Unions: Good Intentions Equaling Good Outcomes?

According to economist Charles Baird, legal disputes between unions and businesses have caused human resources to devote their time to resolving problems with unions – taking their time away from their real tasks. Unions also take the focus off of workers’ well-being by not letting the market work. Unions were originally not hurting organizations’ productivity and helping workers, but today that is not the case.

An example of a union dispute that hurts organizations and workers is the question of whether non-union workers already paying representation services have to pay for expenses involved in recruiting non-union workers. In a 1984 Supreme Court ruling, workers under the Railway Labor Act only have to pay grievance adjustment, contract administration, and collective bargaining. A 1988 decision by the Supreme Court ruled that the same securities were stretched to include workers under the NLRA (National Labor Relations Act). In the 1984 ruling, it seemed the ruling made it clear that workers were not required to pay anything other than what was stipulated and it was stated clearly that non-unionized workers should not have to pay for expenses of unions incurred when trying to recruit non-union workers, and the same was said to be valid in the 1988 ruling.

However the NLRB (National Labor Relations Board) challenged that in 1995 – a case that was specifically about parent unions’ litigation costs. They said that the expenses of unions incurred when trying to recruit non-union workers applied to non-union workers if the recruiting was necessary to contract administration, grievance adjustment, or collective bargaining and also if adhering to a 1991 ruling, expenses must be paid by non-union workers if they “’may ultimately inure to the benefit of the members of the local union by virtue of their membership in the parent organization.’”

Flickr photo by Washington Area Spark.

In 1999, once again the NLRB made the case that the ruling in 1984 did stipulate other expenses to non-union workers. The ruling decided that expenses must be paid if they are for “’organizing within the same competitive market as the bargaining unit employer’” according to the 1995 ruling. The NLRB’s reasoning is that non-union workers benefit from paying the extra expenses because the union has more ability with more members to win higher nominal wages. They also said that the 1984 ruling did not matter to their argument because it did not say anything about organizing, and Congress’ motive is to encourage organizing. However, in 1951, Section 2, Eleventh was added, which says that the airline and railroad were already unionized – and so Congress did not encourage further organizing. So the NLRB’s argument is redundant because apart from Section 1 of the NLRA, Section 8(a)3’s motive of Congress, in addition to Section 2, Eleventh, was to recruit all other non-union workers. Therefore, organizing has never been essential to union security, according to Congress.

The NLRB’s argument in the 1999 decision is founded from an economists’ empirical evidence of the result of fewer non-union firms being present in a certain competitive market when non-union workers are increasingly being organized. This helps further the cause of unions for higher wages – making firms less resistant to their demands. So unions increase wages of already unionized workers.
Research published in the 1970s and 1980s shows that a 2 percent increase in nominal wages is the effect of a 10 percent increase in number of unionized workers. The grocery store industry in Michigan saw similar results in a 1992 study brought about by the United Food and Commercial Workers Union.

However, DiNardo and Lee published a study in 2004 that used data from 1984-1999 and found that the effects of new unionization was around zero. They followed employers over time and adjusted for the selection bias problem that unions organize the more profitable organizations that could pay higher wages by using regression discontinuity. The researchers also found other problems with the argument presented by the NLRB: “Increased organizing leads to increased density (the percent of workers who are organized), and this leads to higher wages through increased bargaining power (decreased price elasticity of the demand for labor).”

Charles Baird says that the increased wages due to union pleas has left few choices to owners of capital and consumers, however they do manage to find other non-restricting options other than unionized firms. United Auto Workers, he says, is a prime example of avoidance of the restrictions of unions. American car companies set up plants in other countries that had fewer unions or discouraged unions. Due to the huge loss of jobs by the moves to other countries, the UAW has had to endure wage cuts.

I think that unions create a lot of problems for many people. Union legal issues impact organization productivity and overall livelihood by having long legal disputes which come at a huge cost of time, resources, and lack of knowledge of how the organization and its employees will be affected. Human Resources has a lot of weight on their shoulders due to union issues. They are the ones dealing with workers and their respective payroll and benefits. Unions disrupt their real work. I think it’s interesting to think about that the one argument by the NLRB, as was talked about in the above article summarized: “Organizing the Organized”, lingered on after 10 years, and may still be going on. There are many other arguments like this one that have perhaps gone on for much longer. The long-term effects on companies can’t be positive.

Union workers may get paid more, but are their wage increases real? According to research in the article, they are not. Real wages are lower due to unions. A similar example is the minimum wage. The minimum wage forces firms to pay their workers a minimum, which may or may not be ideal for the company. If the company can’t really afford to pay their workers that wage, then the company, workers, and economy suffer. The company suffers because they will be subject to more financial stress and could possibly have to cut back on workers and production, the workers suffer because their jobs could be in danger – with the low-skilled workers being hurt the most due to employers being unwilling to pay them higher wages (the employers would be unable to offer them a lower wage due to their lower skill set and the higher -skilled workers would win the jobs vs. the lower-skilled workers), and the economy suffers due too much regulation of the market – more unemployment, lower real wages, less productivity and well-being of businesses.

Companies having to accept union demands for higher wages is damaging, and has the same effects as does a minimum wage. An artificial price for employees is created, which leads to artificial wealth, stunted business environments, and people taking for granted unions’ “good intentions.”

Baird, Charles W, "Organizing the Organized," 24 April 2009, accessed 7 October 2015.

Why Should We Not Want Welfare?

Most people would probably ask what is wrong with welfare. We've had it a long time ever since the 30's. Why not? It helps people.

Actually, in the long run, if you look closer, welfare does not help people. It actually hurts them.

First, welfare is an incentive not to work. This incentive increases every time the government increases the recipients' checks. This is just common sense: like if your grandmother gave you $5,000 this month and then increased the check to you next month to $5,500, you probably wouldn't want to work very much, and eventually not at all if the increases kept coming. The point is, the incentive to work fluctuates negatively as welfare increases. The incentives just keep piling up not to work as is evident by the truth that what many middle-class people earn today is less than what some people who have welfare receive. The result is that work is discouraged and relying on others is encouraged.

Flickr image by Internet Archive Book Images.

Since work is discouraged, productivity also falls. This argument is made clear by Richard Fulmer in his article in The Freeman: "As benefits and benefit recipients multiply, and as the number of taxpayers declines, the latter will be less and less able to bear the ever-growing burden. Many of the most productive and adaptable will move to countries that allow them to keep more of their earnings ... While productivity increases can help offset falling production due to a declining workforce, any such increase requires either capital investments or innovative process improvements. As previously explained, however, welfare states discourage capital formation by discouraging savings. Innovation is similarly discouraged by taxes that reduce or eliminate any profits that such innovation might generate." 

It is ironic that in a country such as the United States, that we should continue to support the idea of welfare when unemployment is such a hot topic and is at the top of the list of objectives to control by the government, as well as the constant cry of inequality among classes.

Not only does welfare hurt people, but it doesn't help the economy either. In his article "Paying the Unemployed Does Not Stimulate the Economy," in The Freeman, James C. W. Ahiakpor makes a valid argument: "Many in Congress as well as the President and some of his economic advisers have argued that extending the period for paying the unemployed will stimulate the U.S. economy out of its sluggish performance. Would any of them consider as valid an argument that giving money out of their own pockets to an unemployed member of their household would promote the financial prosperity of that household? Would they not correctly see such financial contribution as merely a transfer within the household? Would they also not be eager to nudge the unemployed to get up quickly and find a job? ... So why don’t they apply the same logic to the economy as a whole? The only tenable answer is that they are under the spell of the economic miseducation inflicted on the minds of economists and many among the general population by John Maynard Keynes. They believe that consumer spending drives the economy, without having stopped to consider from where consumers get the means to spend."

Welfare itself stems from a good intention, but it does not bring good outcomes in the end. Welfare means dependence, falling productivity, and as Bono of U2 aptly stated, "a Band-aid. Free enterprise is the cure." In other words, free enterprise brings more opportunity and a higher standard of living than any government can promise or give.