The absence of unions is a market failure now?

It is to laugh at Ritchie:

The absence of unionised collective bargaining in far too many UK sectors is a market failure

Nope. Unionised collective bargaining might correct a market outcome in a manner that some will approve of. But the absence isn’t a market failure. No more than the absence of monoposonist employers is a market failure.

Think through what unionised collective bargaining is: it’s the active collusion of suppliers to charge monopolistic prices for their output. The absence of this is not a market failure. It can be all sorts of other things but not a market failure, just no way.

12 thoughts on “The absence of unions is a market failure now?”

  1. right. You might be able to argue that unionisation corrects some sort of market failure (in which employers are able to collude to hold down wages or something), as some sort of second-best solution.

  2. “markets are only efficient when the participants play on a level playing field”

    I hardly know where to start with this. Effectively, it seems like only two identical twins with identical bank balances and identical jobs at identical salaries in the same company with the same boss married to identical twin sisters in the etc. etc. can ever do business with each other.

    I know I’ve said it before, but the man is a weapons-grade cock-end.

  3. “No more than the absence of monoposonist employers is a market failure.”
    Isn’t the state a fairly significant monopsonist employer? (Yes, I know your solution would be less state rather than more unions.)

  4. The absence of unionised collective bargaining is due to the state regulating working conditions. Whether this was done to help unions or undermine them I have no idea.

    Obnoxio The Clown said: “I hardly know where to start with this.”

    He is also making the mistake that markets = efficient when it is merely more efficient than the alternatives.

  5. It CAN be a market failure: When there is no active collusion between labourers and yet there is a constant trend to wages.

    If you have NHS Doctors charging north of £100k to work hours that are practically a part time job, in this situation, you have a quazi-cartelised workforce none of whom are *colluding*, but where there is no method of training staff to compete with them because the Labour party *deliberately* fucked up and wrecked every possible route towards training to be a doctor, except years of medical school at mater and pater’s expense.

    That is a market failure that sees the NHS endlessly recruiting foreigners to run a healthcare system that I am not allowed to work in, because where I get half a million quid to join it is my own lookout.

    Union absence is also a market failure in the case of US Airline Pilot salaries.

    Airline pilots are an example of a situation for unionised bargaining of the form you describe, and yet where they earn laughable money compared to the past. The job has not changed, but their pay has categorically fallen. The reason for their unions not being able to win pay rises is that following dereuglation of the US industry in 1978, the airlines can renege upon any deal made with a union by simply invoking Chapter 11 bankruptcy law and cutting wages as part of a “restructuring plan.”

    They also like inexperienced new hires on $22 – $25k a year over better trained staff with more flying experience, a market failure in that there is *no premium for experience or flying skills*, as Chesney Sullenburger testified to congress about.

    You might think, “So what? All of this leads to low prices for me as the consumer.”

    Except it doesn’t, in that airline profitability has nothing to do with staff pay and more to do with fuel costs and the terms and conditions of equipment finance. Skywest Airlines in the US is currently expanding, purchasing 100 examples of the crummy new Mitsubishi MRJ regional jet, and yet as this analyst notes, they pay some of the lowest wages in the industry.

    The market is therefore failing to pay them the correct rate for their work, and the management, faced with labour market disinterest at such pay rates, is reduced to doing what it always does: Endlessly touting a “looming pilot shortage,” in the popular press as a way of recruiting people, where you, well, pay for your training out of your own pocket.

  6. Bloke in Costa Rica

    By “efficient markets” d’ye think Murphy means the elimination of arbitrage opportunities by incorporation of past and present information into asset pricing?

  7. @Andrew S Mooney

    ‘[Airlines] also like inexperienced new hires on $22 – $25k a year over better trained staff with more flying experience, a market failure in that there is *no premium for experience or flying skills*, as Chesney Sullenburger testified to congress about.
    You might think, “So what? All of this leads to low prices for me as the consumer.”
    Except it doesn’t’

    Are airlines really hiring pilots on $22k a year, Andrew?

    The Cheeseburger experience was a once in a generation event – I know there are a lot of bird strikes but in most cases you can either RTB or not.

    That is, I know of no other example in recent history where a pilot needed to land in the Hudson and could have done but for his own ineptness (though I admit this is from memory).

    That’s not to say that Cheeseburger did not do absolutely brilliantly, but in an era when passenger aircraft increasingly fly themselves I can see why he and his ilk are being phased out.

    I can also see why he doesn’t like that, and why one flight in X,000 or X,000,000 you might wish you had a more experienced man at the helm.

    However, I then consider Tenerife – the worst plane crash in aviation history… caused by KLM’s leading pilot, whose picture was on the cover of the in flight magazine.

    Or numerous crashes involving airlines from the far east, where junior pilots dared not countermand senior pilots, who were making egregious errors, and everyone died as a result.

    Or many crashes where highly experienced pilots relaxed and the aircraft bit them in the arse.

    That is, seniority and experience alone will not save you, and may in fact kill you as often as it saves you.

    Finally, I don’t suppose any thinking person believes for a moment that cutting the annual salary of a pilot who makes many, many flights a year by a few thousand quid is going to have that much effect on the price of an individual ticket.

    Doing away with the pilots altogether and having robot trolley dollies probably wouldn’t make that much difference, compared to fuel costs, landing rights, marketing spend, head office, maintenance, financing the planes etc etc.

  8. Bloke in Central Illinois

    Companies have always been able to renegotiate union compensation contracts in bankruptcy…that has nothing to do with deregulation. And in any case, the legacy airlines like United that have been through bankruptcy still pay pretty well. It’s non-union regional carriers like Skywest and Mesa that pay really cheap rates for newbie pilots.

  9. Andrew S. Mooney

    Your logic is really impeccable…

    The fact that those airlines that pay low wages are doing well and expanding is proof that there is no connection between lower wages and airline profitability?

    Also, I do think the pilot job has changed over time. In case you hadn’t noticed they now have to do very little manual flying…

  10. Interested: Read Richard Aboulafia’s site.
    Yes. They are. You start on 22k a year. There is no premium, whatsoever for flying skills. If you lose your job and move to a new one at another airline, you are at the bottom of the seniority list, and that is potentially what you are paid.

    Bloke in Central Illinois: That is the problem, well done. But Airlines were not able to do that prior to 1978, because one facet of airline regulation included industry employee history and pay, which was a massive issue discouraging mergers.

    When Pan Am merged with National Airlines in this period, one issue was that National Airlines employees were a pack of hicks who flew around Florida, and Pan Am flew the “world’s most experienced airline,” to every continent except Antarctica, and yet their pay was the same. Post Deregulation, any skills or hours flown that you had counted for nothing. It’s one reason Pan Am ultimately died because labour disputes over this issue wrecked the management.

    Emil: Yes. There is no connection between *literally* paying your pilots shitpoke pocket money, buying a load of shoddy airliners on credit, and your airline’s profits. Welcome to capitalism.

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