Wednesday, July 2, 2014

Harris v. Quinn: Can Public Sector Labor Unions "Do Business As Usual?"

There has been plenty of political commentary lately on the Supreme Court's decision this past Monday that for-profit organization cannot be mandated to provide contraceptive services for their employees. While I enjoy the controversy behind birth control, there was another Supreme Court ruling that day which piqued my interest even more so: Harris v. Quinn. By a 5-4 vote, what the Court did was state that health care workers cannot be forced to financially support a union that they would rather not join. This ruling was what the AFL-CIO is calling an "assault on wages and the middle class," but in reality, this ruling was limited in scope because these health care workers were not "full-fledged public employees," which means that this ruling does not apply to a vast majority of public union workers. Although I would have much preferred a blanket prohibition of mandatory union dues [via the overturning of Abood v. Detroit Board of Education], I am glad to see that the Supreme Court has at least some respect for freedom of association. Perhaps the Supreme Court will make a more sweeping ruling in the future.

While we wait for that possible future, let's ask ourselves something in the interim. Can unions keep doing business as usual?

Aside from being a political activity, to put it in economic terms, collective bargaining is a monopoly or cartel with similar effects to a price floor above the equilibrium point, which creates a higher wage (Schmitt, 2008) at the expense of inefficient allocation of resources (Anzia and Moe, 2013), as well as less profits and fewer jobs (Holcombe and Gwartney, 2010). If public sector labor unions are that great, the should be able to survive without mandatory fees. The fact that coercing union fees is required says a lot about the declining quality of labor unions. If public sector unions want to survive, they need to adapt to the 21st century. The public sector union compensation mechanisms need to be modified because they are making up for an increasingly large amount of government outlays.

Since businesses don't run themselves in a top-down fashion like they used to, perhaps employee involvement (EI) programs could work. How about relinquishing some of that collective bargaining power? Opening public sector unions to market forces would be a healthy thing. Relinquishing some bargaining power helped in Wisconsin and Indiana (Barro, 2012). Although there might was a time when worker abuses were rampant and unions were needed, public sector unions have reached the point of having too much power and function like labor cartels. Unless public sector unions become adaptable to a more competitive market, we won't even need to wait for another Supreme Court ruling to relegate public sector labor unions to the dustbin of history.

1-7-2018 Addendum: The American Economic Association just released a paper showing that teacher collective bargaining leads to students having average reduced earnings of $800 (2 percent) and decreases the average work week by 0.5 hours (Lovenheim and Willen, 2017). This indicates that in aggregate, teacher collective bargaining reduces annual total earnings by $196 billion in the United States.

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