Tuesday, February 2, 2016

Collective bargaining is closer to perfect competition

Collective bargaining moves closer to the definition of "perfect competition" -- for whatever that's worth.

Jimmy Hoffa would say that labor owned half the means of production -- the labor half -- and that short of a law requiring labor, ownership and the (ultimate) consumer to get together to set all product prices (an impractical way to sell candy bars), that collective bargaining is the only way to keep labor in the price setting game.

I know the dictionary definition of "perfect competition."  I don't know if economists (or some economists and not others) think that any deviation from such results in lower efficiency.  Seems to me that unblanced market power just rearranges distribution of the "lump of product."  No matter.

What I want to load on the balance in favor of labor union practicality is that, by definition, unions bring the market closer to perfect competition -- by balancing the monopoly power of labor -- one seller (ask any conservative if a labor union is a monopoly) -- against the monopsony power of ownership -- one buyer.

Ownership could counter that there are many "one buyers" in today's labor market.  Which surely moves the market closer to perfect competition than the extreme of one big buyer hiring all labor: which might allow ownership to pay computer programmers the same as burger flippers.  What multiple monopsonists do create (what we do have in the US today) is a subsistence-plus market wherein labor's price is set by subsistence (if that much) plus how ever much more labor is worth compared to other labor -- working up a skill increment ladder -- rather than paying labor by however much the ultimate consumer might have been willing to shell out.

If another definition of perfect competion/efficiency might be the balancing of market satisfactions/dissatisfactions all around -- as is achieved when labor/owner/(ultimate) buyer get together to make a deal -- then collective bargaining is the only known way to achieve that kind of balance. 

US labor market monopsony hits the lower skill labor market three-ways hard: the customary race-to-the-bottom price problem, aggravated by the infinite supply of interchangeable employees, which employees have to sell today or "throw away" (maybe miss meals).  

A subsistence-plus labor market ultimately distorts output in favor of which employees may be manhandled the most/least.  Collective bargaining more structures an economy to produce in accordance with pure consumer preference.

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