The NFL, monopolies, and unions 

Roger Goodell has an op-ed in today’s Wall Street Journal making the case that without the players union, the NFL would look very different than it does today:

Under the union lawyers’ plan, reflected in the complaint that they filed in federal court, the NFL would be forced to operate in a dramatically different way. … the union-financed lawsuit attacks virtually every aspect of the current system including the draft, the salary cap and free-agency rules, which collectively have been responsible for the quality and popularity of the game for nearly two decades. A union victory threatens to overturn the carefully constructed system of competitive balance that makes NFL games and championship races so unpredictable and exciting. … Prior to filing their litigation, players and their representatives publicly praised the current system and argued for extending the status quo. Now they are singing a far different tune, attacking in the courts the very arrangements they said were working just fine.

Goodell is right. The NFL was definitely succeeding under the current collective bargaining agreement with the union, but as my column from this week, that doesn’t mean that players and fans have necessarily benefited.

Unions always tell prospective members that, on average unionized workers earn higher wages than their nonunion counterparts. And that, by itself, is true. However, that does not mean that expanding union membership would raise wages for all workers.

For that to happen a unionized workforce would actually have to add value to a firm’s bottom line. But economic research shows that the exact opposite is true.

The higher wages that unionized workers earn to not come from the Easter Bunny; they come directly out of a firm’s profits. Economic research shows that unionized-firm profits are at least 10% lower than similar non-union firms. Unions think this is great. The entire point of unions is to redistribute profits from a firm’s shareholders to its workers. But this is simply unsustainable in a competitive environment.

Unionized firms that operate in a competitive industry eventually find themselves unable to compete with non-union firms. Studies show that unionized firms spend 15% less on research and development than non-unionized firms and 6% less on capital investments.

Unionized firms can survive not making these investments for a little while, but over time they lose out to non-union competitors. Just look at American manufacturing sector. Between 1977 and 2008 unionized manufacturing jobs fell by 75%, but non-union manufacturing employment actually increased by 6% over that same time period.

But not all unions have suffered since the 1970s. Government unionization has actually increased dramatically since that decade. In fact, the majority of union members today work for the government. The reason is that government is a monopoly. Unionization can thrive in a monopolized industry.

Which brings us back to the NFL. The NFL is a monopoly. We know this because New York Jet Freeman McNeil won an antitrust suit against the league in 1992. But if the NFL is a monopoly, then how is it legal under our nation’s antitrust laws?

The answer is the NFLPA. See, unions are exempt from U.S. anti-trust laws. So practices that would be anti-trust violations if performed by a business suddenly become legal if they are performed as part of a collective bargaining agreement with a union.

Unions need their anti-trust exemption because without it, almost everything that they do would be illegal. Unions function the exact same way as cartels like the Organization of Petroleum Exporting Countries (OPEC) do: They restrict supply (labor for unions, oil for OPEC) thus driving up prices (wages for unions, barrel of oil for OPEC). The result for American football fans: higher prices and less football.

The NFL will survive this year’s labor disruption. It’s a monopoly. Millionaire-NFLPA members can afford to take a year off. But can America still afford unions?

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Conn Carroll

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