In its most recent issue, the New Yorker gloated that in “one of the biggest labor victories since the nineteen-thirties,” the Amazon workers at a Staten Island warehouse voted—2,654 for and 2,131 against—to form a union. The union victory was organized by the Amazon Labor Union (ALU), a grass-roots, home-grown operation that operated outside the traditional channels of organized labor, but with substantial material support and strategic advice from old-line unions. The vigorous union campaign highlighted worker grievances that included a demand for improved safety conditions in light of the COVID virus, higher wages, longer work breaks, better grievance procedures, and a shuttle bus connection to the Staten Island ferry. In the run-up to the election, two key union organizers were fired and one warned. All were black. Amazon claimed it was for violating social distancing rules. The workers claimed that it was an illegal effort to fire them for their organizing efforts. Because of the ALU’s success, further union-organizing campaigns at Amazon are now in the offing.

Union optimism about the ALU election should be tempered by the long litigation struggle that lies ahead. It is an open secret that many businesses that are generally liberal on social issues—think Howard Schultz, who has just returned as the head of Starbucks—are widely and correctly regarded as anti-union. This posture is taken for the simple reason that unions are bad for business—period. To the progressive mind, that anti-union posture is a high political sin. President Joe Biden has already cheered on the Amazon workers, saying, “Amazon, here we come.” But there are at least two major reasons to question the merit of his position.

At a theoretical level, the purpose of any sound system of labor law is to improve the overall productivity of the employment relationship, which includes the welfare of firm workers as one part of that calculation. But union elections are, at best, an imperfect way to achieve that objective. About 45 percent of the Amazon employees voted against the union, which means that the net overall gain for current workers is small indeed: the dissenting workers certainly have legitimate concerns. Why pay union dues, typically at 3 percent, that will eat into any future wage increases? Why encourage management-labor confrontations that will sever direct worker-employer relationships, which could price the Staten Island facility out of the market or could lead Amazon to divert some of its business to nonunion warehouses where costs are lower and profits are higher?

Any social welfare calculus also has to account for the fact that the union victory is bad news for Amazon, its suppliers, customers, and other employees. All these parties are likely to suffer harm from the reduced flexibility that comes when the employer is forced to yield some portion of its operating control to a union, whose economic interests are antithetical to its own on such key issues as outsourcing certain functions or in introducing new technology in the warehouse. These disputes could lead to either a lockout of workers by Amazon or a strike (or even slowdown) by Amazon workers against the company—an outcome that causes everyone to lose.

It should come, therefore, as no surprise that no employer ever accepts a key election loss as the final act. Given the size of the stakes, it is now a routine practice in high-stakes union elections for the loser to bring an action before the National Labor Relations Board (NLRB) to set aside the results on the grounds that the election was not conducted in accordance with the detailed rules prescribed by NLRB regulations. These rules address the procedures to file motions to certify or decertify a union representative. They also set out the various requirements and prohibitions in the election campaign that apply to both the management and union sides of the equation.

When the Retail, Wholesale, and Department Store Union (RWDSU) lost its recognition election against Amazon by a 993-875 vote, it promptly filed objections with the board, alleging a range of unfair labor practices to obtain a new election. The grounds for its objections are not easy to follow. Generally, during union election campaigns, employers may predict the consequences a union victory will have on a firm—or report how similar businesses have failed to thrive after a union election succeeded. But it is illegal for an employer to threaten to go out of business should the union prevail, which is exactly what the RWDSU alleged in its complaint. It is also illegal for employers to seek to suppress organizing efforts. RWDSU claimed Amazon engaged in this behavior by preventing the posting of union literature in plants and by engaging in excessive surveillance of workers during the campaign.

Since these elections are sprawling affairs, any of the alleged behaviors could have occurred at no time, some of the time, or all the time. But because the stakes are so high, both sides have strong incentives to game the system. Thus, the resolution of this dispute—which now would be before a strongly pro-democratic NLRB—could take years. No one should ever prejudge the outcome of a union election. But it is worth remembering that Amazon is a repeat player, who will bear a heavy price in future organizing campaigns if it alienates its workers or crosses over the line into illegality—behavior it has an incentive to take enormous steps to avoid.

The shoe, of course, is on the other foot in Staten Island, where Amazon has employed a litany of complaints about union behavior to challenge the union victory. The applicable rules allow Amazon to hold mandatory meetings before workers to present its own views, so that any efforts by union members to disrupt those sessions, such as by provoking hostile confrontations, could be used as grounds to set aside the union victory. And, at the very least, eyebrows will be raised about union efforts to distribute cannabis to potential workers to drum up support. And, given the evident political biases of the Biden administration, it is surely credible to allege that the labor board officials in charge of election oversight were tilted in favor of the union. Finally, the New Yorker reports that the organizers engaged in the technically legal but ethically dubious practice of “salting,” i.e., hiring workers for the purpose of generating more pro-union votes, even though these new hires never had any intention of keeping their jobs beyond the vote.

These union elections are thus a prelude to a huge legal battle to determine the truth of the warring allegations, which can take years to wind their way through judicial hearings and other intricate procedural maneuvers. In light of these costs, the larger question remains: why embrace an institutional system in which the government incurs the enormous expense of setting up and policing these hotly contested elections? No matter how any particular case comes out, the result is sure to lead to a fractured workforce, where the employer is separated from its workers and the workers from each other. Democratic elections are surely necessary to select government officials at the national, state, and local levels, because there is no way in any given territory to find unanimity among eligible voters. But firms are routinely organized voluntarily without elections, and thus secure greater legitimacy because every person has signed up to join the system, which can then evolve in accordance with shifting preferences and novel institutional restraints. Wholly apart from the NLRB, there is no need whatsoever for firms to be organized on a principle of majority rule. Greater cohesion is possible from the outset by the orderly movement of workers, management, and shareholders and without any of the showdowns and glitches that permeate even the best-run union recognition campaigns.

And for what? The entire apparatus of collective bargaining is put into place to supplant efficient competitive firms with inefficient worker cartels. The net effect of successful unionization always drives towards the disruption of an efficient competitive market with a legal system that loses two ways: it spends huge resources, while conferring dangerous monopoly power to unions when the firm is obligated to bargain with the designated union. Indeed, the adverse effects of a unionized workforce are not confined to the workplace. The only way a union can provide benefits to its workforce is when the firm itself occupies such a strong economic position that it can charge an above-competitive rate for its products. In these circumstances, unions permit the resulting supra-market gains to be shared with the unionized labor. Similarly, unionized firms and their union members work in tandem to block the entry of nonunion firms into local markets so that these firms cannot compete away the monopoly profits. On a global scale, this means unions and unionized firms work to create tariff and other trade barriers that deny consumers the benefit of superior goods and services from abroad.

These social welfare losses explain why there is no reason to celebrate any union victory at Amazon, Starbucks, or, indeed, any other successful firm. After all, they achieved their market excellence in a nonunion environment.

© 2022 by the Board of Trustees of Leland Stanford Junior University.