Right to Work

I’m torn.  As a freedom nut, I’m pretty excited that my former home state of Michigan recently became the nation’s 24^th Right-to-Work (“RTW”) state.  But as a Hoosier, I have to say that I’m appalled at the development: it would’ve been so nice to keep taking companies from our northerly neighbors.  Oh, well, I guess we still have Ohio and Illinois to kick around.

All kidding aside, the recent vote in Michigan was truly astounding.  Michigan is, after all, the birth place of the United Auto Workers and at the end of this month, unions will celebrate the 76^th anniversary of the Flint Sit-down Strike, a work-stoppage which helped nationalize the labor movement.  Michigan has always felt to me like two states in one – the greater Detroit area being the first, and the rest of the state being the other – so it’s not totally surprising that Grand Rapids is more amenable to RTW than Livonia or Saginaw.  But the result is still shocking, historically.  

The labor movement is upset because Gov. Snyder had said that he would not make RTW a priority of his administration, and his decision to sign the legislation on December 11 is being received as an outright betrayal.  But the fact is, the Snyder administration wasn’t focused on RTW until Democrats put Proposition 2 on the ballot for a vote last month.  Prop. 2 was an amendment to the Michigan constitution that, among other things, would’ve prevented RTW.  Michigan voters saw this extraordinary measure as the power grab that it was and overwhelmingly (58-42) voted it down.  This was the context in which the Republican-dominated Michigan legislature decided to run the RTW bill through.  Did Snyder actually go back on his word?  I’m not sure, nor am I going to parse that out.  You can bet the AFL-CIO and Change to Win will be making the case that he did, come 2014 though.

RTW, as it’s commonly known, is a provision of the 1947 Taft-Hartley Act (“TH”) which essentially allows states to override aspects of the 1935 National Labor Relations Act (“NLRA”).  Each state is subject to the entirety of the NLRA, unless it enacts legislation under TH.  One key provision of the NLRA requires that all members of a bargaining group at a “Union Shop” either join the representing union or to start paying for the union’s representation within 30 days of beginning their employment.  TH provided that if a state wanted to allow employees at Union Shops to opt out of paying dues, it was free to do so.  TH did at least one really dumb thing (requiring union leaders to sign anti-communist affidavits) but the aspect that would become the RTW was entirely sensible. 

That last point isn’t universally accepted, even though it should be.  Union members like to raise a free-rider problem objection: since unions are required to represent all of the members of a bargaining unit (premise 1), and that representation requires funding (premise 2), it would therefore be unfair for some members of the bargaining group to avoid paying their fair share for benefits provided to them by the union (inference). Were that line of thinking true, Labor’s claim that RTW efforts are actually geared at union-busting would have legs.  The problem with that view is premise 1: unions are not, in fact, required to represent non-unionized employees.  The NLRA provides for unions to negotiate members-only contracts – they are not required to represent all employees.  The sticking point - and the point on which free-rider concerns turn - is that often times, unions have negotiated contracts with employers in which they have agreed, as the exclusive bargaining agent, to represent non-members.  So, in the 77 years since the 1935 NLRA was signed, unions have had the option to negotiate member-only contracts, and in the 65 years since TH, they've had a rational reason to do so.  It seems to me that 65 years is sufficient time to re-negotiate a no longer sensible contract or, at a minimum, to quit negotiating contracts requiring that unions represent all employees.  But maybe I'm missing something.   

If RTW really isn’t about union-busting, what is it about?  Well, for starters, it’s about limiting coercion: why should the law require someone to pay for representation they don’t want?  That's a big question, one which goes right to the heart of liberty, but it's not the driving force behind the RTW movement.  The real point is, quite frankly, to drive down average labor costs.  

I hope all my Left-loosey buds will appreciate that admission from their Righty-tighty friend.

The trade off, as Charles Krauthammer points out, is more jobs vs. higher paying jobs.  Like rent ceilings and the minimum wage, requiring employers to pay the union rate simply limits the number of people companies can afford to hire.  A manager in Toledo who has labor cost capacity of $40 / hr. could hire 1 union guy at that rate, or she could add a non-union first-shift guy at $18 / hr. and a non-union third-shift guy at $22 / hr.     

That may seem like a horrible reality, but reality it is.  And, it’s only compounded by globalization: if your job is so basic that you could lose it to some unskilled laborer in Mexico or China, well, why shouldn’t you lose it to them?  I mean, what truly makes it “your” job anyway?  Is it anymore “your” job than a soon-to-be bankrupt company is the “owner’s” property?  So, Boeing relocating a plant from Washington (Union Shop) to South Carolina (RTW) may seem like a big deal, but it’s actually a reasonable way of keeping the plant from leaving the country altogether.  

When I put on my Lefty hat, I start thinking about ways around what I feel in my gut to be the pernicious effects of globalization.  One way is trade protectionism – we could slap huge tariffs on all imported goods, thereby driving the price consumers pay for Chinese-made products in line with American-made goods.  The problem there is that tariff-induced higher product prices don’t translate directly into higher wages, and we might still have a declining living standard problem.  But worse still is the Wal-Mart effect: gripe about the store all you want, many low-wage workers need stuff that Wal-Mart makes available cheaply.  

Ultimately, the way to address globalization problems are by addressing standards of living.  That requires either 1) more competition through trade freedom (e.g., we’re already seeing some trends to shift manufacturing from China to Mexico, due to rising labor costs in Asia), which would raise living standards sustainably in the long run or 2) a global Marxist revolution, which would equalize living standards, but at the profound cost of innovation, not to mention blood-shed.  

I hope the second possibility never materializes.

But neither of those long-term possibilities answers the short-term union quandary: how do they stay relevant in the light of a clear and building RTW wave?  Fighting RTW through political campaigns will doubtless be part of the answer, but that would be short-sighted. What if, instead of directing union dues to electing Democrat candidates, unions instead invested more money in the technical education of their workers?  Why wouldn’t that work?  Union dues combined with employer-provided tuition reimbursement benefits would be a huge funding source.  Union apprenticeship training could be coordinated with technical colleges, for example.  In that scenario, the “Union-made” disclosure would become a symbol of superior quality, not just a talisman of solidarity.  Union-member employees would then be worth more than their non-union counterparts – and here’s the really delicious reason – because their skill would be more valuable. 

I recently learned of an investment manager who was trying to hire a portfolio manager and a receptionist.  The company received 70 resumes for the receptionist position, but only 7 for the portfolio manager.  This recent economic contraction and subsequent tepid expansion has impacted low-skilled workers disproportionately.  That’s sad, but let’s face it: we don’t need full service gas station attendants, nor do we need as many checkers at the grocery store, nor do we need as many line workers in a GM plant.  Technological developments have changed the employment landscape permanently.  But the undesirable forces of globalization needn’t be permanent also.  

Mid & late 20^th century American economic exceptionalism was a product of political & economic liberty, a now dead depression-era work ethic, and as I wrote earlier this year, uniquely intact manufacturing capacity after WWII.  There is nothing guaranteeing that the U.S. will remain a great nation, nor can we be assured of future prosperity simply because of lingering manifest destiny fantasies.  But, I still believe we can compete our way out of the current trajectory.  I see labor unions having a potentially redemptive role in that process, but only with some major cultural and strategic changes.