What’s wrong with the transit union?

January 4, 2009 at 14:09 | Posted in economics, monopoly, monopoly power, oc transpo, ottawa, unions | Leave a comment

I couldn’t have put it better. Mr. McGruer will probably face the usual hogwash about ‘natural monopoly’ and that kind of thing, but if there ever was a clear case of a ‘social good’ that is NOT a ‘natural monopoly’, mass transit is it.

by David McGruer

Hostage – noun, 1 a: a person held by one party in a conflict as a pledge pending the fulfillment of an agreement b: a person taken by force to secure the taker’s demands 2: one that is involuntarily controlled by an outside influence. (Merriam-Webster online dictionary)

Whereas many people see the problems of the transit union as solvable provided there is enough money and will to do so, I see permanent problems as an inherent part of the very nature of the union and so not solvable in the real world.

OC Transpo head Alain Mercier says the transit union is holding the city hostage. Looking at the second part of the dictionary definition shown above, I must agree that the people of Ottawa are being partly controlled by an outside force against their will. But what exactly is the source of this force and what allows it to continue? Union power comes from rules established by the use of government force against the rest of the population.

First is the establishment of a monopoly. The transit company and the union have an absolute monopoly on the transit system. No competitors are permitted. In businesses not propped up by government, socialists decry what they call monopolies (in fact only temporarily the top competitors and we even have laws to prevent these) but when it comes to the business of labour unions they insist on monopoly power. A monopoly prevents competition and much innovation, keeping prices higher and ensuring permanent inefficiencies. Observe that the transit union leader proudly admits that the current strike was started at a time when it could inflict maximum harm to the most people – in winter storm season, just before Christmas in the midst of a severe economic slowdown.

Unions try to improve their lot by excluding other workers from job opportunities. In a free market the use of such force is against the law but with government assistance unions effectively prevent others from competing for their jobs. This keeps people who are willing and able to work unemployed. Because they require victims, if everyone was equally unionized then unions wouldn’t work.

Unions, especially in monopolies, attempt to operate outside real-world economics by taking the determination of wages out of the market. A regular wage is a result of competition among employers for workers and among workers for jobs. The transit union wage has little to do with supply and demand by consumers and is mostly a function of holding the consumer hostage until they pressure government to “do something.” This usually means throwing money at the problem until it goes away, leaving the roots of it to be faced again another day.

Unions can even use force against their members. In the present strike we clearly see union leaders preventing their members from even voting on an offer they might well accept. Who denies union employees the right to speak on the subject of their own contracts? Yet union control is so powerful even this can be prevented, while the law stands by rendered helpless.

Unions are also heavily dependent on government inflation policy. It is the normal path of progress to increase efficiency and lower the prices of goods. Employees increase their purchasing power (lower prices) through the means of and to the degree of their increase in productivity. In order for union leaders to be seen to be accomplishing something, union wages must rise in nominal dollars. In a free market, dollar wages need not rise and thus the union leaders would be revealed as a sham. They depend on inflation to be able to point to dollar wage gains. Inflation erodes the value of dollars over time and hurts most the weakest in society – those living on a fixed income and those without union force to push up their wages at the expense of others.

The problems of transit in Ottawa will not have a permanent solution until a free market is restored: competition for the consumer dollar is allowed, taxpayer subsidies are ended and employers and individual employees are freed to negotiate contracts void of coercion. It is a huge task to undo the damage of decades and we appear short of leaders willing to even publicly identify the problem, much less face it. Meanwhile, we must not give in to the current strike against the citizens of Ottawa.

David is a long time east end resident and amateur philosopher. Comments to the editor are most welcome.
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