Understanding distortions in investment in human capital
I assume WH Hutt is referring to long-term effects. Here's what I understand. If "the price of any commodity is raised above the free market level by strike threat or action or by state edict," so that the price is above marginal cost. Then firms earn a "free" mark-up (=price - marginal cost) and need not be as productive as in a competitive market. As a result, they may hire less productive workers or offer less productive jobs, distorting investment in human capital in favor of low productivity and low-paying jobs.