Saturday, July 23, 2011

Why Sports Unions Succeed when others Fail I

The Paradox of Modern Sports Union Success

Unions are dying in the United States. Less than 8 percent of the private sector work force is unionized. So why do unions flourish so successfully in professional sports?

Well it is not because the owners like them. Both professional football and basketball owners are trying to destroy their unions with lockouts. Both will fail, and the owners know it even as the football lockout enters its fourth month and will be resolved soon.

The owners hate the unions; I mean they hate the unions. Many of the owners are self-made wealthy using the teams as forms of ego gratification or extensions of their own Ayn Rand self images as self-made individualists. They will do anything and have tried everything including collusion to destroy the unions, but they fail. Why?

I think the reasons sports unions succeed derive from the very unique shape of the labor market that makes it relatively immune to the global forces that undermine unions all over the world.

The global market enables employers to shift jobs to lower wage countries. Borders mean little, and even technical jobs can be outsources at will an connected via the internet. If owners don’t shift jobs abroad, they can always shift to the south or southwest where government war on unions will ensure lower wages, benefits and working conditions. The shape of the labor market in sports limits these options for owners.

Traditional unions depend upon their ability to organize workers and get workers to perceive that a common good can be achieved by negotiating wages and working conditions together. A common good gets disturbed across all union members. The gain is greater for all workers over the long run than if workers negotiated individually for their contracts. This is the key; if the union stays together, the long term benefits are huge, but if they fall apart, then the benefits fail them.

The benefits of a union revolve around guaranteed wages for work. But the combined power also generates benefits and work rules around safety, none of which individuals on their own could gain. Left on their own,  individual workers would end up with lower benefits, lower wages or job security and less safety over the life of the contract—this is exactly what has happened in the modern American private sector.
So why do sports unions work?

The first and more ironic point is that the owners actually gain an immense legal advantage from having unions to negotiate. This enables owners to get things like salary caps, entry salaries but above all transferrable contracts that can be traded within the league or cartel. The negotiated contract protects the owners and their cartel from potential anti-trust and restraint of trade challenges. The contract protects certain aspects of the game that permit some level playing field and the patterns of player investment and trades that the teams depend upon.

The professional unions move to decertify themselves removed this cover for the superstructure of the sports and their profitability. This enabled the union members to launch a series of law suites that would destroy the profit structure as well as the competitive balance of the leagues upon which the profitability depends. This is doubly important for basketball and football because both depend upon salary caps which could not be sustained without a strong union agreement.

So against their better judgment, the owners need and accept but hate the unions.

Part II will examine the exceptional form that unionization takes in professional sport to adapt principles of unions with the need for compensation for superstarts.


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