David R. Henderson  

The Economics of "Right to Work"

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I was at a conference last weekend at which one of the participants, from Michigan, was excited about the Michigan legislature's passage of a "right to work" law. I started to share his excitement. On the other hand, some libertarian friends, on Facebook and elsewhere have criticized the law on the grounds that it prohibits certain contracts. So how should we think about right-to-work laws? I'm not sure although I lean strongly in favor.

First, it's important to know what "right to work" laws are. They're something that states are allowed to pass under Section 14(b) of the Taft-Hartley Act, passed in 1947. Here's a succinct explanation. Here's an even more succinct explanation from Pat Buchanan:

The closed shop, where a worker must belong to the union before being hired, is dead. The union shop, where an individual must join the union once hired, is dead. The agency shop, where a worker cannot be made to join a union but can be required to pay dues if the union is the agent negotiating the contract for all workers, is dead.

In other words, the right to work laws limit unions' power to make people join a union and prohibit unions from charging dues to people who don't join.

That sounds pretty libertarian. Still, some libertarians say it's not. What's their objection? The most articulate and detailed case I've found is this one by Gary Chartier. It's not long and I recommend reading it. He makes a good point: if you don't like government interfering in relations between employers and employees, then abolish the federal law; don't substitute a new regulation on contracts between employers and employees. (These are my words for his thoughts; if I'm not doing him justice, then I'm open to being told why.)

Interestingly, though, Gary avoids mention of the word "monopoly." He recognizes that federal labor law gives unions the power to negotiate for the whole labor force in a plant or a firm. That's monopoly. Many libertarians, including me, have looked much more favorably on "right to work" laws as an offset to this illegitimate government-created monopoly. It's only a small offset, as we'll see.

So what do you do, given that we have this federal law that Gary and I agree is a bad law? Try to abolish it, of course. But what do you do meanwhile? Many libertarians have argued that you work within the existing law to try to minimize the harm done by monopoly unionism. And a way to do that is with right-to-work laws.

It's true that such laws make it illegal for employers to do what some of them might want to do: namely hire only union workers, require everyone who works for them to join unions, or require everyone who works for them to pay dues to a union. But are there really likely to be many such employers? I don't think so. In fact, if you are such an employer, please say so in the comments below.

Take the extreme case where there are no such employers. Then the law is forbidding employers to do what they wouldn't want to do anyway. So why have the law? To reduce the legal power that unions have over their members and over non-members who work in a place where the union exists.

Now, I don't know that there are no such employers. Maybe there are some. If so, then it becomes a tradeoff. On the one hand, preserve the rights of many non-union workers, many union workers, and unionized employers but trample on the rights of those few unionized employers. On the other hand, trample on the rights of many union workers, non-union workers, and unionized employers but preserve the rights of those few unionized employers. I choose the first option because I think it tramples on way fewer people's rights. And, remember, that if you say right-to-work is wrong and you get your way just on that issue, the federal government will continue to trample on many people's rights.

Of course, "right to work" does not at all prevent the union from becoming the sole bargaining agent for the whole work force. That's too bad because workers should be able to make their own deal with their employer if the employer wants to do so. In the 1990s, I attended a conference on Korea's economy at the Hoover Institution. One of the issues was unionization. I don't remember the speaker or the whole context but at one point I asked the speaker if people were free in Korea's economy to make their own wage agreement with their employer. The speaker said "No" but then said this would not matter because it would be the rare employee who can bargain for a higher wage. A number of labor economists there turned and looked at me as if I was being unrealistic in thinking that a lone employee could do that. I looked back at them as if they had forgotten Econ 101 and said, "Of course, they wouldn't typically use their freedom to bargain for a higher wage; they would use it to bargain for a lower wage." Unions monopolize work forces and keep wages higher than otherwise, causing some workers not to be employed who would otherwise have been employed. I was pointing to the unseen: the people who would want a job at, say, $15 an hour but couldn't get one because the union wage was $18 an hour. Unfortunately, "right to work" laws don't get rid of this monopoly power.

It's possible that this failure to abolish their legal monopoly is the reason that most commentators have focused on one salient part of right-to-work: its prohibition on unions being able to make non-union workers pay dues. I would like to see Gary Chartier or others address this specific issue.

Note: As I said at the outset, I lean strongly in favor of right-to-work laws. But that doesn't mean I'm not persuadable. I'm more open to the idea that my view on this is wrong than I am to the idea that my views on slavery (against), legally required racial discrimination (against), rape (against), or murder (against), to name four in no particular order, are wrong.

UPDATE: I recommend that you read the article that Sheldon Richman links to in the comments below. Here's my comment on the article. There's little in it that I disagree with. As I said from the outset, the best solution is to abolish the law that gives government-enforced monopoly power to unions. Sheldon and I agree on this. The issue here is whether we should just settle for saying that and pushing for that or do something else meanwhile. Sheldon gives some interesting historical background on Percy Greaves' role in trying to roll back or abolish the Wagner Act. I did not know any of this. Had I been a U.S. Senator at the time, I would have gone with what Greaves said. The present issue, though, is what we do now. I do have one nuanced disagreement with Sheldon. He writes, "Greaves's prediction was accurate." Greaves had predicted that passing Taft-Hartley would take pressure off the push to repeal Wagner. Probably true, but we don't know that it's true. Moreover, it's not clear that the pressure to repeal Wagner, though probably higher without Taft-Hartley, would have been enough to get repeal.


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CATEGORIES: Labor Market , Regulation



COMMENTS (30 to date)
egd writes:

I don't like the anti-RTW libertarian argument because two parties (employer and union) shouldn't be able to contract to compel a third party (employees). If they try to do so the government should not enforce that agreement against the third party.

I also think the argument based on union-employer agreement is in error. If an employer can require future employees to join (or support) a union, why can't the employer require future employees to not join (or support) a union?

If an employee can't contract away his right to join a union he shouldn't be able to contract away his right to not join a union.

Sheldon Richman writes:

I weigh in on Gary's side here, citing earlier libertarian critics of RTW, including Milton Friedman and Percy Greaves.

Thomas Boyle writes:

It seems to me that the employer can readily remedy the problem the libertarian critics point to.

As the employer, you reach agreement with the union that will jointly run a closed shop with you. Then you make union representation (but not membership) free to the employees and you set the terms and conditions of employment in negotiations with the union. The union gets paid a per-capita amount in lieu of dues, directly from the employer (of course, this cost gets allocated between the employee, customers, shareholders and government, in the end).

Done. It complies with RTW regulation because the employee never has to join the union: the employer is simply asking the union to perform some of the functions that a non-union shop might assign to the HR department and/or an ombudsman.

magilson writes:

It seems to me the "hardline" libertarian critique of RTW laws is along the lines of the Perfect is the Enemy of the Good aphorism.

Ideally we would eliminate Wagner, or create an exclusion such that states could opt out of Wagner. Since it's impossible to do so in the modern, real world we all live in then we pursue RTW laws under Taft-Hartley.

Blackadder writes:

I don't like the anti-RTW libertarian argument because two parties (employer and union) shouldn't be able to contract to compel a third party (employees).

You misunderstand the argument.

Suppose a producer wants to hire me to star in his new movie (I'm kind of a big deal). I say I'll do it, but only if you specify in the contract that the movie won't involve any non-union labor. Have I compelled anyone who wasn't party to the contract? No. The contract compels the producer, not any non-union employees he might otherwise hire.

liberty writes:

It seems to me that the unlibertarian thing about the RTW law is that two parties - the employer and the organization - the group of workers who have organized as a union - are prevented from making a mutally beneficial exchange. It seems no different from preventing trade between two companies.

Ken B writes:

What if, under David's conditional (that employers are only going along to get along) we were talking churches not unions. The UAW requires all its members attend church and take communion? (I understand that legally it would probably be different. I'm not asking about legal predictions.)

Chris H writes:

Fixing a government intervention with another government intervention seems like the kind of solution that only a politician or bureaucrat could love. Indeed, libertarians should be careful with some of the proposed "fixes" to make sure they don't wind up encouraging more abuses in the future. A good example of this is income tax with-holding. This was a wartime expedient designed with the help of Milton Friedman to make income taxes less onerous. What it did was allow for higher income tax rates than would have otherwise been tolerated. While the perfect should not be the enemy of the good, it's also important to make sure we know what the good is first.

All this being said, I think RTW laws aren't likely to lead to the encouragement of even worse abuses of liberty. They are an imperfect solution, but if every state adopted them it seems likely that that would make repealing the federal law easier (on the basis of "what's the point of even having it"). So on net RTW is a step in the right direction.

To the question of what kind of employer would actually want all union membership, the best guess I can come up with (besides some ideological affinity for unions) is maybe as a combination employee screener and means of easing negotiations. If a union gained a reputation for only including very productive workers then an employer might want union only workers to save on a more onerous interview/background check process. The other factor might simply be wanting a single place to undertake negotiations with employees, though honestly there probably aren't many cases where that wouldn't be more detriment than benefit to employers. I'm not sure that either of the benefits from having a union or closed shop would be cheaper than a good HR department in general, but maybe it could happen?

Bill McGonigle writes:

I had written along similar lines in 2011 when NH passed such a bill.

It seems entirely likely that some employers would rather outsource all their HR work to a union, should mutually agreeable terms be found. That's a general guiding principle for businesses - outsource non-core competencies. But Taft-Hartley prevents this.

To ask, "But are there really likely to be many such employers? I don't think so" is antithetical to the libertarian perspective - that we should violate the right-of-contract because not that many people would care? And especially since Taft-Hartley is in effect, the market for such arrangements cannot be mature - if any examples are found they would all be from before modern productivity practices were in place.

States don't have to try to find the best possible social-engineering outcome in light of Taft-Hartley (and violate fundamental rights in the process). Their better option is to nullify the unjust provisions of Taft-Hartley directly.

egd writes:
Have I compelled anyone who wasn't party to the contract?
Yes. You've compelled future employees to contribute money to your union.

If you contracted with the employer that the employer would pay union dues for any new employees, then you're not compelling anyone else.

Is the libertarian argument that government should pass as few laws as possible, or that government should be impartial? If it's the former, then I suppose I'm not a libertarian. I think it's the latter - where government acts it should act impartially.

RTW makes the law impartial - no one can be compelled to join or prevented from joining a union by his employer. Absent RTW, you cannot be prevented from joining a union, but you can be compelled to join.

John David Galt writes:

I'm with David on this one. The prospect of an employer, truly voluntarily, setting up a union shop is about as likely as voluntary communism.

More to the point, the primary purpose and effect of most unions is to collect forced dues and funnel the money into Democratic political campaigns. This gives that party an unfair lock on political control of affected areas, and thus makes serious reform (such as repeal of the NLRA, or better yet, appointment of a Supreme Court that will strike it down as they should have in 1934) effectively impossible.

When opponents fight you into a corner, you don't dare worry about who owns the only sword in reach.

Darwin writes:
Suppose a producer wants to hire me to star in his new movie (I'm kind of a big deal). I say I'll do it, but only if you specify in the contract that the movie won't involve any non-union labor. Have I compelled anyone who wasn't party to the contract? No. The contract compels the producer, not any non-union employees he might otherwise hire.

It seems like the two areas where this might compel someone would be:

a) The producer has already hired a number of non-union people who are less of a big deal than you are. He now goes to them and say, "Hey, sorry, but you need to either join the union or I'll fire you. Which is it?"

b) Rather than hiring only people who are already in the union, the producer decides to make job offers to a number of non-union people and tell them, "Hey I'm making you this offer, and I'd really like to give you this job, but if you want to accept it you'll have to join the union. Otherwise I withdraw the offer."

Now, I guess, the next question is, how offensive do we choose to find this compelling? After all, we don't generally have a problem with an employer compelling employees to do things like show up on time or go off to some nice hotel and take training seminars for a week. Both of these would at least have some degree of opportunity cost, and perhaps might even have monetary costs of an indirect source. Does being ordered to join a union cross some line that makes it more offensive than these? (I would tend to think yes, but I'd have to think for a while to justify why.)

Tim writes:

It seems to me that the unlibertarian thing about the RTW law is that two parties - the employer and the organization - the group of workers who have organized as a union - are prevented from making a mutally beneficial exchange. It seems no different from preventing trade between two companies.

That would be the case if the Wagner act didn't exist. In practice, the employer is compelled to negotiate with a union even if they don't want to.

These libertarian arguments against RTW remind me of the obstinate libertarians @ H&R who argue against gay marriage on the basis that we should be fighting against state marriage licensure. I'd be interested to know how many who oppose RTW also oppose gay marriage, because the principle is exactly the same, but opposing gay marriage can be culturally more difficult.

Don Boudreaux writes:

Matt Zwolinski's thoughts on this matter are also valuable:
http://bleedingheartlibertarians.com/2011/06/libertarianism-and-the-right-to-work/

Thomas Boyle writes:

Existing union law means that, absent RTW, a subset of the workforce can unionize the workplace, and the union can then impose a union membership requirement on current and future employees.

The employer and the non-union-supporting employees are not parties to this agreement; they are compelled by it.

The libertarian ideal is to eliminate the union's ability to unionize the workplace; it could represent only its members, and membership would be voluntary.

Absent the ideal (and, so far, that's not on the table), RTW makes union membership and dues voluntary. It does not, as I noted above, prevent the employer from choosing to work with the union. It does prevent the employer from requiring union membership but, as I've described, that's a distinction that need not make a difference. As I understand it, what RTW does NOT do is to allow non-union employees to continue to represent themselves in their negotiations with their employers.

Blackadder writes:

egd,

You say: You've compelled future employees to contribute money to your union.

If a future employee doesn't doesn't want to contribute money to the union, then they don't have to take the job. Same as with any other condition of employment.

Blackadder writes:

What if, under David's conditional (that employers are only going along to get along) we were talking churches not unions. The UAW requires all its members attend church and take communion?

Given that libertarians oppose all anti-discrimination laws, I don't see why this would pose a problem.

Ken B writes:

@Blackadder: "libertarians oppose all anti-discrimination laws"

You know, I don't think that's true.

egd writes:

Blackadder writes:

If a future employee doesn't doesn't want to contribute money to the union, then they don't have to take the job. Same as with any other condition of employment.

You wouldn't have any objection then to employer agreements prohibiting union membership?

Charley Hooper writes:

It's easy to forget that employees are not fungible. There are good ones and bad ones; productive ones and unproductive ones.

My brother, who is unionized, can't seem to comprehend that I've worked for years at companies with thousands of other employees, but I alone negotiated the terms of my employment.

Perhaps I negotiated a rate that was below the average, to get my foot in the door. Perhaps I negotiated a rate that was above the average, because of my skills and experience.

My brother thinks that the powerful corporations would have squashed me, but I had other companies to work at. Both sides of the negotiation had some measure of power.

Blackadder writes:

You wouldn't have any objection then to employer agreements prohibiting union membership?

No objection.

Julien Couvreur writes:

Door 1: repeal government laws that interfere with voluntary agreements and weaken government power.

Door 2: use further government power to pile on a seemingly beneficial interference, which would at least offer a short-term improvement, but which reinforces government power and legitimacy long-term.

How to choose?

The answer lies in principles and consistency.
We criticize statists for using the power of the state, often to achieve short-term goals but at the expense of worse if unintended long-term effects.
You would think we would not fall prey to the same error.

Door 2 seems preferable over the status quo (but not as good as door 1). It is tempting (like all uses of government power).
But if we stand by the moral principal that ends don't justify the means, then is this not a representative application? Doesn't door 2 make libertarians hypocrites?

As a side note, "right to work" implies a new kind of right. The proliferation of such so-called rights is something libertarians should avoid promoting, even if incidentally.

Foobarista writes:

How does all this change if the employer is the government, with all the well-known public-choice issues with the union essentially picking the "management" of the government? All the above debate presumes that the union doesn't actually run the employment entity, which is the case with the UAW in GM, and frankly much of the government in places with strong "political machines".

MichaelM writes:

Isn't this essentially a prime example of Robert Higg's 'ratchet effect'? One bad intervention (the privileges unions gained under the Wagner Act which were only partially and imperfectly repealed in the Taft-Hartley Act) are 'fixed' by another intervention down the line?

I understand that we're not likely to get the perfect (repeal of the Wagner Act in its entirety), but shouldn't it still be worth fighting for? After all, the 'good' solution (Right-to-Work laws) already have their constituency -- pro-business conservatives. Does it serve libertarians at all to continue to act in a way that allows others to tar us as exactly the same as the pro-business conservatives? How can we win back the free market, classical liberal rhetoric that pro-business conservatives have stolen from us when we are happy to support anti-free market statutes like right-to-work laws?

Ken B writes:

If we judge by the usual Libertarian rules -- shortest path to a sacred axiom wins -- then Sheldon Richman wins. I think DRH is trying to carve out a special case. In some games depriving a player of options is a benefit. If few employers would accept a closed shop absent Wagner -- David's conditional -- then this seems such a case. It looks like a justifiable use of a dodgy legal ploy to ameliorate another dodgier one. But I 'm not a big fan of libertarian principles.

This is the real point of my religion question . Such a demand would be illegal now, countervailing the compulsion in Wagner, and most would like the outcome.

I agree with DRH, but I'm not sure he should agree me!

MichaelM writes:

I think Sheldon wins in the long run either way. DRH fails to carve out a special case -- except in the literal sense that he points out a short run problem that applies only within that short run. Once you leave the short run behind, he's still wrong and Sheldon's link makes DRH look like he's just compromising for political reasons.

Does that make the purely libertarian position stupid? Literally, yes. The Greeks called anyone who refused to participate in the politics of the city-state an 'idiotes', an idiot. Anyone who concerned themselves primarily with the 'private' aspect of life, which libertarians take as the [i]only[/i] aspect, was an idiot to them.

But the Swedes, belatedly, made a counter-point: The fool dies happy.

David R. Henderson writes:

@MichaelM,
Once you leave the short run behind, he's [David Henderson's] still wrong and Sheldon's link makes DRH look like he's just compromising for political reasons.
I am compromising for political reasons, if by that you mean that I think repealing Wagner is an extremely unlikely event in the next 20 years.
Does that make the purely libertarian position stupid? Literally, yes. The Greeks called anyone who refused to participate in the politics of the city-state an 'idiotes', an idiot. Anyone who concerned themselves primarily with the 'private' aspect of life, which libertarians take as the [i]only[/i] aspect, was an idiot to them.
I think this is unfair to Sheldon. Sheldon often mixes it up in the political arena. He doesn't run for office but he speaks out on actual issues that people vote on. I think he and I would agree that if you can pare back a bad regulation, a bad government spending program, or a tax, we should favor that. The problem comes, as in this case, when there is a new regulation that mainly pares back a bad old one but also does a slight amount of harm.

Ken B writes:

David R Henderson:

The problem comes, as in this case, when there is a new regulation that mainly pares back a bad old one but also does a slight amount of harm.

I'm note sure this is an accurate and fair statement of David R Henderson's position! I read that what you find objectionable is the principle not the slight harm. If there was no Wagner Act etc, you'd object to this law on the same grounds as Sheldon wouldn't you? I take it you are willing to compromise on the principle because the infringement on the employers rights would be at worst minimal, and quite possibly non-existent. Would David R Henderson agree?
David R. Henderson writes:

@Ken B,
You're misunderstanding my point. The slight harm is the harm done to the principle. And actually Sheldon and I both agree on that. If there were no Wagner Act, I would object to the law on the same grounds as Sheldon.
I take it you are willing to compromise on the principle because the infringement on the employers rights would be at worst minimal, and quite possibly non-existent.
Yes, that's right.

Ken B writes:

Dalmia in Reason discusses this thread. She sides with those of us who like RTW.

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