Tuesday, January 15, 2008

COLLECTIVE BARGAINING & MAJORITY RULE

by Charles Baird, Ph.D
Professor of Economics, Emeritus

On August 15 this year The New York Times reported that several major unions asked the National Labor Relations Board (NLRB) to force employers to bargain with them even when they represent only a minority of employees at a firm. Under the National Labor Relations Act (NLRA) an employer is forced to bargain with a union only if the union achieves majority support among its employees. Usually this majority support must be demonstrated in a NLRB-supervised secret ballot election.

In the private sector, labor unions are becoming economically irrelevant. In 2006 only 7.4% of the private sector workforce was unionized. The decline has been uninterrupted since the mid 1950s when the figure was 35%.

Although they are becoming economically irrelevant unions remain politically powerful as a special interest. For example, they have forced most Democrats in the House and Senate to support an amendment to the NLRA that would eliminate the requirement that majority support must be demonstrated by secret ballot. Instead, majority support would be assumed if the unions collect the signatures of a majority of workers. These signatures would be collected on a face-to-face basis by union organizers who don’t take kindly to not getting their way. Cynically, they call this measure the Employee Free Choice Act.

The attempt to get the NLRB to force employers to bargain with unions that do not have majority support is another attempt by unions to reverse their private sector decline. The unions expect that once they are in the door representing a minority, it will be easier to draft additional workers. If the NLRB doesn’t comply, the unions will likely force congressional Democrats to try to amend the NLRA to force minority bargaining.

Under the principle of “exclusive representation” if a union demonstrates majority support among workers it gets to represent all the workers in a firm – even the minority who don’t want union representation. I call this monopoly bargaining, for when a union has majority support it represents those who voted for it, those who voted against it, and those who didn’t vote. Individuals are forbidden to represent themselves. Unions defend this as “industrial democracy.” But democracy is a form of government, and unions are not governments. The terms and conditions of sale of one’s labor services are a private, not governmental, matter. One may choose to be represented by a union in such sales, but no one ought to be forced to do so.

The principle of freedom of association, embodied in the First Amendment, forbids government to prevent any person from associating with any willing other person (or group) for legal purposes. The word “willing” is crucial. Any A forced to associate with any B doesn’t have freedom of association. Any worker forced to associate with any union doesn’t have freedom of association.

In light of freedom of association the idea of minority bargaining, by itself, is not all bad. Of course, unions want to have minority bargaining when they don’t have majority support and monopoly bargaining when they do. But the logical flip side to permitting unions to bargain for a minority of workers who want union representation is that unions should not be permitted to bargain for a minority of workers who do not want union representation. All minorities should have freedom of association. This was the case before the NLRA, and it was called members-only bargaining.

In 1934 there was a serious strike threat in the automobile industry. The Auto Workers Union wanted the employers to grant them monopoly bargaining privileges. The auto companies agreed to bargain with the union about the terms and conditions of employment of union members, but they refused to bargain with the union concerning union-free workers. President Roosevelt, who thought a strike in the auto industry would damage the economy, imposed a strike-threat settlement based on members-only bargaining. Indeed, he went on national radio and proclaimed that members-only bargaining was the only form of collective bargaining consistent with freedom of association. A bit more than a year later he capitulated to union pressure and signed the NLRA which abolished members-only bargaining and imposed monopoly bargaining.

Mandatory good faith bargaining is another feature of the NLRA. Under normal contract law for a contract between private parties to be valid it must have been the case that all the parties consented to bargain with each other and, at the end of the bargaining, all parties must have consented to the terms of the contract. Coerced contracts are considered null and void. Under the NLRA this rule does not apply. If a union wants to bargain about something (except something that is illegal) an employer is forced to bargain on the subject. Moreover, the employer is forbidden to make any take-it-or-leave-it offers. The employer must compromise with the union. Failure to compromise is taken as proof of lack of good faith and is an “unfair labor practice.”

I have often argued that the NLRA ought to be repealed and replaced with legislation modeled on New Zealand’s 1991 Employment Contracts Act (ECA, which was repealed at the behest of unions in 2000). Under the ECA there was members-only representation. If a worker chose to be represented by a union, an employer would have to recognize the union as the worker’s representative. If the employer wanted to bargain for the worker’s labor services he would have to do so with the union. But the employer was not forced to bargain with the union or the worker himself. This is the only form of collective bargaining and union representation consistent with freedom of association. Alas, since American politics has become little more than a game of plunder of some for the benefit of others, we are stuck with the NLRA or worse for a long time to come.
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