The Employee Free Choice Act--Posner

In 2007, the House of Representatives passed the Employee Free Choice Act, a law to promote unionism. The bill failed in the Senate because of Republican opposition. Obama in his presidential campaign urged passage of the bill, and with greater Democratic control of the Senate as a result of the recent election there is a good chance that it will be passed, though not a certainty in view of the fierce opposition of the business community and the Republican senators, who could filibuster the bill; but the Democrats might persuade enough of those senators to defect, to have enough votes to shut down the filibuster. The Act would do three things. The first is strengthen the very weak machinery for enforcing the prohibition in the National Labor Relations Act (the Wagner Act) of unfair labor practices, such as employers' discriminating against employees who support unionization. This part of the Act is uncontroversial. The second thing the Act would do is dispense with the requirement of a secret election to determine whether the employer must recognize a union as the representative of his workers (more precisely, of a "bargaining unit" consisting of workers having similar jobs; a large employer might have a number of such units). Recognition means that the employer must try in good faith to negotiate a binding collective bargaining agreement with the union that will specify terms and conditions of employment. The Act would require the employer to recognize the union if the union obtained signed union-authorization cards from a majority of the workers in the bargaining unit. This is the most controversial provision of the bill. The remaining provision, which is also controversial, would require that if within a specified period (including a period for mediation) union and employer could not agree on the terms of a collective bargaining agreement, their dispute would be submitted to binding arbitration. The arbitrators would thus determine those terms. The card-signing provision would undoubtedly make it easier for unions to organize companies in which there was considerable union support but not quite enough to assure victory in a secret-ballot election. Supporters of unionization are likely to feel more strongly than opponents, and so will be more likely to exert pressure on waverers to sign cards than opponents will be to exert pressure on them not to sign. Compulsory arbitration would also promote unionization, and perhaps more so than the card-signing provision of the Act. It would eliminate the costs of striking against a stubborn employer, and would appeal to workers because an arbitrator could be expected to be more generous in setting terms and conditions of employment than the employer, though there will be cases in which a union could extract more from an employer by striking or threatening to strike than an arbitrator would be likely to give it. I doubt that the Act would have a great effect on unionization. Unions have been in steady decline in the private sector for decades and now account for only about 7 percent of nonfarm workers in that sector (farm workers are not covered by the National Labor Relations Act). Elaborate government regulation of workplace safety and health has reduced the value of unions to workers, as has greater job mobility and the increasingly technical and individualized character of many jobs, which makes it difficult for workers to agree on the terms and conditions of employment that they should be seeking. International competition has reduced the power of unions to extract supracompetitive wages, benefits, or work rules, as has the deregulation movement, which has made the formerly regulated industries, such as transportation, more competitive. Unions have little power in a competitive industry, because a supracompetitive wage, by increasing the employer's cost, will shift his output to competitors. We are seeing this happen in the automobile industry, where union intransigence has been a factor in the decline of the Detroit automakers, now on federal life support. These economic forces will not be changed by passage of the Employee Free Choice Act, and so the Act's effect on unionization and therefore on the economy will probably be marginal. But whatever the magnitude of the economic effect, that effect will be negative. This is not because all unionization is bad. One should distinguish between nonadversarial unionism and adversarial unionism. In nonadversarial unionism the union recognizes that it is in partnership with the employer and focuses on activities that are supportive of rather than antagonistic to the efficient operation of the company. These activities include protecting workers from abusive supervisors and coworkers, forwarding the concerns of workers to management, assisting workers to obtain skills necessary for their advancement, providing social amenities, interpreting management to the workers, and, in short, mediating between the workforce and the management. One might think that these are functions that the employer itself could perform, and often this is true. But an independent union (company unions are forbidden) may have a degree of credibility with the workers that the employer lacks and may reduce agency costs by monitoring the behavior of supervisors over whom the employer has limited control. The Act will not promote nonadversarial unionism, because an employer will not resist being unionized by a union that will make his company operate more efficiently. It will promote, though one hopes to only a limited degree, adversarial unionism, illustrated by the relation between the United Auto Workers and the Detroit automakers. The union is determined to squeeze the companies for all it can get for the shrinking number of workers employed by the companies--the union being responsible in significant part for the shrinkage. Adversarial unionism is also conspicuous in education. More of that we do not need. We especially do not need an uptick in adversarial unionism during what increasingly appears to be a depression. The fact that Democrats in Congress should be pressing for a revival of the union movement at this time indicates a lack of understanding of the economics of depressions. A depression involves a severe reduction in output, resulting in a reduction in inputs, including labor inputs: hence increased unemployment. Adversarial unions increase unemployment, by obtaining wage increases that reduce employers' output by increasing labor costs. A similarly incoherent New Deal program of fighting depression combined sensible measures like going off the gold standard, expanding the money supply, and increasing employment by public-works programs with output-restricting programs like the National Industrial Recovery Act, which encouraged the formation of producer cartels, the Agricultural Adjustment Act, which curtailed agricultural output in order to raise farmers' incomes--and the National Labor Relations Act (the Wagner Act), which encouraged the formation of workers' cartels: adversarial unions such as the United Auto Workers. Some economists believe that such measures prolonged the depression. They certainly did not shorten it.

Comments

[Ken]

Can you give us some examples of nonadversarial unions?

Ken

[Jim]

It is hard to decide which is more responsible for the decline in the US manufacturing base, the unions or the management. I suspect that both were greedy and shortsighted. But I digress; We all know that advocate organizations live on and on for their own selfish reasons long after there is no need for their function. I wonder if the unions fall into that category

[Linda]

In my opinion the unions do fall into that category.

[Ron Efron]

Would autoworkers have made it to the middle
class without the UAW ? Doesn't the UAW combine adverserial and nonadverserial features ? Isn't that what we need if we are going to combine economic growth with equity ?

[neilehat]

The same can also be said of Management. Remember, it takes two to Tango. Adversarial Unions are the result of Adversarial Management and vice-versa.

I wonder how the Courts would work without the Adversarial System. Would it be "Mitigate, don't Litigate"?

[Peter]

What about unions in the public sector (police, fire, public works employees)? Most of these types of workplaces aren't engaged in active competition, though you briefly bring up education unions, which I would think would operate along the same lines. Why do you feel adversarial unions in this context are just as harmful?

On another note, if I understand it correctly, the card signing provision would apply not just to new unionization, but also to existing workplaces that want to change their representation to a different union. Maybe this provision would make it easier for workers to change unions when the union isn't working in their best interest, which seems like a net benefit.

[Jack]

Would it be crass to discuss one of the strongest unions this side of the AMA? That of the American Bar Assn? A private association that has somehow become a monopoly for representing a citizen in our own public court system.

The high barriers to entry, and with much of the work done by low paid clerical help and paralegals while the hourly fees seem, curiously similar? If we were going for efficiency surely routine divorces and civil matters could be competently handled by paralegals with a few years of experience. Shouldn't the consumer have the right to choose the level of service desired?

[Jack]

The Union Way Up
Monday 26 January 2009
by: Robert B. Reich, The Los Angeles Times

America and its faltering economy need unions to restore prosperity to the middle class.

Why is this recession so deep, and what can be done to reverse it?

Hint: Go back about 50 years, when America's middle class was expanding and the economy was soaring. Paychecks were big enough to allow us to buy all the goods and services we produced. It was a virtuous circle. Good pay meant more purchases, and more purchases meant more jobs.

At the center of this virtuous circle were unions. In 1955, more than a third of working Americans belonged to one. Unions gave them the bargaining leverage they needed to get the paychecks that kept the economy going. So many Americans were unionized that wage agreements spilled over to nonunionized workplaces as well. Employers knew they had to match union wages to compete for workers and to recruit the best ones.

Fast forward to a new century. Now, fewer than 8% of private-sector workers are unionized. Corporate opponents argue that Americans no longer want unions. But public opinion surveys, such as a comprehensive poll that Peter D. Hart Research Associates conducted in 2006, suggest that a majority of workers would like to have a union to bargain for better wages, benefits and working conditions. So there must be some other reason for this dramatic decline.

But put that question aside for a moment. One point is clear: Smaller numbers of unionized workers mean less bargaining power, and less bargaining power results in lower wages.

It's no wonder middle-class incomes were dropping even before the recession. As our economy grew between 2001 and the start of 2007, most Americans didn't share in the prosperity. By the time the recession began last year, according to an Economic Policy Institute study, the median income of households headed by those under age 65 was below what it was in 2000.

Typical families kept buying only by going into debt. This was possible as long as the housing bubble expanded. Home-equity loans and refinancing made up for declining paychecks. But that's over. American families no longer have the purchasing power to keep the economy going. Lower paychecks, or no paychecks at all, mean fewer purchases, and fewer purchases mean fewer jobs.

The way to get the economy back on track is to boost the purchasing power of the middle class. One major way to do this is to expand the percentage of working Americans in unions.

Tax rebates won't work because they don't permanently raise wages. Most families used the rebate last year to pay off debt - not a bad thing, but it doesn't keep the virtuous circle running.

Bank bailouts won't work either. Businesses won't borrow to expand without consumers to buy their goods and services. And Americans themselves can't borrow when they're losing their jobs and their incomes are dropping.

Tax cuts for working families, as President Obama intends, can do more to help because they extend over time. But only higher wages and benefits for the middle class will have a lasting effect.

Unions matter in this equation. According to the Department of Labor, workers in unions earn 30% higher wages - taking home $863 a week, compared with $663 for the typical nonunion worker - and are 59% more likely to have employer-provided health insurance than their nonunion counterparts.

Examples abound. In 2007, nearly 12,000 janitors in Providence, R.I., New Hampshire and Boston, represented by the Service Employees International Union, won a contract that raised their wages to $16 an hour, guaranteed more work hours and provided family health insurance. In an industry typically staffed by part-time workers with a high turnover rate, a union contract provided janitors with full-time, sustainable jobs that they could count on to raise their families' - and their communities' - standard of living.

In August, 65,000 Verizon workers, represented by the Communications Workers of America, won wage increases totaling nearly 11% and converted temporary jobs to full-time status. Not only did the settlement preserve fully paid healthcare premiums for all active and retired unionized employees, but Verizon also agreed to provide $2 million a year to fund a collaborative campaign with its unions to achieve meaningful national healthcare reform.

Although America and its economy need unions, it's become nearly impossible for employees to form one. The Hart poll I cited tells us that 57 million workers would want to be in a union if they could have one. But those who try to form a union, according to researchers at MIT, have only about a 1 in 5 chance of successfully doing so.

The reason? Most of the time, employees who want to form a union are threatened and intimidated by their employers. And all too often, if they don't heed the warnings, they're fired, even though that's illegal. I saw this when I was secretary of Labor over a decade ago. We tried to penalize employers that broke the law, but the fines are minuscule. Too many employers consider them a cost of doing business.

This isn't right. The most important feature of the Employee Free Choice Act, which will be considered by the just-seated 111th Congress, toughens penalties against companies that violate their workers' rights. The sooner it's enacted, the better - for U.S. workers and for the U.S. economy.

The American middle class isn't looking for a bailout or a handout. Most people just want a chance to share in the success of the companies they help to prosper. Making it easier for all Americans to form unions would give the middle class the bargaining power it needs for better wages and benefits. And a strong and prosperous middle class is necessary if our economy is to succeed.

[lower back pain]

If I understand it correctly, the card signing provision would apply not just to new unionization, but also to existing workplaces that want to change their representation to a different union. Maybe this provision would make it easier for workers to change unions when the union isn't working in their best interest, which seems like a net benefit.

[bar chairs]

I really felt I was looking in your life's window and seeing a real person in your dad. Thanks for this.

[floor jack]

A great tribute. Having been reading your stories for a while, I'm not surprised that much that you come from such a wonderfully multi-dimensional fathe

[hydraulic jacks]

This was very nice. I enjoyed meeting your dad through your matured perception of him. When we are younger we often don't realize that which we appreciated in our parents all along, but weren't aware in the throes of our youth and ignorance.

[booster cable]

Words can't do this fine piece justice - I'd give you one of Linda's hugs if she'd lend me one.

[non-woven fabric]

But even without knowing all those logical fallacies and inconsistencies—I instinctively realized that entire debate fiasco was a crock of bullshit.

[dust maskss]

Wonderful to see your great hockey story from Minnesota, the 11th Canadian province and the land of pond hockey.

[Medical mask]

I'm the same as you about following hockey, but I live in Boston, so yay Bruins, and can we now return to normal?

[Steroid]

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