Arnold Kling  

Employer Tyranny

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Chris Bertram, Corey Robin, and Alex Gourevitch write,

These are just some of the considerations that lie at the heart of any defense of unions, regulation of contract and the workplace, and workplace democracy. Whether we call that defense egalitarian liberal, social democratic or democratic socialist, libertarians reject it as an abridgment of economic freedom and, more particularly, the freedom of owners to do what they wish with their property. But the defense of freedom requires such interventions. Private power, left as unrestricted as the Bleeding Hearts would leave it, simply gives too much scope to private empires of tyranny and domination. Taking freedom seriously means confronting the unfreedoms that ordinary people are subject to in their ordinary lives: the Bleeding Hearts, with their fetish of private property and contract, just can't do that.

That is the conclusion of a long post. Pointer from Tyler Cowen. Tyler has a long critique here. So does Alex. I endorse much of what they say.

Basically, Bertram, et al argue that if workers only have the exit option, they will be enslaved by employer-tyrants. However, if they are given the voice option, through unions and government, they will enjoy freedom.

Whether their argument holds depends on how well the options work in practice. By "works well," I would focus on consequences.

Just be careful about assuming that there must be a perfect option. For example, if the exit option is imperfect, that does not mean that the voice option works perfectly.

My own view is that neither option is perfect. However, I think that the exit option tends to work better, and that adding the voice option, whatever its merits might be in theory, tends to be detrimental in practice, particularly if one takes into account the effects on third parties, notably consumers and unemployed workers.

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COMMENTS (18 to date)
Joe Cushing writes:

To me the biggest problem with unions for a company is not the wages and benefits they demand, it's all the inefficiency they force onto a business. A large company like GM has 1000s of pages of rules and regulations imposed on them by the union for how they can run their business. If you know anything about rules, they make sense for some but are usually bad for others. Having a union means loosing control of your business over time.

PrometheeFeu writes:

I'm not a big fan of the political power that unions enjoy, but I think there is something to consider. We all see that the primary problem with governmental power is the lack of meaningful exit opportunities. Due to immigration restrictions, many people can't move to other countries. And even if they do have that option, many other countries aren't that much better leaving the sea-steading option which isn't actually viable. (not today at least) Now, I think it's worth considering that for some people, that is their relationship with their employer. Quitting their job will land them in abject poverty just as effectively as attempting to steer clear of all sovereign territory. In the past, company-towns made that even more salient. So I think that in some cases, private employer exercise of power is not that different from the exercise of governmental power. In those cases, unions can be a good balancing force.

That said, it's also important to realize that most people in America are not in that situation. They have plenty of options and opportunities even if those options may mean taking a pay-cut. But for the guy who has to choose between his job and homelessness, I don't think his opportunity for exit is any more meaningful than his opportunity for exit from governmental interference.

Tracy W writes:

I got the impression that Bertram et al weren't arguing for voice so much as government regulation of what employment contracts could lay out for workers and that which it couldn't.

PrometheeFeu: in the case of the guy who has to choose between his job and homelessness, one way of improving his situation is to set things up so he has the choice between his job and another job.

This has the nice benefit of also helping the woman with the abusive husband who is considering leaving her current job and her home city to escape.

And it helps the guy who faces homelessness if he loses his job, and his boss is a nice guy, but said boss has just made a few bad mistakes so is going bankrupt and will be homeless himself shortly.

All three of these situations are an argument for making it as easy as possible to employ people, which includes making it easy for the employer to exit the relationship.

Joe Cushing writes:

I've had two jobs that I had difficulty escaping from.

Brandon Berg writes:

Tracy W has it right. If you look at places that actually implement all the kinds of restrictions leftists want, they're good places to have a job, but terrible places to be looking for a job.

MikeP writes:

The issues being worried about pale in comparison to the cumulative assault on the rights of illegal immigrants and prospective immigrants due to federal workplace regulation.

When you get beyond the myopia and look at people who don't have jobs because of workplace regulation, the perspective of the authors is almost comical.

Seth writes:

@Joe Cushing -- What made 'escape' from those two jobs difficult?

Other thoughts:
- I prefer the workers becoming owners rather than forming unions. While not perfect either, that seems to work better than exit alone or exit and unions. Though, I have nothing to back that up.

- In arguments like Bertram et al, I feel there is a type of equivocation on point of view between what's better for everybody vs. what's better for the person who really, really wants to stay at particular company. Bertram et al seems to give preference to the latter and while ignoring the former.

PrometheeFeu writes:

@Tracy W:

I fully agree that it's best to give that person other job opportunity and as a general rule, nothing has been so effective at that task as the free market.

My point is that I think libertarians in general are making the mistake of believing labels too easily. Just because one thing is labeled government while the other is labeled private firm doesn't mean they should be analyzed as such. There are lots of grey areas. If I can meaningfully move away from a town, the relationship of residents and city council end are quite similar to that of a landlord and its tenants. Fees are collected, services are provided, if you don't like it, you can move out. On the other hand, if I have no meaningful option apart from my job, my employer wields over me a power not unlike that of the government. Sure, he can't send me to jail, but he can condemn me to a life of misery.

MikeP writes:


And yet people move in order to be near the job or industry they want. They don't move in order to be near the government they want -- unless they are the unemployed poor looking for the best benefits or the unemployed rich looking for the lowest taxes.

Indeed, it is the most accurate model to say you live where you live, and the government imposes itself on you because you live there. It is rare that employers have that kind of influence on you.

PrometheeFeu writes:


I must say that you are empirically wrong. The most obvious example is people who move in order to be in a particular school district. But that is merely the most direct example. Law enforcement, a key city government activity has a direct impact on the local crime rate which has an impact on people choosing to move in or out. A poorly maintained city street will make any neighborhood look bad and drive potential buyers away. So will smashed street lights, garbage on the streets, etc... Cities provide lots of services.

Now of course, it is rare for a person to move just because of things that are caused by local government policies. But to paraphrase someone, if you don't add "at the margin" at the end of every sentence, you're not doing economics.

MikeP writes:

Look at two cities with similar populations by class and income. I would guess that their streets are similarly well paved and their garbage similarly well picked up.

You might think the population sorted itself into the cities because of the city services, but I would contend that the city governments evolved to serve the desires -- and the tax base -- of the population.

School districts are a perfect example. In most cases, school districts are exactly as good as the parents within the districts. The parents bring the kids, the kids bring the success, and the success brings other parents. It's a case of parents wanting their kids to go to school with the kids of other parents who want their kids to go to quality schools. All the school district has to do is not screw it up.

At the margin, parents who choose a school district are selecting their kids' classmates. The school district just happens to be governing them.

MingoV writes:

Here's the union issue in a nutshell:

Joe Private Businessowner should have the right to bargain directly with individual employees and ignore any kind of union comprised of multiple employees. Instead, governments force Joe to negotiate with unions to stay in business. Joe should not have fewer rights than others. An association of employees should not have more privileges than other groups.

PrometheeFeu writes:


Of course the process isn't unidirectional. All that I'm saying is that the relationship of residents to local government resembles a lot more the relationship of renters to landlords than the relationship of citizens to the federal government.

PrometheeFeu writes:


That's well put.

Thomas Boyle writes:

It's not just the right of exit from the employer relationship that matters. It's also the right of exit from the union. Where the employee has a problem finding an alternative employer, the union claim is that this is the situation where a union is important. However, absent a right-to-work law, if the employee cannot escape the employer, then the employee also cannot escape the union - and the employee is then open to exploitation by both the employer and the union.

Russell Nelson writes:

@PrometheeFeu You meant: "if you don't add "at the margin" at the end of every sentence, you're not doing economics at the margin."

Arthur_500 writes:

A company that allows itself to enter into a contract that is untenable will not be able to stay in business. Take GM for example (please). It entered into a variety of contracts with dealers, suppliers, and Unions giving it the highest costs in the automotive business. they could no longer sustain this and bankruptcy was their only option.

I don't pity the UAW for getting themsleves a good deal. I pity the taxpayers for allowing the bankruptcy process to be abridged at the expense of other stakeholders, other unions, and the rule of law. GM should have gone bankrupt and the pieces would have been picked up by interested parties.

the UAW, et al were greedy. No question. However, management gave them a contract. We have seen the same thing in public Schools, Cities, States and the Country. Sign the contract to avoid short-term bad press and let someone else pay the bill.

I admire Wal*Mart for closing a store when being given the option of unionizing. that's their perrogative. Likewise it is the perrogative of union members not to do business with non-union companies and pay more for the services. It is also an option of those workers not to work for conditions they decide are unfair or unsafe.

We will never live in a perfect world (until I become dictator) but the Unions had a place in bringing about some necessary changes in the workplace. The idea that they are a necessity may be highly over-stated now that so many of those workplace situations are history.

The biggest problem with Unions is that they have to show they are still relevant and they can only do that by getting ever more, wages, benefits and members. This can easily make the worker portion of the budget unsustainable and cause companies to seek better conditions for example, in China.

Beth writes:

Arthur 500 said, "...the Unions had a place in bringing about some necessary changes in the workplace..."

Arthur, I am not certain that is entirely true. I just finished studying Union history in America recently and I noticed for the most part that meaningful changes in the workplace that happened in the 18th and 19th centuries took place in increments before some Unions actually used their powers through government.

I also learned that the changes by Unions forced upon employers (that were in the employee's favor and benefit) came with costs in other areas. Employees may have gained in better working conditions but it came with sacrifice in other areas. Unless employers had already implemented improvements on their own, those forced by Unions had unintended consequences.

I am convinced that working conditions would have improved on their own in the US and other countries without Unions. It is easy to point to Unions and say they did all the work. I think they get credit where it is not due and no one considers that alternatives forgone with the forced changes that they were successful in implementing.

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