What Strikes Do to the Innocent Bystander

When a union closes down all the suppliers of a good or service in a community, costs are imposed on people who are not involved in the labor contract. If this neighborhood effect of strikes only created a consumer “inconvenience” there would be ample reason for government intervention—just as there is in the analogous case of air polluters. Areawide strikes, however, do much more than deprive consumers: Serious financial losses are absorbed by wholesalers, retailers, manufacturers and shippers (and their laid-off employees) who are critically dependent on the struck materials or services for their livelihood. No measure of, say, idle man-days due to strikes has any bearing on this vital social cost. In this year’s West Coast dock strike, for example, farmers lost a billion dollars in export revenues, and many importers, retailers and freight forwarders lost much or all of their income. Many innocent people were thus forced to pay—in lost revenues and jobs—for someone else’s decision to close every port on the West Coast. Moreover, even when such strike- induced “inconvenience” amounts to thousands of lost dollars, the injured parties are not allowed to sue the union for damages.

Why should a union wish to strike all competing businesses simultaneously? Such a strategy obviously creates less—not more—pressure on each employer, since each firm would surely prefer to have his competitors struck too, rather than lose customers to unstruck rivals. Many business representatives have, in fact, openly advocated the “stabilization” of industrywide bargaining.

About the Author

Alan Reynolds

Alan Reynolds, National Review’s economics editor from 1972 to 1976, is a senior fellow at the Cato Institute and the author of Income and Wealth.

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When a union closes down all the suppliers of a good or service in a community, costs are imposed on people who are not involved in the labor contract. If this neighborhood effect of strikes only created a consumer “inconvenience” there would be ample reason for government intervention—just as there is in the analogous case of air polluters. Areawide strikes, however, do much more than deprive consumers: Serious financial losses are absorbed by wholesalers, retailers, manufacturers and shippers (and their laid-off employees) who are critically dependent on the struck materials or services for their livelihood. No measure of, say, idle man-days due to strikes has any bearing on this vital social cost. In this year’s West Coast dock strike, for example, farmers lost a billion dollars in export revenues, and many importers, retailers and freight forwarders lost much or all of their income. Many innocent people were thus forced to pay—in lost revenues and jobs—for someone else’s decision to close every port on the West Coast. Moreover, even when such strike- induced “inconvenience” amounts to thousands of lost dollars, the injured parties are not allowed to sue the union for damages.

Why should a union wish to strike all competing businesses simultaneously? Such a strategy obviously creates less—not more—pressure on each employer, since each firm would surely prefer to have his competitors struck too, rather than lose customers to unstruck rivals. Many business representatives have, in fact, openly advocated the “stabilization” of industrywide bargaining.