THE EMPLOYEE FREE CHOICE ACT: ECONOMIC IMPLICATIONS
March 9, 2009
The Employee Free Choice Act (EFCA), which is pending before the U.S. Congress, would provide for union representation when an employee majority has signed union authorization cards and would create a system of mandatory arbitration if a collective bargaining agreement is not reached approximately 130 days after a union is newly certified.
Are there any likely unintended consequences, should the legislation be passed? According to Anne Layne-Farrar:
- While card checks could be expected to increase union membership as hoped by EFCA proponents, EFCA is unlikely to achieve its main goal of improving social welfare, which should take into account possible consequences not only for union members but for all individuals.
- In particular, passing EFCA would likely increase the U.S. unemployment rate and decrease U.S. job creation substantially.
The precise effect on unemployment will depend on the degree to which EFCA increases union density, but for every 3 percentage points gained in union membership through card checks and mandatory arbitration, the following year's unemployment rate is predicted to increase by 1 percentage point and job creation is predicted to fall by around 1.5 million jobs, says Layne-Farrar:
- Thus, if EFCA passed today and resulted in an increase in unionization from the current rate of about 12 percent to 15 percent, then unionized workers would increase from 15.5 to 19.6 million while unemployment a year from now would rise by 1.5 million, to 10.4 million.
- If EFCA were to increase the percentage of private sector union membership by between 5 and 10 percentage points, as some have suggested, unemployment would increase by 2.3 to 5.4 million in the following year and the unemployment rate would increase by 1.5 to 3.5 percentage points in the following year.
Source: Anne Layne-Farrar, "An Empirical Assessment of the Employee Free Choice Act: The Economic Implications," Social Science Research Network, March 3, 2009.
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