Freeman

ARTICLE

The Case of the Free Rider

OCTOBER 01, 1966 by PETER A. FARRELL

Mr. Farrell is Instructor of business and economics at Marist College in Poughkeepsie, New York.

Those among us who persistently support economic arrangements of a compulsory nature and who, ironically enough, are called liber­als, have rallied stoutly to the proposition that no worker should be allowed to withhold support from a union favored by the majority. The worker who resists such a union exposes himself to heavy at­tack. One clergyman, for instance, refers to the activities of the “free rider” (the nonunion man on a unionized job, in case you haven’t heard) as being “inequit­able, unjust, and immoral1 (em­phasis added). A college ethics text describes2 the nonunion man on a union job as “a parasite” who “share(s) in the common good without contributing to that good.” According to this learned view it would seem that a worker earns his way in society not by actually working but rather by paying his union dues.

The argument by which the in­dependent worker has been trans­formed into a social leech has been exposed and refuted time and again but, like the “machines throw men out of work” fallacy, it refuses to die.

In the first place, union dues are used for many purposes other than the support of collective bar­gaining which allegedly makes possible the good things which workers receive. They are used to support political candidates and programs, and, as has been abun­dantly documented by various of­ficial inquiries, they are sometimes tapped by unscrupulous union leaders for their own personal use.

That a worker should be forced to contribute funds to political causes which he actually opposes seems illiberal and undemocratic to say the least. Nor can union participation in American politics be written off as insignificant. It is indeed a crucial factor in many elections. That a worker impairs the common good when he refuses to subsidize the various undesir­ables who have gained power in the labor union movement is ridiculous on the face of it. It is well to recall in this regard that the Teamsters Union with 1.5 million members is the largest single union in the United States.

Those favoring the union line in the compulsory union contro­versy usually imply that the union is forced to “service” nonunion workers by representing them at the bargaining table. But as one critic of compulsory unionism has aptly replied:

What is not told is that “exclu­sive representation” (by which a union bargains for all employees in the bargaining unit and not just its own members) was fought for strenuously by the unions on the grounds that if they did not bar­gain for nonunion workers, the em­ployer could use favoritism toward the nonunion workers as a means of destroying the union . . . there­fore it should be pointed out that nonunion workers in an open shop today are not free riders but forced riders since under the Taft-Hart­ley Act they lose their right to bar­gain with their employer and are forced to bargain through the union.3

 The issue is thus in clearer fo­cus. The union chieftains fought for the elimination of the right of nonunion workers to contract for their own wages. Having achieved this, they and their in­tellectual champions have pro­ceeded to castigate the nonunion men for not supporting the very organizations which have caused them to lose an important right. The last thing the unions would want would be a situation where they no longer had the extraordi­nary power to bargain for all workers within the bargaining unit.

Limits to Union Achievements

As decisive as these points are in deflating the free rider indict­ment, more basic factors deserve consideration. The free rider charge, after all, is based on the assumption that unions do in fact produce higher wages for work­ers. Now, economic theorists are in general agreement that through concerted action (refusing to work at less than a prescribed wage), resource suppliers (workers) can force the price (wage) that they receive for their resource (an hour’s labor), above the level that would otherwise prevail. All of this, of course, is exactly what a union attempts to accomplish.

However, the higher price for labor bears with it unpleasant side effects. Most notably, the substitu­tion effect would set in at two pos­sible levels. The employer, for one, would substitute those alternative resources (automated machines, for example) which under the new conditions are cheaper than man­power. Consumers of the finished product, on the other hand, would be encouraged to substitute what­ever finished products the market provided at a now cheaper price. The greater the possibility of sub­stitution at the two levels, the more drastic would be the reduc­tion in the use of the resource following an increase in its price, or in our case, the greater would be the number of workers laid off.

With this analysis in mind it is not surprising to learn that widely noted statistical studies have shown that a great many unions are ineffective in raising wages.4 The union leaders in question rec­ognize that higher wages would result in widespread and immedi­ate unemployment. They are forced, therefore, to accept what is offered. Such unions seldom make the headlines and their pres­ence, therefore, is likely to go un­noticed. Clearly, the free rider charge is meaningless in this situ­ation based as it is on the assump­tion that the union does produce results.

Sometimes, however, substitu­tion of other resources by the em­ployer or other finished goods by the consumer is unfeasible in the immediate future. Here, the union leader is likely to make bold de­mands for wage increases. If the demands are not met, a strike will be called and efforts made to in­sure that operations are sus­pended for the duration of the strike. If the company voluntarily shuts down, the strike likely will proceed on an uneventful note; but if it attempts to continue opera­tions (which, of course, it has every right to do) union-incited violence becomes a likely result. Mass picket lines will be set up to isolate the plant from raw mate­rials and willing workers. Cars entering the plant will be overturned, while workers attempting to enter by foot will be punched and shoved and subjected to the rawest kind of verbal abuse. Acts, which in any other circumstance would result in prompt arrest, will curiously enough be overlooked by local authorities.

In May of this year when a taxi strike developed in New York City, eight drivers who defied the union by continuing to operate had their windshields smashed.5 Another had sugar placed in the gas tank of his cab. The mayor of the city reportedly considered this situation “. . . normal as can be with a taxi strike.”6 No arrests were reported. In a 1965 taxi strike, several uncooperative drivers found their cabs gutted by fire and numerous others were terror­ized by roving goon squads.7 These episodes, unfortunately, are only recent examples of a pattern that continually repeats itself wher­ever unions are powerful.8

If, as often happens, the com­pany capitulates to these tactics and grants the higher wage de­manded, the union will appear to have won a smashing victory for the workingman. The nonunion man will be ridiculed more than ever for receiving benefits at the hands of the union without paying his share of the cost of maintain­ing the union.

No Lack of Substitutes

However, one can think of nu­merous reasons why the free rider charge is still lacking in validity. For one thing, substitution is still likely to occur after market par­ticipants have had time to adjust to the new situation. New substi­tute resources will be developed by producers. Substitute products previously considered too expen­sive will be marketed by competi­tors. Importation of foreign goods will be increased, and at the same time, research and development may bring forth entirely new discoveries making the original prod­uct obsolete (just as government price supports have stimulated the development of synthetic fab­rics injuring the cotton and wool industries which the price sup­ports were intended to help). In all these ways and more, a free market can adjust to an increase in the cost of labor induced by a union.

A worker lacking seniority might well realize that he would be among the first to be laid off. In resisting the union, therefore, rather than taking a “free ride,” he would be protecting his very livelihood. If he is obliged to support the union, he would be forced to subsidize the very organization that is doing him in.9 Among so­cialists generally there is a pre­sumption that the interests of all workers are identical, but, as this instance shows, that presump­tion is wrong.

For another thing, the worker may justifiably abhor the violent and coercive tactics that the union threatens or actually invokes. The end, most people would agree, does not justify immoral means.

Finally, the nonunion man may realize that any wage increase he actually receives through the union will be paid for: (1) by a decrease in the real income of con­sumers, who, for the most part, are workers themselves, and (2) by a loss of earnings by those workers who are forced into less desirable jobs. His gain will be their loss. It is just possible that he may prefer not to join in the exploitation of other workers. That a union, rather than the greedy capitalist of socialist lore, is the real exploiter of the work­ing man is, of course, a substantial irony in itself. The union may hurt the employer in the short run but not indefinitely. This is true because any plant may be closed down when profit margins shrink below acceptable levels. Capital may then be re-invested where more profitable opportunities are thought to exist.

All of this points to the con­clusion which numerous statisti­cal studies have substantiated, that unions have not actually en­hanced the workingman’s overall share of national income.10 Rather, through their monopolizing tac­tics, they have increased the wages of a relatively small group of workers while causing many more workers to suffer a reduction in real wages. If anyone emerges from this situation as a “free rider,” it is the union itself and those who support it rather than the worker who resists it.

We are now in a position to ap­preciate David McCord Wright’s advice: . . . that we deflate our absurdly over-expanded idea of the net beneficence of unions . .. and see them for what they are — often reaction­ary agencies of personal privilege.11

Footnotes

1 Jerome L. Toner, O.S.B. in Right­-to-Work Laws and the Common Good, a pamphlet by the United Steelworkers of America, p. 10.

2 Herbert Johnson, Business Ethics (New York: Pitman Publishing Corp., 1956) pp. 262-63.

3 Edward A. Keller, The Case for Right-to-Work Laws. (Chicago: The Heritage Foundation, 1956), p. 42.

4 Albert E. Rees of the University of Chicago estimates that one-third of U.S. unions have had no effect on wages. See Wage Inflation (National Industrial Conference Board, New York, 1957) pp. 27-28.

5 New York Daily News, May 13, 1966, p. 3.

6 Ibid.

7 New York Herald Tribune, July 1, 1965, p. 1.

8 For a comprehensive analysis of union tactics see Professor Sylvester Petro’s Power Unlimited: The Corrup­tion of Union Leadership (New York: The Ronald Press).

9 For an excellent analysis of this situation see Professor Philip D. Bradley’s study, Involuntary Participation in Unionism (Washington: The Ameri­can Enterprise Association, 1958).

10 In Philip D. Bradley’s study noted in the above footnote, the conclusions of seventeen relevant studies are sum­marized as follows:
1. Unions have not raised the general level of real wages in the United States.
2. Unions have not increased labor’s share in the national income.

11 David McCord Wright, “The Cana­dian Compulsory Conciliation Laws and the General Problem of Union Power,” Notre Dame Lawyer, XXV, No. 5 (1960), 651.

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October 1966

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