see discussion of baseball below)

2) The distribution of income is always, and only, a political question. Unions are declining because they have been loosing the political war.

3) More specifically, income is not a function of value created but of value captured. Consider baseball. Baseball players, because of their union, make far more today than in the past because the union lets them capture the value they were always creating. The "efficiency" of the game has been totally unaffected. If people were not in the stands to see Albert the owners of the Cardinals and all their money would not be creating "value."

4) Whether or not to have public unions depends on three issues:

A) is is necessary to offset untoward political power by those who pay the taxes, such power being achieved by using campaign contributions to buy politicians and influence elections.

B) to raise private sector wages. Businesses have to compete for talent. By raising the pay for public employees, the demand for talent goes up. Hence, a tool for combating income inequality is to tax the rich and pay public employees higher wages. This forces the rich to pay higher private wages. Income redistribution does work. McKinsey has a great study up on its site proving this---its 600 city study, which should be ready by everyone. Compare the GDP per capita in between Madison Wisconsin, the Cities and St.Louis. The former have high wages for state and local and high wages for private sector.

C) last, but most importantly, and Posner doesn't get this at all, there are a number of FT time pieces on regional economics that point out that public employment is a very important way to redistribute wealth geographically. If we don't do such we risk becoming like Europe in a worse way. The way Europe is set up now, everyone with any talent is moving to Germany, leaving Portugal, Spain, Italy, Greece, etc., in an impossible situation. People don't realize that Europe is not a fair fight. Portugal and Greece and even Italy did not start at the same place as Germany in the current race.

In sum, again, these "essays" don't advance the ball; rather, that just . . .


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Observer: Great rebuttal! Posner does not "get it" and you cover many of the lacks. His comments indicate a belief in the mythology of unions setting out to kill their golden goose and wrongly believing they've the organizational or political power to do so. The evidence for such theories would be scanty to none.

Becker too answers some of Posner's bewilderment:

Posner: "Between 1945 and 2009, the rate of unionization in the private sector fell from 45 percent to 7 percent, which is telling evidence of the inefficiency of unionization."

"Unions declined over time in the private sector in most developed countries partly because of the shift from manufacturing with large plants, where unions have been strong, to the service sector with small establishments, where unions have been weak."

Indeed! One can make a fair argument that the unionized sectors created far higher productivity gains than did non-union sectors.

"As Posner indicates, an important reason for the growth of unions among government employees has been the expansion of government. This expansion increased the number of government employees, and gave them a more powerful voice as voters, and as contributors to political campaigns."

Interesting. Not sure about the states and local but the number of Fed employees have fallen as percentage of the population.

As for "competing against other nations" truth is US AVERAGE wages continue to rise, while median and lower incomes stagnate or lose purchasing power. We should be lamenting the weakness of the labor movement and the decline of its economic and political power.

(I'd recommend he read the book Winner Take All Politics -- Hacker and Pierson to shore up his understanding of where the political and economic power of the US resides.)

"History may be repeating itself in the public sector, as taxpayers wake up to the fact that state and local governments are raising taxes and reducing services to pay for union-exacted benefits for public employees."

Ha! have I told you of one Newport to Ensenada yacht race where some boats left their anchors behind to save weight, amidst a calm those w/o anchors being pushed back toward the starting line by the currents looked on longingly at those with their anchors down and standing still. Indeed the stagnant and declining wages of many likely do make local property taxes seem high and a burden to pay along with some jealousy of those standing still.

Aah, yes, the All for the Rich agenda masquerading as "conservatism" is alive and well, while most Americans continue to lose purchasing power.


"Child labor laws are a perfect example of unions restricting competition. In modern society, child labor laws prevent a man-sized teenager from carrying a piece of paper in an air-conditioned office building. Is that "unjust" or a "sweatshop" - whatever the hell those words mean."

... the same laws that protect a 15 year old "paper carrier" also protect would be mine workers as well. Fact is today, more so than when the work rules were put in with good reason, young teens have the nearly full time job of absorbing an education, doing a lot of homework and getting enough sleep to effectively learn.

Pepe Fenjul Jr.

Baseball players, because of their union, make far more today than in the past because the union lets them capture the value they were always creating.


Rcfwilmette, Alvin is right. Workers and employers will each try to cut the best deal they can. But there are serious reasons why your other points don't apply. No one here is suggesting we should get rid of the Federal agencies that ensure a safe workplace or repeal the laws that prevent child labor (which would be against efficiency anyway-- it's more efficient for children to be engaged in learning because they have the greatest capacity to, then). In short, your attempt to cast liberal causes as part of one interlocking and mutually necessary network has no substance.

The fact is, Americans had so little in savings because of things like unions and liberal promises of government bailouts for citizens like declaring bankruptcy so easily, Social Security beyond the value of what was paid in, Medicare and Medicaid. The fact that people change their behavior based on government actions is one that appears to me utterly absent from all liberal thinking. It should not be. It's called moral hazard: any time you know someone else will save you from the consequences of risky actions, your actions become riskier. So the savings rate dropped, and the resulting helplessness was the fault of the Left. And, yes, this completely applies to corporations as well. "Too big to fail" and "too pitiable to fail" are both equally repugnant.


Interesting. The cause of the budegetary woes of the Nation are caused by the existence of Public Employee Unions and their ability to extract concessions from their Employers. And so... How disingenuous.

Never mind the fact, that there has been a massive hyperinflation occuring in the Health Care Industry for at least the last twenty years that has gone on unchecked. Never mind the fact that there has been massive underfunding on various pension programs. Never mind the fact that there have been massive tax cuts and other types of cuts, such as the elimination of Tariffs and Duties on goods and services brought into the Country and a fundamental lack of Customs enforcement and the list goes on and on. Is there really any question as to why the Governmetn budget short fall exists? This sounds like a Management problem, not a Union problem, but let's blame the Unions none the less. As for responsibility, its become a game of rhetorical fallacies. "Don't blame me, blame them"! Use of Stacking the Deck, Black/white fallacies, Glittering Generalities, etc.. Oh, not too mention Outright Lies. My, the Propaganda Machine has been running overtime and as it has been said, "Our cup runneth over"!

As for the legitimacy of Unions and their Collective Bargaining Rights, for Americans, hasn't there always been the fundamental right to "Freely Associate with whom one chooses and to freely organize into associations to petition for a redress of grievances"? Undoubtedly, there is a massive body of Case Law covering this topic (I'm not about to take the time to do the research to come up with the citations). As for Ohio, Indiana, Wisconsin, etc. don't we have enough bugetary problems as it is? Without having to go to Court to get its current interpretation on this fundamental rights issue? Think of the millions of dollars we could save.

This fundamental right of "Free Association" also applies to Corporate entities and the rise of the Corporate Lobbies that plague Capitol Hill today. Which, in some cases, has perverted and corrupted Policy and Legislation for years with the inclusion of Loopholes, quarantining Legislation in Committee and outright graft, just too name a few from the "Bag of Tricks". Remember, we do have the best Congressmen/women and Senators (maybe even Judges too) that money can buy...


I think the "...with their attaining in the private sector a rate of unionization comparable to that of the heyday of unionization..."

should read "...with their attaining in the public sector a rate of unionization comparable to that of the heyday of unionization...."


Baseball players along with others players make more today for a number of reasons:

The free use of our publicly owned broadcast airwaves is the biggest factor.

Next is most likely free agency. "Owners" used to trade players like pawns with the player having little influence while players who tried to offer themselves to other teams were boycotted.

Then there are the taxpayer subsidized stadiums, often built to "retain" the club after owners threaten to move to a city offering them a better deal.

Major "LEAGUE" sports aren't very good for economic examples as most of the leagues operated under anti-trust exemption that freezes out competitors not invited.


Handworn: SS was not implemented by union bargaining but by Congress that arguably acted on behalf of the majority of its constituents.

While Medicare/Aid and everything else beginning with "Med" are in trouble, truth is the main thing "wrong" with SS is that of the income increases that should have gone to working folks (under $107,000) had we a the rising tide that lifted ALL of the boats (which stronger unions in the burgeoning service sector would have helped facilitate) escaped to those of much higher incomes thus denying SS the nearly 15% contribution.

In the political mythology of today, much is made of their being "to few paying SS for too many recipients" which has some truth to it, but, rarely mentioned is that average earnings (not median earnings) have more than quadrupled since SS was implemented.

SS checks average something like $1500/month which might pay for a very modest living in our least costly regions, and is most often immediately spent on basic needs and return to the economy, including $100 for Medicare B and another $100 for the prescription drug program that assures Big Pharma gets full retail for its drugs, ie more than twice what the VA that is "allowed" to negotiate prices pays.

Lastly, as the SS income circulates through our demand starved economy with a multiplier effect perhaps quarter of the income is returned to the the Treasury as those earning it pay their taxes and SS contributions. Overall cutting SS benefits will do little to "save" SS and as strapped seniors necessarily turn to other transfer programs, would likely increase the federal deficit.

Premature Ejaculation Treatment

Thanks for the post.


Another (Ha among many!) positive effects of public unions not mentioned is that of it being a bulwark against the patronage that preceded it and the massive inefficiencies as pols increased their political power by hiring those who were "in" and workers helped their perhaps incompetent relatives "get on".

True there are laws against patronage but that are vulnerable to subversion. Sans a union grievance committee who goes up to the bosses to complain? And would they be likely to prevail?

NEH: Yes....... and perhaps our Profs will tackle the often massive inefficiencies when governmental tasks are "privatized" to "save money?"

Here in Alaska the riches to be gained by a "private prison" resulted in the FBI sending several legislators and private advocates (bribers) to prison.

"Somehow" a quasi-private prison was built out in "The Mat Valley" of Palin fame that would have brought prisoners back from CO where we pay $20,000/per to house them. Mat Valley was to own the new prison built at huge cost fronted by the state and "lease it back"" operators and all. At this point the prison has been "whoops" constructed and nearly finished on rural land yet to be served by water and sewer.

Going ahead with the whole project will take the housing of prisoners up to $75,000/year IF the place is run at capacity. Currently the legislature is, well, balking, as real conservatives might applaud. The choices? Not to open the new building, but heat and guard it at a cost of $20 million/year empty, or the cheapest in the long run, tear the new building down the day it's finished. The costly building is built to be a prison and it's FAR too costly to convert to any other use. Great, eh?


Jack, Just one question, "Who owns or owned that rural land and what's Palin's and company connection"? Incorrect cost analysis or just a mistake? ;) Meanwhile, Federal/State/Local Budgets are coming apart at the seams and Public Sector Unions are to blame. Right...


Jack, as an Alaskan I can point to the mess that was the union built pipeline, and prisions can be messed up by unions as well, see California.


Negotiation between peers is what leads to efficient markets. There is no way that an employer and an employee can negotiate as peers. An employer and a group of employees (a union) can negotiate as peers and achieve an efficient market. (Yes, of course there are fluctuations in the supply of labor or the supply of jobs that affects this negotiation, but the idea of an employee having any ability to negotiate as a peer with an employer is ridiculous... Yes, there are employees who are unique and are able to negotiate the trade of their unique skills, but those employees generally are not unionized).


Observer states: "The distribution of income is always, and only, a political question."

An economically inept statement, but appealing to socialists. Move to Europe.

Jack observes: "Another (Ha among many!) positive effects of public unions not mentioned is that of it being a bulwark against the patronage that preceded it and the massive inefficiencies as pols increased their political power by hiring those who were 'in' and workers helped their perhaps incompetent relatives 'get on.'"

Evidently hundreds of millions of union political contributions have nothing to do with patronage. How curious.



NEH: There's no connection to Palin, though she was "hotshot" "developmentally" minded Mayor and later Gov while this went on.

Initially, officials struggled in trying to find a location for the prison before settling on land that the Matanuska-Susitna Borough said it would donate.

Read more: http://www.adn.com/2011/03/20/1765588/prison-finances-bedevil-alaska.html#ixzz1Hwb5I1Fv

Ha! one of the boosters claims a 7 multiplier for the dollars spent/wasted, but the truth is the AK multiplier is very low as most of what we use here comes from other states, mebbe a 2 multiplier.

Luke: Sorry no sale or relevance. The Alyeska Pipeline was built by a consortium of oil companies. After settling the Native Land Claims, at Presidential level during the 70's "oil crisis" the belated start of the pipeline resulted in a cost-plus race to get the thing built as fast as possible. One can easily understand the commercial urgency of trying to get $10 billion/year of throughput going as compared to pinching pennies on the $15 billion cost of the pipeline. I was here at the time and the unionized, certified welders working in HARSH conditions, along with truck drivers and a host of others earned every penny of overtime pay they received.

Today? The corrupt Veco company made a fine game of "subcontracting" and hiring $15hr guys to do hard work in miserable conditions far from home to duck Davis Bacon pay scales. As you know Veco was sold off after its long time owner went to prison for blatantly bribing the half dozen legislators who also were jailed or are facing re-trial.

BTW a bit on the economics of oil: The price paid is the "wellhead" price, that which is paid at the end of its long journey, often including through Panama, to N-O and then piped north to other states. Subtracted from that end price are ALL of the shipping and pipeline costs. The pipeline is somewhat of a regulated utility allowed its maintenance costs and capital recapture. So IF there were cost overruns resulting in higher transportation fees, they are paid out of the pre-shipment worth of the oil that is shared by the Alaskan citizenry who own the oil and the oil producers.

As for CA prisons "messed up by unions" is that just one more lament about prison guards being paid? What does it cost to buy or lease a home in much of CA>

Would not a better question be that of why the US is locking folks up at TEN times the rate of the civilized nations?

The handwringing over "wages being too high to compete??" Truth is our GDP and average wage increases every year, so one guesses we're still generally competitive. Trouble is it's all constipated WELL above the scales of even the "richest" of union labor. Take a look?


Larry touches on the well-known (but "these days" oft not mentioned) flaw of capitalism of "many sellers of commodities (including lower or medium skilled labor) having NO market power against the few, and much better organized buyers. Larry's dead on........ you can spot the price takers who ask "What are they paying for.......... various jobs" while those having market power report on having "Sat down and worked out an employment contract...) and those above them benefiting mightily from interlocking directorships and a truly sick level of entitlement resulting in CEO pay for the SP 500 averaging $14 million/year. Say the lifetime earns and retirements of a dozen "unionized" teachers each year.

an observer


Economics has absolutely nothing to do with the distribution of income. Until you understand that you understand nothing about economics.

For example, before the Civil War America's southern states redistributed income from slaves to owners through slavery. Slavery was political power in action.

For example, Disney gets much of its income from its copyrights on Mickey Mouse, etc. The length and enforceability of those copyrights, and hence Disney's income, is a political question. Tomorrow, Congress could abolish such copyrights or shorten them at its whim.

The same is true for patents and trade secrets.

Copyrights, patents, and trade secrets comprise the bulk of our collective wealth. Government could redistribute such in a moment, by changing the applicable laws. The point is that all questions regarding the distribution of income are political.

Governments can directly redistribute income with laws against monopolies or wage or price controls.

Government can tax income or wealth and redistribute.

Government can tolerate public officials demands for bribes and redistribute income.

The list and illustrations that prove my point is endless.

Government does not have to permit baseball players to have a union or to strike. By permitting such activities, government gives the players the economic power or leverage to be more fairly paid for the value they create, to capture that value.

There is no law of economics that determines what owners make or what players make. The laws that govern these distributions are statutes passed by Congress. Congress, if it wanted, could outlaw baseball and then neither the owners nor players would make anything.

What would baseball players be paid if they couldn't strike and didn't have free agency?

Read great men like Buffett or Munger who look for businesses with moats in which to invest. More often than not those "moats" are conditions that exclude competition and permit rent seeking. And, often, those moats are created by Government.

an observer


Get focused. We aren't talking about why professional sports teams are taking in more $$$ We are talking about the fact that unions work for professional sports teams.

The question is, Why?

It is because the teams cannot move and escape the rights of the works. The Yanks in Nashville without ARod would not be the Yanks.

The only choice is for management to lock out the players, as we are seeing in football.

This is why Wal-Marts fights unions so hard. It cannot move; it's business model is location bound.

The great mistake made by American labor was its failure to organize retail when it had the power to do such. Instead, well to do union workers started voting Republican, based on social issues.

Having been played for fools there is little that can be done for the average American worker now. This is why they are so made. The last three years showed them that gov't works for Wall Street but not Main Street.

Like most people who make mistakes, they blame others when they should be blaming only themselves.

Germany just had hundreds of thousands of people march against nuclear power. Until the average worker takes to the streets to demand a fairer shake, which will have to come through laws redistributing income, it is only going to get worse.


Does unionization really reduce the efficiency of labor market? I beg to differ. In the absence of unionization, labor market for public sector employment is a classical example of monopsony, where the government is the sole employer of labor. Classical labor economics informs us that, in a monopsonistic labor market where individual labor has little bargaining power vis-à-vis the employer, the average wage rate is lower than that under a competitive labor market. In short, a monopsonistic labor market without unionization results in inefficient allocation of labor resources, which in the long run leads to the diversion of labor from the public sector employment (assuming the general labor market is reasonably efficient.)

What unionization does to an otherwise monopsonistic labor market is to transform the market structure into a case of bilateral monopoly, where the government and the union each wield comparable bargaining power. A bilateral monopoly market is certainly less efficient than a perfectly competitive labor market where the numbers of the employers and employees are numerous. However, a bilateral monopoly could produce a more efficient allocation of resources than a monopsony if the risk of negotiation gridlocks and holdout could be checked through appropriate legislations (e.g. I agree with Prof Becker that the right to strike by public sector unions must severely checked, but not their general right to bargain.) A bilateral monopoly could, at least in theory, produce an outcome that is identical to that under a perfectly competitive labor market. However, this is not to say that a bilateral monopoly will definitely mimic a perfectly competitive outcome. Neither do I claim that a bilateral monopoly is always more efficient than a monopsony. Indeed, the potential bargaining range in a bilateral monopoly case is anywhere between an employer-monopsonist outcome (no unionization) and an employee-monopolist outcome (a single union dominating the entire national labor market). Because the efficiency-outcome of a bilateral monopoly is uncertain, the key is to achieve a relative balance of power between the government and the public-sector union (instead of abolishing union bargaining power all together) so that the net outcome is closer to an efficient outcome under perfect competition. To abolish union bargaining right is to reduce the labor market to an employer-dominated monopsony.

Therefore, I respectfully dissent from your categorical notion that unionization (in public sector) reduces the efficiency of labor market.

Are taxpayers overcompensating public employees? Yes and No. Public-sector unions today probably wield some excessive bargaining power due to their right to strike and voting power – otherwise it's difficult to explain the more generous pension benefits granted to public sector employees than to their private sector counterparts; it could hardly be attributed to higher productivity in the public sector. Excessive union power in turns results in an unfair redistribution of wealth from the public at large to public sector employees. However, it's a far cry from this to arguing that collective bargaining power should be abolished all together (as Governor Walker has done in Wisconsin). If unions are not allowed to bargain collectively, taxpayers will certainly pay much less for the government machine, but that lower price-tag is an inefficient one – because the taxpayers would under-compensate public employees at a wage level below the competitive equilibrium. In other words, it results in an unfair redistribution of wealth from the public employees to the public at large, which is exactly what has happened in Wisconsin.

I would go as far as agreeing with you that the bargaining power of the unions should be curbed to certain extent (Perhaps Governor Walker should seek an audience with Margret Thatcher at some point.) But I cannot agree with a bill that bans collective bargaining in the public sector all together.


Observer your TANS post is pretty good. But the one to me appears flawed.

As for sports......... the whole thing is so far divorced from "capitalism" as to not be relevant to a discussion of LABOR or public employee unions. As they DO get a windfall profits from the free use of OUR airwaves, I'm all for the guys doing the work getting there share. Remember......... they are called "teams?"

Come to think of it.......... Why to T E A M S have "owners?"

"This is why Wal-Marts fights unions so hard. It cannot move; it's business model is location bound."

.......... GIVEN that COSTCO competes with them very successfully and PAYS their folks w/o a billion every year in subsidies so Walmart workers can feed and house themselves, one assumes THE reason the company with the fattest bottom line in world history doesn't pay its "associates" is due to greed and the fast that "they can"

As for "location bound" truth is when a WMT is unionized they close it and move to another town. Ha! Alaska might be ideal for a strike as folks from all over the state shop in Anchorage and Fbks...... a winning vote in a few stores and they'd have to abandon the state!

I agree with most of the rest but it's TOUGH to organize retail clerks etc. BTW I was once a retailer, and THE reason it was nearly impossible to pay higher wages in my shop was that of the guy down the street not paying higher wages. In a store like WMT they move so much product that paying a decent wage would hardly show up in prices. Tally up what one checkout clerk does in the five minutes you're waiting and multiply it by 20 or more customers per hour.

Lastly? Ha! Welcome to the NON-"Chicago School" club!


TANS -- wonders: "Evidently hundreds of millions of union political contributions have nothing to do with patronage. How curious."

.......... it may partially offset the billions spent by the corpies, K-street lobbyists, but probably not the 24/7 constant campaign of Clear Channel's 1,000 plus propaganda pumping stations.


....... and trouble is "locked out players" can not TEAM up and create another more efficient club. Sure would be a cost cutter not to have to give half the revenue to the (plantation?) owners?

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