THE financial crisis has unfortunately deflected attention from our next major meltdown: ordinary labor markets. The early days of an Obama administration will likely see passage of othe so-called Employer Free Choice Act – which will put a union noose around the neck of every US business, large and small.
Union membership has dropped relentlessly from about 35 percent of the work force in 1954 to about 8 percent today. The main factor is the massive attrition in failed unionized industries such as steel, automobiles and rubber. A chorus of labor advocates falsely attributes this collapse to management’s alleged unfair labor practices of management in union elections, about half of which labor wins anyway.
The true explanation lies in a simple fact: Unions are a bad deal for most workers. They get some added bargaining leverage, but pay heavy dues, give up prospects for advancement in the firm and face higher odds of layoffs by hamstrung employers who can’t compete in ever-more competitive global markets.
The false diagnosis leads to the bill’s two-part “cure” to the nonexistent problem:
* It eliminates the need for a union to win an actual election to become the workers’ representive. Instead, gaining a simple majority of the targeted work force – in the form of signatures on cards – would make the union the official bargaining agent for all workers, including those who had no knowledge of the union’s activities.
* Worse still, the act lets a government-created arbitration panel impose the first two-year contract over the employer’s objections if the two sides don’t reach agreement within 130 days after union certification.
Barack Obama is a strong supporter of this effort to turn all US workers into civil-service employees. But he never admits how the law would wreck the small businesses he has sworn to promote.
EFCA allows aggressive unions like the Serviceworkers Employees International Union to pick their targets and ambush them. E.g.: Imagine a new firm preoccupied with product development, credit arrangements, inventory control and marketing – suddenly approached with this chilling message: “Our signed cards let us represent for two years all your employees, including future hires.”
The hard-pressed employer has to hire immediately professional legal counsel to steer it through a legal thicket that could end in work rules and layoff restrictions that make liquidation or bankruptcy the firm’s only viable alternatives.
Why bother to go into business at all – if a few card checks, even when obtained by intimidation or misrepresentation, can make a union your involuntary partner at the most vulnerable time of your business?
The unions pooh-pooh these objections by claiming that card checks and compulsory arbitration work for public unions. Not so. The only sense in which these arrangements “work” is to substitute surrender for strikes.
In fact, mandatory arbitration dooms many public employers to offering the same wretched or overpaid service in the future that they have offered in the past. Innovation is out of the question, because a dominant union can veto any intelligent structural or wage reform.
And private businesses don’t operate the same kinds of protected niches as public unions – they face real competition. The employer groups that I’ve represented know full well any private firm that succumbs to unionization won’t be strong enough to survive adversity or nimble enough to advance. Yet EFCA would enable labor unions to muscle their way into an involuntary partnership with the firm’s owners.
So a future President Obama will face a hard choice: Show abject fealty to the labor unions, which have done so much to promote his candidacy. Or avoid decimating the small businesses he has promised to help.
With the economy wobbly, we don’t need a massive government intervention to disrupt the balance between management and labor.
Richard A. Epstein is a professor of law at the University of Chicago, a visiting professor at NYU Law School and a Manhattan Institute adjunct fellow.