Commentary: The Monopoly Hiding in Plain Sight

by  Michael D. Farren and Christopher M. Kaiser


With persistent inflation and growing concerns over a recession, pundits, policymakers, and the president have expressed concern about an alleged lack of competition lurking in the dark corners of the U.S. economy. As President Biden himself said, “capitalism without competition isn’t capitalism, it’s exploitation.” From Big Tech to baby food, both sides of the aisle are on the lookout for monopoly power. But sometimes the best place to hide is in plain sight.

Unbeknownst to many, monopolies aren’t limited to huge companies ostensibly controlling the prices of the goods we purchase. Labor can be monopolized too, and a lack of competition in the workforce causes its own problems. Case in point: While labor unions serve a vital purpose, laws that turn them into miniature monopolies have made them less answerable to their own workers. This is a rare opportunity for bipartisan cooperation among competition crusaders.

Finding incontrovertible evidence of monopoly power usually requires sophisticated economic research, but here, no fancy analysis is needed. That’s because the National Labor Relations Act (NLRA) of 1935 gives certified unions — those approved by a one-time majority vote of workers — monopoly power through “exclusive representation.” In unionized workplaces, employers can only negotiate with that single union — it’s illegal for any other union to bargain on behalf of similar workers at that same business. And because a union must represent every worker — even those who would prefer to negotiate on their own behalf or those who would prefer a different union — it receives a monopoly-style privilege.

Critiques of exclusive representation are nothing new, but not enough attention has been given to how it undermines the welfare of the very workers it ostensibly tries to protect. The lack of competition created by the policy inhibits the emergence of new kinds of unions that could better meet workers’ needs. This isn’t to say that unions don’t strive to provide quality service, but unions’ insulation from competition means that they are naturally less responsive to the desires of their own members. There’s just no stronger motivator than the potential of losing one’s clients, which is nearly impossible under current labor law.

Because of exclusive representation, union workers receive lower quality services and pay higher union dues than they otherwise would. They deserve the union of their choice, not just the one that monopolized their workplace once upon a time.

Economic theory offers no justification for granting this monopolistic privilege. Rather, exclusive representation was a political idea intended to help assembly line workers push back against the oversized bargaining power of factory employers during the 1930s. But tipping the scales toward unions didn’t necessarily benefit modern workers.

Former President Obama clearly articulated that “competition is good for consumers, workers, businesses, and our economy.” The Biden administration seems to share this sentiment, having argued that “the American promise of a broad and sustained prosperity depends on an open and competitive economy.” So it should be disconcerting to the president that competition for worker representation is severely restricted, especially since he also believes that “government should never be a barrier to workers organizing.”

At the moment, rewriting the NLRA’s mistake isn’t politically feasible. But rethinking exclusive representation by recognizing the open secret that unions currently function as government-enabled monopolies would be a step in the right direction.

Imagine if unions were connected to workers rather than workplaces. They could provide a better safety net for those between jobs. Health insurance, unemployment insurance, and professional development could be provided by unions or employment co-ops, rather than by employers, which would make economic downturns less risky for workers. Tying these services to your employer is the equivalent of putting all your eggs in a basket that someone else is carrying.

The measure of a union should be how well it serves its members. If workers had the freedom to join the union of their choice, worker organizations would be motivated to constantly find new and better ways of serving their customers. This is a bipartisan compromise that could both improve the labor market and reverse unions’ multi-decade decline.

President Biden promised to be “the most pro-union president,” but in this sense, maybe he isn’t pro-union enough. And despite his opposition to monopoly power, maybe he’s not worried enough about that, either.

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Michael D. Farren is a senior research fellow and Christopher M. Kaiser is a research assistant with the Mercatus Center at George Mason University.
Photo “Franklin Roosevelt Signing National Labor Relations Act” by National Labor Relations Board.



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