The Real Reason to Worry about Maryland Casino Unionization
Last Friday, the Baltimore Business Journal ran an article on the unionization of workers at Maryland’s new casinos. The article presents the standard unionization paradigm, with supporters saying unions assure workers of “good-paying jobs with good benefits” while critics worry that unions create “inefficiencies for business.”
Unfortunately, the article completely misses the real story about Maryland casino unionization and why it should trouble Marylanders.
The folk history of unionism is that it protects workers’ safety and helps them to get fair pay. No doubt there’s some truth to that. But a more careful reading of unionism history is that it helps workers in monopolized and cartelized industries to get a bigger cut of the monopoly and cartel profits.
Think of the most powerful unions in American history: autoworkers, Teamsters, airline and railroad employees, utilities workers, steel workers—all working in industries that had immense market power. But when those industries were opened up to competition and the monopoly and cartel rents dissipated, so did the unions’ power (along with the financial windfalls to industry managers and shareholders). Not surprisingly, thriving unions today are found in the strongest, least-challenged monopoly: government.
There clearly is market power in Maryland’s gaming market: Annapolis has outlawed the operation of casino games by anyone but a state-sanctioned casino, greatly limited the number of casinos it will sanction, and has given each of those casinos a geographic monopoly zone. The state did this purposely to create rents. But those rents are supposed to go to the state via casino taxes and be put to public use: funding state government operations (ostensibly education, but really just general operations).
However, as Jeff Hooke and I predicted in an MPPI/MTEF paper a decade ago, Maryland was leaving a lot of the rents on the table, to be scooped up by the casinos. And now, as evidence that we were right, the newly unionized workers are demanding their cut. (In fairness to them, why are they any less entitled to those rents than the casinos’ managers or shareholders?)
This is a double-dose of bad news for Marylanders. First, like any other monopoly, the casinos’ rents represent money taken from casino customers, i.e., the public. Unlike natural monopolies, where rents provide incentive for competitors to find ways to enter the market and compete, state-sanctioned monopolies serve no good economic purpose. So casino consumers are getting hosed—in a supposedly “progressive” state no less!
Second, Maryland’s ostensible justification for hosing casino consumers is crumbling—some of those rents are not going to public use. Instead, they’re going to the casino investors, managers, and employees.
So the real story about Maryland’s casino unionization is that it further reveals how bad a deal Marylanders got under the current casino law. That’s the story I wish the BBJ had told.