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Antitrust Law Journal

Volume 85, Issue 3

An Antitrust Exemption for Workers: And Why Worker Bargaining Power Benefits Consumers, Too

A. Douglas Melamed and Steven C Salop

Summary

  • Based on the authors’ economic analysis that indicates that moderate worker bargaining power when negotiating with employers leads to increases in downstream output and lower prices as well as increases in wages and employment, this article proposes legislation to establish an antitrust exemption to permit the formation of voluntary worker associations that enable workers to engage in joint negotiation with employer firms that are likely to have “monopsony bargaining power.”
  • Members of the associations, which the article calls “joint negotiating entities” or “JNEs,” could include both those workers deemed to be “employees” and, in some situations, those regarded as independent contractors. Each JNE would be treated as a single entity and generally subject to the same antitrust treatment as other single entities.
  • The JNEs would have fewer rights and less power than traditional unions and would thus be unlikely to become monopoly sellers of labor. While the proposed antitrust exemption and related worker protections would be limited, they nonetheless could lead to benefits for both workers and downstream consumers, whose interests would not conflict.
An Antitrust Exemption for Workers: And Why Worker Bargaining Power Benefits Consumers, Too
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Introduction

A growing body of economic research finds that employers commonly have monopsony power in labor markets and that this power is, predictably, commonly used to suppress both worker compensation and employment below competitive levels. There has thus been growing recognition by those who have studied labor markets that enhancing worker bargaining power will further a number of policy objectives. This power also has now been recognized in the 2023 Merger Guidelines. While the kinds of changes that commentators have proposed would go a long way toward improving the economic status of workers and might have other desirable effects as well, they are controversial and might not become law. Examining the problem from the perspective of antitrust, we propose a modest alternative that warrants consideration both on the merits and because it might face less opposition than other proposed changes.

In this article, we propose legislation to establish an antitrust exemption to permit the formation of voluntary worker associations by employees and certain types of independent contractors that would enable the workers to engage in joint negotiation (i.e., collective bargaining) with the firm that hires them in situations where that firm—which we refer to as the employer—is likely to have “classical” monopsony or dominant bargaining power, which we refer to collectively as monopsony or monopsony bargaining power. Where employers have such monopsony bargaining power, both wages and employment (and thus labor market output) are suppressed below competitive levels. Joint negotiation by appropriately circumscribed worker associations could offset or countervail this employer power to some extent. As we explain below, the result would be both increased wages and increased employment (i.e., output) in the upstream labor market. The result also would be increased output and reduced prices in the downstream product markets in which the employer sells the products to which its workers contribute.

In other words, permitting voluntary worker associations would be likely to benefit both workers and downstream consumers in the affected markets. A joint negotiating entity or “JNE” would not create a labor monopoly, which we refer to as a monopoly union. Instead, where employers have monopsony bargaining power, the JNE would simply countervail that power to some extent. The effect would be to increase the wage rate (which we use as a shorthand for worker compensation). The increased wage rate would increase employment by attracting more workers or inducing existing workers to work longer hours. Both the wage rate and employment would move closer to competitive levels. Assuming no reduction in productivity, the result would be increased output and reduced deadweight loss in both the labor market and the related downstream product markets.

Because monopsony power in labor markets can harm both independent contractors like gig workers and those who are deemed to be “employees” under applicable employment law, both independent contractors and non-unionized employees would be permitted to form or become members of JNEs. Each JNE would be treated for antitrust purposes as a single entity that is owned by its worker-members and is generally subject to the same antitrust treatment as other single entities. In these respects, JNEs would be analogous to labor-outsourcing firms that are owned by their workers.

JNEs would be easier to form than traditional labor unions and could include certain independent contractors. The narrowest scope of a JNE would have it represent workers only at a single firm. Such a JNE would have fewer rights and less bargaining power than a labor union. For example, that JNE would not necessarily be the exclusive bargaining agent for all workers in the work unit. There could be multiple JNEs in a work unit; and, except in narrow circumstances described below, workers would not be constrained by the contract of any JNE of which he or she is not a member. Thus, there could be competition among JNEs. A single JNE also could not represent the workers at multiple competing firms. Because of their more limited powers, JNEs would be very unlikely to become monopoly sellers of labor. Nor would an employer be legally compelled to negotiate with the JNE, just as a buyer is not required to negotiate with a particular input supplier. Indeed, our proposal is more likely to provide JNEs with too little bargaining power than with too much. For that reason, we suggest ways in which our proposal might be expanded.

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