Freeman

IDEAS AND CONSEQUENCES

Labor Freedom Makes Sense

Compulsory Unionism Is Immoral

FEBRUARY 01, 2003 by LAWRENCE W. REED

If compulsory unionism were put to a moral test, it would flunk without debate. Forcing a worker to join and pay dues to an organization he doesn’t want to represent him is a manifest violation of that worker’s free will and right of contract. It so happens that it also fails the economic test, as two recent studies strongly demonstrate.

No less a figure than the American labor movement’s founder, Samuel Gompers, favored freedom of choice in representation. He once told workers, “I want to urge devotion to the fundamental of human liberty—to the principles of voluntarism. No lasting gain has ever come from compulsion. . . . [T]he workers of America adhere to voluntary institutions in preference to compulsory systems which are held to be not only impractical, but a menace to their rights, their welfare and their liberty.”

Furthermore, Gompers noted, “there may be here and there a worker who for certain reasons . . . does not join a union of labor. It is his legal right and no one can or dare question his exercise of that legal right.”

Unfortunately, that right is no longer respected everywhere and is met by most organized labor leaders with scorn and evasion.

In a genuinely free labor market, government would be neutral in labor-management relations except for adjudicating disputes, enforcing contractual obligations, and punishing deception and violence against people and property. Individual workers would be free to negotiate directly with employers, or they could band together and offer their labor services as a group. Government would not bless one method of bargaining over another by bestowing powers of coercion on any parties in the marketplace.

In a recent study published jointly by the National Legal and Policy Center and the John M. Olin Institute for Employment Practice and Policy, Ohio University economists Richard Vedder and Lowell Gallaway demonstrated that compulsory unionism does economic damage that ultimately works to the disadvantage of workers, both unionized and non-unionized (“Do Unions Help the Economy? The Economic Effects of Labor Unions Revisited,” October 2002, www.nlpc.org/olap/lrev/).

They calculate that unions have cost the U.S. economy $50 trillion over the past half-century. By distorting the price of labor and imposing inefficient work rules, Vedder and Gallaway argue, union policies constitute a steady drain on resources and overall productivity: “The deadweight economic losses are not one-shot impacts on the economy. What our simulations reveal is the powerful effect of the compounding over more than half a century of what appears at first to be small annual effects.”

These economic losses mean that although unionized workers have 15 percent higher wages than non-unionized workers, overall wages are depressed by an economy that is 30–40 percent smaller than it would otherwise have been. In other words, unionized workers get a slightly larger piece of a pie made significantly smaller by their union efforts.

Vedder and Gallaway provide stunning data on what happened after unionization of key industries. For example: In 1960, after 40 years of John L. Lewis’s militant leadership of the United Mine Workers (UMW), wages were indeed higher for those who still had jobs but there were 400,000 fewer people employed in the coal industry. By 1999, just 70,000 workers were left in coal mining—barely one-tenth the number when Lewis took control of the UMW 80 years before.

Vedder and Gallaway concede that unions make some people happy by improving their perception of their “quality of life,” but they are quick to point out that recent migration patterns are more revealing. The 11 states with the lowest rates of unionization between 1990 and 1999 “had net in-migration of 3,530,108, which is more than one thousand persons a day, every day, for nine years.” At the same time, the 11 states with the highest rates of unionization suffered a net loss of 2,984,007 people.

“Right to Work”

In the past seven decades, federal and state laws have undermined the principles of a free labor market. However, at least federal law allows states the option of adopting an alternative to full-blown compulsory unionism known as “right to work,” under which workers cannot be compelled to join or pay dues to a labor organization as a condition of employment. Labor economist and fellow IOL columnist Charles Baird points out that the 22 right-to-work states still grant unions the exclusive power to represent all employees at a work site if only a simple majority so vote. But the relative labor market freedom in those states provides some interesting (and remarkably favorable) contrasts with the 28 less-free states where compulsory unionism enjoys far greater legal sanction.

That’s the major finding of a Mackinac Center for Public Policy study by economist William Wilson, titled “The Effect of Right-to-Work Laws on Economic Development.” Released in June 2002, it examined economic data from states with right-to-work laws and those without, including the state known as a bastion of unionism and birthplace of the United Auto Workers—Michigan.(See www.mackinac.org/4290.)

Between 1970 and 2000, Wilson found, right-to-work states created jobs nearly twice as fast as Michigan did. From 1977 through 1999 Michigan’s gross domestic product grew at only around half the rate of right-to-work states. From 1978 through 2000 the unemployment rate in Michigan was, on average, 2.3 percent higher than in right-to-work states. While Michigan wages are nominally higher than those in right-to-work states, after correcting for differences in the cost of living, the typical family in a right-to-work state has $2,800 more in purchasing power per year. While poverty rates dropped dramatically nationwide over the past 30 years, Michigan was one of seven states, all non-right-to-work, that witnessed an increase in the percentage of residents living in poverty.

Manufacturing is one of the key segments of the economy that unions are supposed to be made for. But in the past 30 years, Wilson points out, right-to-work states created 1.43 million manufacturing jobs, while the other states lost 2.18 million manufacturing jobs.

The evidence in the Wilson study overwhelmingly corroborates that of the Vedder-Gallaway study. Together, the two documents send a powerful message: Compulsion is costly. Freedom in the labor market is a sound economic principle because it results in more wealth for everybody.

For those of us offended by coercion and inspired by liberty, it’s always nice to know that what makes moral sense also makes economic sense.


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February 2003

ABOUT

LAWRENCE W. REED

Lawrence W. (“Larry”) Reed became president of FEE in 2008 after serving as chairman of its board of trustees in the 1990s and both writing and speaking for FEE since the late 1970s. Prior to becoming FEE’s president, he served for 20 years as president of the Mackinac Center for Public Policy in Midland, Michigan. He also taught economics full-time from 1977 to 1984 at Northwood University in Michigan and chaired its department of economics from 1982 to 1984.

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