Suppose the marginal revenue product of individuals who work in the union sector is greater than that of individuals who work in the nonunion sector. Normally, we would expect labor to move from the nonunionized sector to the unionized sector-from where it is worth less to where it is worth more. But if this cannot happen, owing to the supply-restraining efforts of the union, then

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If the union restricts the supply of labor to the union sector, preventing labor from moving to where it is most valuable, it leads to a misallocation of labor. This means labor is not employed in the sector where it could generate the highest value, which is inefficient from an economic perspective.

Suppose the Marginal Revenue Product of Individuals Who Work in the Union