Mar­ket forces mean’s that strike ac­tion is ob­so­lete

The Pak Banker - - OPINION - Andrew Lil­ico

WITH ju­nior doc­tors agree­ing to an all-out strike in April and teach­ers con­sid­er­ing strik­ing over the Gov­ern­ment's new school academies pro­gramme, it seems like a good mo­ment to ask when, if at all, we should still al­low strikes? Con­trary to pop­u­lar opinion, there is no "right to with­hold labour" or "right to strike" in the UK. If you don't turn up to work with­out a good rea­son, you are in breach of con­tract. If you try to en­cour­age oth­ers to stay off work with you, you will be in­duc­ing a breach of con­tract by oth­ers and could be sued for dam­ages by the firm.

What we do have in law is a spe­cial im­mu­nity from breach of con­tract suits for unions in­cit­ing strikes, pro­vided that those unions have fol­lowed the re­quired rules such as bal­lot­ing mem­bers. We've had these spe­cial pro­tec­tions in place for unions for more than a cen­tury, but it's very rarely asked whether we need them any more.

So what is the pur­pose of a strike? A strike ex­ists to back up col­lec­tive bar­gain­ing by work­ers over pay and con­di­tions and in sup­port of staff felt to have been treated un­fairly (for ex­am­ple, by be­ing dis­missed). But one does not need to think about it very long to find it odd that this is per­mit­ted.

Af­ter all, we don't al­low col­lec­tive ac­tion in most com­mer­cial set­tings. Sup­pose all the plumb­ing firms and sole-trader plumbers in your area got to­gether and agreed to raise the prices they charged you for plumb­ing work. Two things would hap­pen. They would be pur­sued by the com­pe­ti­tion au­thor­i­ties and the ring­leaders could be pros­e­cuted for form­ing a cartel. In eco­nomic terms, col­lec­tive bar­gain­ing via unions is ex­actly the same thing - the for­ma­tion of a cartel to ex­tract higher prices or other ad­van­tages through mar­ket power.

Now, it may sur­prise some read­ers, but there are cir­cum­stances where eco­nomic rea­son­ing sug­gests it will be de­sir­able to al­low car­tels (and in par­tic­u­lar car­tels of work­ers) to op­er­ate. A clas­sic case would be the con­di­tions un­der which unions orig­i­nally re­ally got go­ing. If there is one very large em­ployer in an iso­lated area, and op­por­tu­ni­ties to travel else­where are lim­ited, such that if you do not work for that em­ployer you do not work at all, the firm is what is called a "monop­son­ist" or "sole pur­chaser of labour" - a form of mar­ket power.

Un­der these cir­cum­stances - with­out unions - the firm could use its mar­ket power to force down the price of labour or work­ing con­di­tions be­low what work­ers would get in a prop­erly com­pet­i­tive mar­ket; one in which they could take a job else­where if they didn't like what was on of­fer at that firm.

What col­lec­tive bar­gain­ing via a union does in these cir­cum­stances is to bal­ance (or "coun­ter­vail") the mar­ket power of the firm by giv­ing the work­ers their own col­lec­tive mar­ket power. With bet­ter bal­ance, the fi­nal re­sult may be closer to the out­come that would arise in a com­pet­i­tive mar­ket.

For most of the his­tory of unions, this kind of case has been very rel­e­vant across im­por­tant parts of the econ­omy. Even af­ter lo­cal monop­sony power for firms faded in some ar­eas, as trans­port links im­proved and work­ers had more chance to go else­where, mo­nop­o­lies and car­tels in many parts of the econ­omy were looked upon be­nignly, ac­tively en­cour­aged or even en­forced when gov- ern­ments cre­ated na­tion­alised mo­nop­o­lies.

Even in sec­tors where there might be com­pe­ti­tion on the con­sumer side of the mar­ket, that could be be­tween a small num­ber of firms that were lo­cated in very dif­fer­ent parts of the coun­try ( eg one firm might be in Sun­der­land, an­other in Birm­ing­ham and an­other in Ox­ford) and cer­tain work­ers might have in­dus­try- spe­cific skills. It might not be com­pletely im­pos­si­ble for work­ers to move, but it could be suf­fi­ciently in­con­ve­nient to give firms at least some monop­sony power.

But today, across the vast ma­jor­ity of the econ­omy, we have much bet­ter mech­a­nisms than al­low­ing worker car­tels for ad­dress­ing mar­ket power. Com­pe­ti­tion au­thor­i­ties can in­ves­ti­gate sec­tors and man­date reme­dies. And if work­ers are treated un­justly, strikes are not the an­swer - le­gal ac­tion is.

Across most of the econ­omy, strikes and the col­lec­tive bar­gain­ing they sup­port should sim­ply be for­bid­den as the anti-com­pet­i­tive prac­tices they are.

Mer­ci­fully, there are so few strikes these days it hardly seems worth ban­ning them. But in prin­ci­ple the way it should work is that un­less a sec­tor is of­fi­cially deemed to be a monop­sony pur­chaser of labour, col­lec­tive bar­gain­ing and strikes should be for­bid­den un­less it is sought by the firms them­selves. (Some firms might find it more con­ve­nient to deal with one union bar­gainer and feel that was worth the cost of creat­ing a work­ers' cartel.)

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