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| March 18, 1997 | |
Testimony before the U.S. House Committee on Education and the Workforce
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Thank you, Mr. Chairman, and members of the United States House Subcommittee on Labor, for inviting me to testify today.
How can American workers get justice on the job? For more than a century now, labor unions have been celebrated as the answer. The belief in unions as fearless champions of the downtrodden working man against "the bosses" had reached such a pitch by 1944 that the late Henry C. Simons, a University of Chicago economist, could honestly write: "Questioning the virtues of the organized labor movement is like attacking religion, monogamy, motherhood, or the home.....any doubts about collective bargaining admit of explanation only in terms of insanity, knavery, or subservience to 'the interests.'"
Yet only three years later a Republican-controlled Congress effectively attacked religion, monogamy, etc., by passing the Taft-Hartley (Labor Management Relations) Act on June 23, 1947 over President Harry S. Truman's veto of three days earlier. Declared a "slave labor" act by organized labor, Taft-Hartley amended the National Labor Relations Act of 1935 by declaring several "unfair" labor practices unlawful and, among other changes, outlawing the so-called closed shop, strikes by federal employees, and union contributions to candidates for federal office. The political winds had shifted abruptly.
Taft Hartley signaled that labor unions would no longer receive the one-sided governmental support they had enjoyed during their great years of expansion, 1933-1946. Yet the situation hardly reverted to the pre-New Deal ideal of the rule of law. In many ways Taft-Hartley embedded labor unions and government ever more deeply into the regulation of the workplace.
Among LMRA's provisions to limit union-created harms was the famous Section 14(b)1, which permits states to pass so-called right-to-work (RTW) laws. Such laws prohibit or make illegal company/union agreements to require membership in a union as a condition of obtaining or retaining employment, that is, RTW declares so-called closed shop, union shop, maintenance of membership, preferential hiring, or other union security provisions unlawful. RTW laws currently prevent private-sector unions from negotiating union security clauses in 21 states (aside from agreements falling under the Railway Labor Act or federal preemption doctrine).2 State RTW laws need not prohibit all forms of union security but most do.
Employee freedom of choice is the principal argument in favor of a RTW law, that is, employees should not be compelled to become members of a labor organization nor forced to pay dues to it simply to retain their jobs. The theory is that labor unions should be voluntary associations, an idea supported in the American Federationist in April, 1916 by Samuel Gompers: "The workers of America adhere to voluntary institutions in preference to compulsory systems which are held to be not only impractical but a menace to their rights, welfare and their liberty." The principal argument against such laws is that under the duty of fair representation, a union which possesses exclusive (monopoly) representation rights among a group of employees must represent all employees fairly whether or not an employee is a dues-paying member. This allegedly creates a "free rider" problem which can be solved by a union security clause forcing all employees represented to pay their "fair share" of representation costs. The validity of these and related arguments has been explored elsewhere.3
There has been a general stalemate in labor law since the mid-1970s, observes MIT's Thomas A. Kochan (1995, p. 386), a member of the so-called Dunlop Commission on the Future of Worker Management Relations. The most notable exception to this generalization is the 1988 Supreme Court decision in Harry E. Beck v. Communication Workers of America, which found that union members are legally entitled to a refund of the portion of their dues spent on activities other than collective bargaining, contract administration, and grievance procedures. The Court found that only 21 percent of member dues went for bargaining-related activities, enabling Beck and his co-plaintiffs to collect a 79 percent refund. The Beck decision might be described as walking a fine line between those two implacable foes, coercion and voluntarism: Beck tacitly approves of compulsion to defray representational costs on the job but nixes compulsory dues for other union purposes, especially political.
With expansion of the scope of the Beck ruling in 1990 Roesser, 1990 Kidwell, and 1991 Lehnert, "unions now cannot require dues in excess of all collective bargaining costs for all union workers, whether in the private or public sector," according to George Mason University law professor Kenneth Kovach (1993, p. 607). The Beck decision and its progeny have immense potential to expand freedom at work but have had little impact in the workplace so far because workers are poorly informed of their Beck rights, unions dispute how to separate bargaining from non-bargaining costs and the National Labor Relations Board has offered little help for workers seeking rebates.4 In January, the NLRB ruled in Carpenters vs. Bodenstein that a union must inform represented employees who object to paying full union dues and seek a refund of (1) the percentage reduction in fees for objecting non members, (2) the basis for the union's calculation, and (3) a procedure for challenging these figures. This ruling offers moral comfort to objectors but little practical relief because the unions remain in control, just as they did after the Landrum-Griffin Act was passed in 1959. By contrast, there is little controversy over the pricing of membership services by country clubs and other associations because they are disciplined by the members' ability to discontinue purchase without jeopardizing their livelihoods and the availability of competing providers. Finally, note that within a month of assuming office in 1993, President Clinton rescinded an executive order issued by President Bush that required federal contractors to notify workers of their Beck rights by posting notices at worksites, dimming the prospect for executive relief during this administration.
How much did the unions spend in 1996 to defeat Republicans? No one really knows but it can safely be put in the hundreds of millions of dollars. The AFL-CIO's $35 million voter-education campaign was only part of the total spending by organized labor. Troy (1996) estimates the value of union staff time and other union in-kind contributions in federal elections at $300 to $500 million. Bennett (1991) found that "unions spend eight to ten times as much on political activity as they contribute directly to candidates," suggesting a figure of $330 to $410 million to the Employment Policy Foundation (Lyons 1996, p. 3)5 Norquist (1997) puts it at $600 million if the AFL-CIO spent only 10 percent of its affiliated unions' dues income on campaign activities. Based on a recent sample of 34,000 financial disclosure forms (LM forms) at the U.S. Department of Labor, the Employment Policy Foundation claims that unions receive $13.4 billion annually, primarily from dues, fees, sales of assets, interest and rental income (Lyons 1996, p. 2). The last time computer tapes of LM forms were available, Bennett (1991) found that unions collected 46 percent of their revenue from workers in the form of dues, fees, fines, assessments, per capita taxes and work permits. If the proportion were similar in 1996, then approximately $6.2 billion came from workers' dues and similar fees. The Employment Policy Foundation also estimates from LM forms that the average union member paid $425 in dues in 1995, which would imply $5.6 billion in member dues for AFL-CIO-affiliated unions (a reported 13.1 million members), or $7 billion in dues collected from all 16.6 million union members. While an exact figure is impossible to calculate, a substantial share of this political spending was collected from unwilling employees. The issue is not the legitimacy of participation by unions in the political process per se but what control members might exercise over the money which they have surrendered to union officials for political purposes.
Despite all the money spent on politics, the tide has been unfavorable for unions. The prevailing drift in ideology is toward limited government, individual rights and economic liberty, what Adam Smith called "the obvious and simple system of natural liberty." Advocates of socialism, interventionism and welfare statism, by contrast, are on the intellectual defensive around the globe, even as government grows.
New Zealand provides a stunning picture of how much the ideology of efficiency and free markets can suddenly change the labor rules. Supply-side replaced Keynesian demand-side thinking as the key to prosperity, and in "a blitzkrieg of change, financial and foreign exchange markets were liberalized, factor and product markets were largely deregulated" (Kelly 1995, p. 335). Operating against a background belief that the existing system of state rigidities had outlived its usefulness, the intellectual arguments for repealing the privileged position of unions (Brook 1990, NZ Business Roundtable 1990) armed the political forces that passed the 1991 Employment Contracts Act. Unions now have completely voluntary membership, and they are rapidly losing membership (sliding from 42 to 25 percent of the workforce) and collective contracts. Without government support, of course, most labor cartels are short-lived. New Zealand has enjoyed a "sustained economic upturn since 1991" and "the reforms have markedly improved New Zealand's economic prospects" (Evans et.al. 1996, pp. 1893-94).
What should be done about compulsory union dues and their misuse by union officials? The answer, in brief, might be, follow New Zealand! The fundamental cause of our problems with compulsory unionism stems from the federal labor laws foolishly passed in the 1930s and which continue to distort the playing field in U.S. labor relations, to hinder the discovery of superior forms of labor relations, and reduce the freedom and real incomes of working people. Government should not directly help nor harm unions but simply enforce ordinary property, contract, tort and criminal law in an impartial manner. Admittedly, this involves rethinking the entire labor problem and the current labor policies that we have inherited from the 1930s. The object would be to restore the rule of law in labor relations, which means generality, impartiality and predictability. Unions and others would then be treated like everyone else. No longer would Justitia peek out from behind the blindfold and say, "Is this a labor matter? Oh, in that case it's different."
The success of deregulation in product markets can be realized in labor markets too. It can be done in either piecemeal or wholesale fashion.
The issue of compulsory dues has legs. The most important reason is ideological: we are a nation dedicated to the idea of freedom. Prison, for example, is our punishment of choice for that very reason--taking away a wrongdoer's freedom takes away his most precious blessing as an American (Kahan 1996). As long as unions collect compulsory dues, it will rankle a lot of Americans, all the more so when fewer and fewer believe that unions are necessary to obtain justice at work. Our deep-down belief in freedom visibly matters in politics because important money and power are at stake too.
Thank you for allowing me the opportunity to submit this testimony. Naturally, I would be pleased to answer any of the committee's questions.
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