Why unions tend towards self-destruction

As pointed out by Mish Shedlock, the public MTA union has brokered an 11% pay increase while municipalities across the country struggle to make ends meet. The callous disregard of public unions for their taxpaying “employers” is highlighted in this article by the candid comments of an Albany police union chief, who stated for the record that “If I’m the bad guy to the average citizen… and their taxes have go up to cover my raise, I’m very sorry about that, but I have to look out for myself and my membership.”

Given that most local and state government budgets are complete disasters, the only possible result of such union intransigence is massive layoffs. It’s already happening, in fact, as municipalities all over cut back on police and fire budgets. Some towns have even shuttered their police departments, relying on county sheriffs for protection.

Plot illustrating the steady decline in union membership over the past several decades.

It’s pretty clear that unions, far from providing job security to their members, more often price their members out of a job. One need only look at the massive decline in American union membership (see the included figure) to see proof of this. Union bosses get rich at the expense of the junior members, whose jobs are cut. But how is this possible? How can union presidents continue to get elected despite the fact that they are clearly pricing their members out of existence?

The answer, I think, is that unions are inherently self-destructing because of a survivorship bias in their member voting, exacerbated by union domination of the labor prices in certain fields. When union jobs are lost, those who are fired are likely to seek employment in other fields, as unions do everything they can to ensure that when a job is priced out of existence at one firm, it is priced out of existence at all firms. That’s why there are three (for now) US auto companies but only one union. If companies do it, it’s called price fixing. If labor does it, it’s called the United Autoworkers Union.

Intuitively, one would expect that any union boss so arrogant as to insist on pay raises unaffordable by the employer would get voted out by union members. However, if you lose your job you’re probably not going to sit around paying union dues, you’ll probably going to start looking into a lateral move into another trade. Or you might just give up looking for work or retire early. The point is this: the people who continue voting for the status quo union leadership are, by definition, those who have benefitted from union membership, not the millions of workers who have had to leave their chosen profession due to the union destroying their jobs.

Imagine a hospital which has such poor medical care that anybody who has more than a cold dies, but whose cafeteria serves fillet for every meal. Customer surveys of this hospital would be nearly unanimously positive; all the people who leave the hospital will have had a great time, but the corpses can’t complain. This pretty much describes what is happening at unions.

4 thoughts on “Why unions tend towards self-destruction

  1. Fred Woodbridge

    As you already know, I despise the very idea of unions. It is, however, interesting to read your perspective on why they continue to exist even as membership numbers deteriorate.

  2. Alain DeWitt

    I think unions served a purpose at the end of the 19th century and the turn of the 20th, but now with numerous laws and regulatory agencies in place, they have become counterproductive.

    I am deeply troubled by the idea of government employees unions. Government is supposed to be an arbiter of last resort between labor and management. Having government unions, skews that equation. And, if you don’t like making your living working for the government, go into the private sector.

    1. Jonathan Post author

      I think we’re seeing the beginning of the end for unions, especially public ones. They’ve actually pushed so hard that they are bankrupting their employers, which is hard to do when your employer is the local government. I kind of hope we get a double-dip recession, because that will cause a massive wave of municipal bankruptcies, allowing courts to invalidate union contracts. The only way for things to get better is for these ludicrous obligations to get cleared out of the system.


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