Labor Unions Wreaking Havoc In This Modern Day Economy

by: Charles Santini

I just watched a labor union destroy my town. They didn’t break windows over scab workers or anything like that. They did however, dig in so hard and so ferociously on policies that would have made their employer, well soon to be former employer, uncompetitive in the industry. The irony of the situation is, that had a new manufacturing plant opened here, offering the wages and terms submitted to the union in these latest rounds of negotiations, they would have been welcomed with open arms. Not only is the current union not opening its arms, they are lopping them off to spite the rest of their body. The final negotiation deadline has now come and gone. The jobs and company will soon go with it, along with my city; all in the name of holding on to a labor structure, which once served a purpose, but is now the personification of stubbornness and greed.

I am not some distant bystander. I used to be in a union, two in fact, and I hated every second of it. One was so pointless and powerless, the fact that they collected union dues from me was borderline robbery. The second, was so powerful and over-reaching I constantly found myself in awe of the incompetence it encouraged from the employee base. I watched several fireable offenses (if theft from a co-worker is not one, then I don’t know what is) get swept under the rug as consequences from the administration received pushback from the union. The elected officials within the group protected their friends and the ones with the most seniority, and anyone who disagreed with that or a newer hire was left to fend for themselves. I gave two unions a chance. Two let me down, and another one is about to fail the 100,000 people who live in my city.

The manufacturing facility here once employed over 10,000 workers at its peak. That number is now down closer to 3,000. I am not proposing that the 70% drop is completely attributable to the union presence. Unfavorable state tax regulations as well as international competition contributed to a lot of it as jobs moved to India, while some stayed domestic and moved to Texas, which has more business friendly taxation. My blame of the unions comes in to how they responded to those challenges.

Running a business is not simple, but the philosophy behind it is. Find a product people want for a price they are willing to pay. If you are failing, adapt or die. If you cannot adapt in business, you are left with nothing. The philosophy for the union who remained here to represent the already depleted workforce, who have no idea how to run a business, read more along the lines of, dig in, ask for more, and don’t negotiate. Who was left to work at the plant after jobs began to leave? It certainly wasn’t the 20 or 30 somethings, looking to support a family. The union didn’t protect them. It wasn’t the most productive employees who wanted to see the plant succeed and worked the hardest. It was the union leaders and the people with the most time accumulated who made the most money. That is the only group of people a union protects and will ever protect.

Those who back unions and support unions only seem to look at it from one side, higher wages and better benefits; a short sighted and self-serving purpose. What they fail to grasp is how an economy, or a single business for that matter, functions. Let’s take a look at a theoretical scenario using the local facility here. Once work moved partially to India and Texas, as it did, let’s say the company was left with enough contracted business to justify one million dollars in labor expenses. (An absurdly low number, but easy to work with.) It would be the view of the union to protect only the top ten workers, if they made $100,000, putting a significant strain on the possible output of the facility. This is in contrast to supporting and protecting a hundred jobs paying $10,000 per year, effectively increasing the output and efficiency of the facility.

The numbers in this scenario are exaggerated, but the conclusions and the real world results are not. The manufacturing facility in my town will leave. It may have left at some point anyway, but it would have been a slower process giving displaced workers and the region time to adapt. The writing has been on the wall here for years, and the local union leaders are apparently the only ones who haven’t seen it. Now the process has simply been accelerated. They will leave in one foul swoop. I’m certain of it. One of the terms that unions like the throw out there in their press releases is ‘good faith’. Well, that’s a door that swings both ways. In business, if you don’t adapt, you die. There appears to be several funerals on the horizon.

FEE: Milton Friedman, Right to Work, and Free Riders

            by CHARLES BAIRD

            On December 11, 2012, Rick Snyder, governor of Michigan, signed a bill that made the state�home of the United Auto Workers (UAW)�the twenty-fourth right-to-work (RTW) state. A RTW law prohibits unions from forcing workers to pay union dues and fees as a condition of continued employment. 

            The UAW and other unions reacted with predictable wrath and violence, even going so far as to tear down a large Americans for Prosperity tent with several pro-RTW people in it. Not to be outdone, state representative Douglas Geiss, a reliable union crony, threatened that blood would be spilled in reaction to the new law. 

            Earlier that year neighboring Indiana had become the twenty-third RTW state. People in the old Rust Belt, it seems, are beginning to renounce their long-time allegiances to coercive unionism. Unions and their apologists are desperate to quash the emerging consensus that unionism is legitimate if and only if it is voluntary. Only voluntary unionism is consistent with workers� freedom of association.

            One of the arguments used by union apologists in their reaction to the Michigan story is the observation that Milton Friedman, whom they call conservative but who was actually a classical liberal, was opposed to RTW laws. Thus, they argue, conservatives who support RTW are hypocrites. 

            Here is how Martin Fridson put it in Forbes magazine on December 14:

            Supporters of right-to-work laws cast the issue in terms of individual rights. They will have to confront the fact that Milton Friedman, an acknowledged champion of human freedom, consistently opposed outlawing contracts that compel employees to pay dues to unions. �

 

If right-to-work supporters hope to prevail, they must be prepared to explain why they believe the great champion of individual rights, Milton Friedman, was wrong on this issue.

 

            Friedman was not wrong on the issue at all, for his argument in Capitalism and Freedom (1962) on this issue was made in the context of a �competitive� labor market. Unions exist to quash labor market competition.

 

            Friedman begins with a paragraph that unionists (almost) love.

 

            The principles involved in right-to-work laws are identical to those involved in FEPC [Fair Employment Practices Commission]. Both interfere with the freedom of employment contract, in the one case [FEPC] by specifying that a particular color or religion cannot be made a condition of employment; in the other, that membership in a union cannot be. Despite the identity of principle, there is almost 100 percent divergence of views with respect to the two laws. Almost all who favor FEPC oppose right to work; almost all who favor right to work oppose FEPC. As a liberal, I am opposed to both, as I am equally to outlawing the so-called 'yellow-dog' contract (a contract making non-membership in a union a condition of employment) [p. 115].

 

            Union apologists often elide the bit about the yellow-dog contracts; but still, Friedman clearly rejects RTW laws on the basis of freedom of contract. If employers want to operate their enterprises on a union-only (closed shop) or union-free (yellow dog) basis they should be free to do so. It is none of the government�s business. But the government has made it its business by enacting the National Labor Relations Act (NLRA).

 

            On the following page Friedman writes:

 

            As a practical matter, of course, there are some important differences between FEPC and right to work. The differences are the presence of monopoly in the form of union organizations on the employee side and the presence of federal legislation in respect of labor unions. It is doubtful that in a competitive [unregulated] labor market, it would in fact ever be profitable for employers to offer a closed shop as a condition of employment�.

 

            The coincidence of a closed shop and labor monopoly is not an argument for a right-to-work law. It is an argument for action to eliminate monopoly power regardless of the particular forms and manifestations which it takes (p. 116).

 

            The NLRA imposes forced association on workers through �exclusive representation,� which is more appropriately called monopoly bargaining privileges for unions. Once a union is certified (by the National Labor Relations Board) as an exclusive bargaining agent for employees in a firm, all such employees must accept such representation whether they, as individuals, want it or not. Individuals are even forbidden to represent themselves. 

            Friedman is clear that such monopoly should not be permitted. In his view, getting rid of the monopoly is better than relying on RTW laws to ameliorate the malign consequences of the monopoly. I agree. Repealing the NLRA would eliminate the labor monopoly in question. Under those circumstances RTW laws would be illicit.

            However, in my view, if we cannot get rid of the monopoly, RTW laws are an acceptable means by which some modicum of workers� freedom of association can be protected. I don�t know whether Friedman would agree with this point.

            All union apologists use the free-rider problem as justification for forcing workers they represent to pay union dues and fees as a condition of continued employment. They argue that inasmuch as unions, under the NLRA, must bargain for all workers, not just their voluntary members, all workers will benefit. Any dissenting worker who didn�t pay the union for those benefits would get them for free. He would be a free-rider. He wouldn�t pay his �fair share.� 

            This hoary argument is wrong for at least four reasons. 

1. Most of the time, if the union represented only its voluntary members no one except union members would get union-generated benefits. The only exception would be union-bargained improvements in the job environment such as improved safety. Exclusive representation creates the possibility of free riding. If unions want to get rid of free riders, they should advocate repeal of exclusive representation.


2. The free-rider idea is based on the assumption that a dissenting worker gets a net positive gain from union representation. However, this gain is never demonstrable. Costs and benefits are subjective. Suppose a union bargains for and gets increased safety on the job. Say a dissenting worker values that increased safety by the same amount he values $100, but he values the forced association with the union by the same amount he values losing $300. On the dissenting worker�s value scale there is a net loss of $200. If he is forced to pay dues, he would be a forced rider.


3. This forced-rider argument applies to all the alleged benefits of being represented by a union. Moreover, even in wages, salaries, and pensions there is no evidence that a union-represented worker is better off than a union-free one. Private sector unions are now admitting that the terms they can get are severely constrained by competitive market (even global) competition.


4. Consider market dynamics. For example, a union-impaired employer is more likely to lose market share than a union-free one. Over time, union rules reduce productivity growth and even reduce the level of productivity. If union-impaired employers shrink relative to union-free ones, employees of the former have less job security than employees of the latter. In this case, union representation hurts workers. Forcing them to pay for the hurt is like forcing victims of assault to reward the perpetrators.

            If more and more states adopt RTW laws, the union movement will become so anemic that perhaps even its crony politicians might summon the courage to repeal the NLRA. 

            No, I am not an incurable optimist. I just like to dream.