The Michigan right-to-work law

Much attention is being paid in the news today to the impending passage of Michigan's new "right to work" law, making it the 24th state to enact right to work legislation.. Unions are of course fighting it tooth and nail, as is the Democratic party, since union dues provide hundreds of million in campaign funds to Democratic candidates. Nevertheless, Michigan voters in this last election soundly defeated a union-sponsored proposition to embed union power in the state's constitution, so the public is clearly behind this move.  And so it should be, since states that have enacted right to work laws have seen immediate inflows of companies and jobs (from union states).

In truth, "right to work" laws are not anti-union, though of course unions describe them that way. They simply say that no worker can be forced or required to join a union in order to get a job, nor can unions automatically deduct union membership fees from a worker's pay.  In our free society one would think that would be an obvious right anyway. It is interesting that in states that enact right to work laws, a very large number of union members promptly stop paying their union dues, reasoning no doubt that the union doesn't give them enough benefit to justify the dues.

But in fact unions were always a bad idea, even at their inception.  Certainly something was needed in the early days to oppose the coercive power of big businesses and defend the basic rights of workers, but the union wasn't the right answer, though I have to admit that right off the top of my head I don't know what would have been the right answer. But certainly companies in which workers are part owners and/or shareholders get the incentive structure in the right direction.

There are three fundamental problems with the union idea:

1) Unions are, in fact, labor cartels, and have the same problems that any cartel has in a free market.  They distort prices. We prohibit corporate cartels for just that reason -- colluding to raise prices above what a free market would support distorts the market and raises prices to the consumer.  Unions do exactly the same thing, colluding among workers to raise wages above what they would be in a free market.  The increased prices of goods imposed by unions are, in fact, just a hidden tax on consumers.

2) The incentives are all wrong. The incentive for union leaders is to maintain their high-paying jobs, not to keep their worker's companies healthy and competitive. So they are always negotiating for higher pay, more benefits, more jobs and fewer layoffs for any reason.  That leads to "featherbedding" jobs (unnecessary jobs, as when the railroad unions forced railroads to keep a brakeman on each train, even after trains stopped carrying cabooses or needing brakeman.). I had a friend years ago who was a sheet rock hanger.  He joined a union job in Washington DC, and hung 120+ sheets the first day.  At the end of the first day, the union foreman came by and told him that union members never hung more than 88 sheets per day, and if he continued to exceed that, "something bad" might happen to him.  That artificial union limit of course raised the cost of construction.

The recent baker's union debacle with the Hostess company revealed that unions required different products from the very same factory to be delivered in different trucks, and that truck drivers were not allowed to unload their own truck; another union member had to do it. All of these abuses make companies less competitive, and in the end drove many companies, and even entire business segments (like domestic steel production), into extinction as more competitive foreign companies took their business.

Perhaps the most obvious current example of how the incentives are all wrong is in many of the teacher's unions across the country, which are resisting tooth and nail educational innovations that would benefit students, just because it might cost some teachers (especially senior but ineffective teachers) their jobs.  The teacher's unions talk a lot about their students, but their actions make it plain that educating students better matters a whole lot less than preserving union teacher jobs.  Clearly the incentives are wrong here.

3) The vast amount of dues money collected from members, with little or no member oversight on how it was spent, quickly attracted all sorts of abuse. The mobs quickly realized the potential, and took over many unions to plunder the funds and use the threat of strikes to extort money from businesses.  Union bosses awarded themselves extravagant salaries and lived in luxury. Some raided the pension funds. Union dues were, and still are, used as a powerful political weapon at the discretion not of the members but of the union leadership elite.  All in all it is an arrangement just begging for abuse.

So in the end it is probably inevitable, especially in this new era of austerity and global competition, that union membership and union power will continue to decline precipitously.  No doubt the fight will go on noisily, with lots of political posturing from Democratic politicians (Obama was doing just that yesterday), but the end is probably inevitable.