In honor of Labor Day, I figured that some contemplation on the job market would be in order. For a recession that officially ended nearly five years ago, it's amazing how sluggish job growth has been. It would be great if they could implement some policies that actually work so we can get our economy back on track. A few months back, the good people over at the American Enterprise Institute came up with a few policy alternatives that would do the trick. One such policy alternative was to get more states to accept right-to-work laws. In spite of its name, a right-to-work law (or RTW for short) does not guarantee every citizen employment. The function of such a statute is to prohibit mandatory union membership and dues as a prerequisite to enter into a given profession. This, according to proponents, secures the rights of employees to choose whether or not they would like to join a union. For the longest time, I thought that RTW was a good way to stop unions from forcing employees to monetarily support the Democratic Party. I was then introduced to viewing the right-to-work law in a different light: a right-to-work law essentially acts as a government regulation of contract agreements telling employers how to run business. I'm no fan of unions abusing their power, and I am certainly open to an alternative policy. As of now, there are 24 states that have implemented right-to-work laws, and most people support it. However, is the implementation of a right-to-work law the way to go?
From a deontological standpoint, I have to wonder whether further government intervention to try to resolve the issues of the initial government intervention of passing restrictive labors laws back in the New Deal era is a wise decision here. Union security agreements are not as simple as "no union association" or "mandatory collective bargaining"; there are gradations. Take a "fair share provision" as an example, which don't mandate union membership but require a "fair share fee" to cover collective bargaining costs (This might sound fair, but for those who are worried that this would fund union political activities, let's remember that money is a fungible resource). Whether you have mandatory collective bargaining or RTW, they are both examples of the government interfering in the freedom of contract because they limit the types of contracts in which the parties may enter. Since I am a fan of economic freedom, I think that eliminating exclusive representation (i.e., monopoly unionism) without passing RTW laws is the best route.
As a consequentialist libertarian and a pragmatist, I have to realize that the American political establishment is not ready for a completely liberalized freedom of contract. As such, I have to ask whether RTW laws are preferable to the status quo of exclusive representation. The last thing we need is some form of public policy paralysis simply because we don't get everything we want. The extent to which RTW laws improve economic growth can be difficult to determine because states with RTW tend to have stronger pro-business laws in effect, thereby making the effects of RTW more difficult to isolate. Even so, some have given it a go.
One of the most recent reports on the subject was written by the Heritage Foundation (Sherk and Kloster, 2014), in which they found that RTW laws reduce union aggressiveness while promoting economic growth. Competitive Enterprise Institute (Vedder and Rose, 2014) also conducted a recent study. What CEI found was that a) people are migrating from non-RTW states to RTW-states, and b) economic growth is greater in RTW states than non-RTW states. The Mackinac Institute had similar findings (Hicks and LaFaive, 2013). In all fairness, I might as well cite a think-tank that begs to differ. The Economic Policy Institute, which is unabashedly pro-union, conducted studies that concluded that RTW has no positive economic effects and only works to diminish the wages of union workers (Lafer, 2011; Gould and Shierholz, 2011). The EPI's findings make sense when one considers the Left's theory that unionism makes for a strong worker class. I might have to favor the findings of the Congressional Research Services (Colins, 2012). What did the CRS find? Although wages were lower in RTW states, historical research shows that very little actually has to do with RTW laws (CRS, p. 12). Although aggregate employment has modestly increased, it is unclear if that is attributable to RTW laws or not (p. 11). If we're looking at RTW laws from their effects, the only thing we can conclude is that the research on RTW is inconclusive.
Opting for a completely liberalized freedom of contract is too much to request in a country whose unions have a good amount of power and political clout, which is why, at least for now, I would take that option off the table. If I had to choose between forced unionism and RTW laws, I would have to opt for RTW laws. Yes, it's true that the economic effects are more ambiguous. However, RTW laws have weakened the monopolistic grasp of unions, although globalization and the decline of the manufacturing sector also contributed to the decline of unions (Vedder et al., 2012). I would posit that union membership has been on the decline in the private sector because they do not provide members with an incentive to voluntarily join or remain members. It's why unions need to change their way of business if they want to survive in this century. Without going too much off-topic, what I would like to reluctantly conclude with is that although RTW laws are far from ideal, they are second-best, Pareto-optimal laws.