Why I Hate Unions
Aren't unions great? They're the reason you have a bunch of work benefits today!
Yeah... No.
Labor productivity growth in a competitive market is what raises total labor compensation (no, that EPI graph is not accurate). That compensation can take the form of all those work benefits in the marketplace if there's a demand from workers. Mandating them through legislation simply means that workers don't get a choice when it comes to other forms of compensation. For example, higher wages.
But, that's not all. When unions achieve higher wages for their members, this is done at the expense of someone else, since it's not increased labor productivity in a competitive market that made them happen (= higher production costs for businesses). Who's that someone else? Well, it's usually would-be workers who won't get employed in the future, especially since unions prevent companies from firing inadequate workers and replacing them with more productive ones. It could also be consumers, who will now pay more for the same products, and this has regressive effects because wealthy people tend to spend a smaller proportion of their income, as Keynesians love to point out.
Furthermore, it could result in the company investing less in the capital improvements that would've permitted an increase in labor productivity in the future, so instead of getting higher wages later on, you get higher wages at first but lower ones in the long run. As Bastiat would put it, there are things you see (higher wages right now) and things you don't see (lower wages in the long run), and since people only see the benefits, they're convinced that unions give them higher wages overall.
The typical pro-union thinking is that the business owners will simply make less in profit: Can’t Amazon afford it, with the record profits they've been making, you evil capitalist?
Yes, they can afford it, but that's not the question. Profits are a market signal, meaning that entrepreneurs will allocate their resources where they can make the greatest profit. In a free market, it means they'll allocate them where there's the greatest demand among consumers. But, what if rates of profit are distorted? If entrepreneurs make less in profit where there's the greatest consumer demand? They'll allocate their resources elsewhere, leading to inefficient outcomes.
Does anyone benefit?
Yes, some workers benefit from what unions do, just like some renters benefit from what rent control does. However, in both cases, it's a drain on other workers/renters. It creates special privileges for some, and disadvantages for others. This tends to create concentrated benefits and diffused costs, meaning that the costs are distributed widely, so if we go back to Bastiat: you don't see them. That's why union jobs are often better compensated than non-union jobs, but when unions become dominant (ex. Scandinavia), they lose their ability to steal from non-union workers and, paradoxically, the labor market often becomes more flexible than in many less unionized countries (it seems to incentivize market reforms). That’s what happened in Scandinavia.
What about monopsony?
The question of market power is a common reply to the arguments I made in this tweet, but it's a bad one. Monopsonies are viewed as market failures but actually serve a purpose in a free market. They're signals that a need is not being satisfied, so they are the perfect opportunities for entrepreneurs to make a profit by filling in the gap. Free-market monopsonies can also make large initial investments worth it since sufficient profit is needed to cover those upfront costs, but if the rates of profit are distorted, nobody will make the investments.
This is not to say that market power is always good, because it can be created by legislation. Indeed, there would be less market power if there were fewer regulatory barriers to entry. So, market distortions increase market power, and that includes the ones unions and labor regulations create, yet its prevalence is a common argument for unions and labor regulations.
Find the error.