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10. Monopoly and Competition > 4. Labor Unions > B. Some Arguments for Unions: A Critique

(2) Monopsony and Oligopsony

It is often alleged that the buyers of labor—the employers—have some sort of monopoly and earn a monopoly gain, and that therefore there is room for unions to raise wage rates without injuring other laborers. However, such a “monopsony” for the purchase of labor would have to encompass all the entrepreneurs in the society. If it did not, then labor, a nonspecific factor, could move into other firms and other industries. And we have seen that one big cartel cannot exist on the market. Therefore, a “monopsony’‘ cannot exist.

The “problem” of “oligopsony”—a “few” buyers of labor—is a pseudo problem. As long as there is no monopsony, competing employers will tend to drive up wage rates until they equal their DMVPs. The number of competitors is irrelevant; this depends on the concrete data of the market. Below, we shall see the fallacy of the idea of “monopolistic” or “imperfect” competition, of which this is an example. Briefly, the case of “oligopsony” rests on a distinction between the case of “pure” or “perfect”competition, in which there is an allegedly horizontal—infinitely elastic—supply curve of labor, and the supposedly less elastic supply curve of the “imperfect” oligopsony. Actually, since people do not move en masse and all at once, the supply curve is never infinitely elastic, and the distinction has no relevance. There is only free competition, and no other dichotomies, such as between pure competition and oligopsony, can be established. The shape of the supply curve, furthermore, makes no difference to the truth that labor or any other factor tends to get its DMVP on the market.