Are trade unions monopolistic ?

Contemporary capitalism is monopolistic in character. A question arises about the bargaining power of labour in such a system.


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In the labour market unorganized labour cannot hope to bargain successfully. It suffers from certain serious limitations vis-à-vis the powerful employees. But labour can verily improve in position through organization. The monopsonistic bargaining power of the employers then is counterbalanced by the monopolistic power of the organized labour.

J E. Meade maintains that “trade unions are monopolistic bodies with power and incentive to rig the market to their own benefit, not less than other monopolistic bodies.


According to Halm, labour unions undoubtedly are monopolies an the economic sense of the word. To what extent under monopolistic conditions their wages would be higher than they were’ previously under competitive conditions would depend on certain factors. Halm has listed 4he following factors.

1. Labour may simply appropriate the share of the employers’ profit which was withheld previously.

2. Trade unions may be able to get a share in the monopolistic profits of certain industries at the expense of consumers and of other labour groups.

3. Such an organized union can also raise its wages at the expense of labour by restricting entry into the organized field.

4. Trade unions may try to get a share of the competitive profits of industry. This may compel the marginal producers to leave the business. This will increase unemployment. In this case one group gains at the cost of the other.

5. The danger of unemployment can be reduced when a liberal monetary policy permits general price inflation. Then the increase in real wages will he less than the increase in money wages.

6. Wage rates case also be increased, without inflationary conse­quences, if the increasing purchasing power of wage earners is met by a sufficiently increased supply of commodities.

The problem of organized labour has become the most crucial and difficult issue in the-modern times. Marx had shed tears at the reckless and cruel exploitation of labour, during the nineteenth century. Had he been alive today, he would have been immensely shocked at the greed, selfishness, irresponsibility and inefficiency of the organized labour, particularly in the developing countries like India.

The employer is simply helpless and often has to dance to the tune of labour. Organized labour in certain public enterprises in India, such as steel, banking, insurance, shipping, port and power generation, etc., have succeeded in creating cases of affluence for themselves at the cost of the nation. The implementation of a national income policy has been stubbornly opposed by these employees. While controlling mono­poly in India the government Would do well to break the irresponsible monopoly of labour at first. This is a vital economic -issue and the politicians should not be scared to face it.

Prof. Galbraith was of the view that such labour unions were to be encouraged as they exercised “countervailing power” against the mono­polistic employers. Unfortunately today in almost every capitalistic and developing economy labour has started exercising “over-countervailing power”. We have already mentioned it as a major development in the capitalist economies. Henry Simons, etc., therefore favour the restoration of competition not only in the product market but also in the factor market.


So employers should be prevented from combining to fix wage rates On the other hand, we should promote as much competition as possible in the labour market. Besides, collective bargaining power also should be controlled and regulated.

F. Machlup has correctly said ”while denigrating monopoly of one type we should not encourage monopoly of the other type.”

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