Myths about Labor Myths

by Ivan Osorio on February 22, 2010

in Bailout Watch, Economy, Employment, Labor, Regulation, Stimulus to Nowhere

Sunday’s Washington Post features a supposed myth-debunking piece about organized labor that is so misleading that it’s hard to know where to begin driving trucks through the holes in it. A combination of egregious omissions and inaccurate characterizations present a picture so distorted that I cannot let it go unchallenged. Segments of the piece, by Post reporter Alec MacGillis, are indented, with my responses below.

1. Organized labor is in inexorable decline.

Not exactly. Organized labor isn’t so much shrinking as shifting. The proportion of private-sector workers who are union members continues to drop, to 7.2 percent last year from 7.6 percent in 2008. But this decline was offset by the ongoing growth of public-sector unions — 37.4 percent of public employees are now represented by unions. Today, there are more public employees in unions (7.9 million) than private-sector ones (7.4 million).

Even within the private sector, organized labor’s decline isn’t irreversible. Much of it is a result of larger economic forces such as the shrinkage of union-dominated manufacturing industries and the expansion of more transient, service and professional jobs where the workers are more difficult to organize.

But there are growing sectors in which unions are making inroads — low-wage jobs in retail and in health care or elder care, for example. And they would be signing up more workers if the regulatory climate were more favorable. As manufacturing-heavy as the economy was in the early 20th century, it was only when President Franklin Roosevelt pushed through the pro-union reforms of the New Deal that membership surged, tripling from 12 percent of the workforce in 1930 to 36 percent in 1945.

A sure sign of an industry being economically moribund is its having to rely on government to survive, which is exactly what organized labor is doing by relying on public sector membership to keep its numbers up. This is not a “shift,” but a retreat away from the market.

The boost in unionization among low-wage workers is hardly a ray of hope for unions to reestablish themselves in the private sector, since it is nowhere near what’s needed to reverse the trend toward the day when unionization becomes almost exclusively a government employee phenomenon.

As MacGillis notes, it was changes in federal labor law, not market forces, that helped fuel union growth during the mid-20th century. From the way he describes it, the Roosevelt administration and its Congressional allies merely “reformed” labor law to give unions a fair chance. In fact, the biggest such change, the National Labor Relations Act (NLRA, also known as the Wagner Act), was intended, as its own preamble states, to “encourag[e] the practice and procedure of collective bargaining.”

It does so by tightly controlling how employers may communicate with their own employees regarding unionization and by establishing monopoly bargaining, whereby employers must recognize a certified union as the sole representative for their employees.

The NLRA also established closed shops, in which union membership (or paying “agency fees” in lieu of union dues for representation an employee may or may not want) can be a prerequisite for employment. The Taft-Hartley Act of 1947 (which MacGillis calls “anti-union” in item 3 below) allowed states to enact right-to-work laws to ban closed shops. Today, there are 22 right-to-work states, so in 28 states, employees can still be required to pay union dues or their equivalent in order to get or keep a certain job.

Moreover, unions’ rush toward the public sector is hardly an economically neutral event. As he acknowledges in the second “myth” item below, public sector unionization is now wreaking havoc upon state and local government budgets around the country.

So, while organized labor may be economically moribund, it remains politically vibrant.

2. Unions are bad for economic growth.

Economists on the left and the right can debate this one for days. The pro-labor side has a strong argument: The period of highest union penetration, from the 1940s to the ’70s, was also a period of sustained economic growth. The other side counters with examples of unions doing harm to their members and industries: The “jobs bank” that the United Auto Workers maintained for years, paying laid-off workers to do nothing, is a favorite. And labor’s foes like to note that states in the South and the West with “right to work” laws restricting unions have successfully lured companies from the North or from abroad. But at least for now, the most heavily unionized regions — the Northeast, the Midwest, the Northwest and California — still hold most of the country’s wealthiest states and its most dynamic metro areas.

The more pertinent claim against organized labor may be on the public-sector side, where unions put significant pressure on state budgets, particularly with pension obligations. A new study by the Pew Center on the States finds a $1 trillion gap between what the states have promised their workers and what they’ve set aside.

MacGillis presents both sides fairly in this item. However, it’s worth noting the weakness of the pro-unionization argument he cites, which relies on arguing causation from coincidence, in both time and location. Economic growth occurring at the same time as increases in union membership does not prove causation one way or the other. In fact, the years following World War II saw a surge in consumer spending after years of pent-up demand during the war years. That was the first period of robust economic growth after the Wagner Act, so the proposition that the strong economy was resilient and dynamic enough to bear, and account for, the added costs of increased unionization is just as likely, if not more so.

By the same token, prosperity in states with a strong union presence does not prove that it was unionization that helped bring about that economic vibrancy. Unions were hardly crucial in the growth of financial services in New York and San Francisco, or that of information technology in Washington State and Silicon Valley.

MacGillis notes, rightly, the enormous stress that public sector unions have put on state budgets. This is a major problem that could seriously harm the greater economy by fostering an environment of high taxes, poor public services, and future policy uncertainty.

3. Labor laws are not the issue — economics are.
Far from it. Even lawyers who represent employers say the system is badly outdated. There has not been a major change to labor laws since the anti-union Taft-Hartley Act of 1947. With no progress on the legislative side, energies have focused on the five-member National Labor Relations Board, the panel of presidential appointees that rules on election disputes and labor complaints appealed by unions and employers. The NLRB is such a political football that it borders on the dysfunctional. For the past 26 months, only two of its five seats have been filled. This can mean long delays for cases awaiting judgment. While the Labor Department has far fewer union elections to oversee these days — 1,343 last year, down from 7,773 in 1970 — it must process about 25,000 unfair-labor-practice charges per year, including many that arise from nasty jurisdictional disputes between unions.

The two board members, a Democrat and a Republican, have managed to make rulings on 500 or so less-controversial cases, but the weightier disputes have been set aside. Sixty cases have been pending for two years or more, and of them, 24 go back more than four years. And the Supreme Court is considering whether the two-person board is even allowed to have made the rulings that it did.

The New Deal-era NLRA not functioning as it was intended is irrelevant to the significance of economic changes regarding the state of organized labor today. No amount of bureaucratic streamlining is bound to reverse “the shrinkage of union-dominated manufacturing industries and the expansion of more transient, service and professional jobs where the workers are more difficult to organize,” which MacGillis cites.

4. The Employee Free Choice Act would radically reshape the job market.
Not really. While the proposal would bring the biggest change in generations, it would leave some union challenges unaddressed. The bill as written would let workers form a union if a majority of them sign cards in favor of one, without having to hold a secret-ballot election at the workplace. Unions argue that such elections are unfairly influenced by employers. But even before Democrats lost their filibuster-proof Senate majority, they had all but jettisoned that part of the bill — dubbed “card check” by opponents — because it lacked support among conservative Democrats. Instead, the measure would now ease the process by shortening the window before elections, giving employers less time to sway workers, and by increasing the penalties for employer violations, both relatively incremental changes.

Arguably the more consequential part of the bill would be a new requirement: Employers and workers who do not reach a contract within several months after an election would need to submit to an outside mediator. As it now stands, more than a third of unions that win elections never secure a first contract. Employers ignore them, workers are afraid to strike in protest (strikes occur far less often than they used to), and the union eventually dissolves.

The legislation would not address what Wilma Liebman, the Democratic NLRB member, has argued is the unions’ bigger problem. In a speech last week, she said the true challenge is in the economy’s growing reliance on temporary and contingent workers and on undocumented immigrants, two categories that are difficult to organize.

Effectively eliminating secret ballot in organizing elections would expose workers to high-pressure tactics with the secret ballot is specifically intended to avoid. MacGillis cites the union argument that workers can be “unfairly influenced by employers” (without explaining how), but doesn’t acknowledge the very real phenomenon of union pressure on voters to join. Either way, there is no better way for workers to be protected against pressure from either side than the secret ballot.

EFCA’s binding arbitration provision would enjoin a federally appointed arbitrator to impose a contract if a newly unionized company and the union do not reach a contract after a certain time (120 days in EFCA’s current version). Unions have tried to sell this as a guarantee of a first contract. MacGillis repeats this argument, but fails to mention any argument against it, which are quite strong.

First, an appointed arbitrator would have no knowledge of the company’s business, yet have the power to impose a binding contract. Second, binding arbitration would provide an incentive for the union to make maximal demands, in the knowledge that it could get no worse than management’s final offer in arbitration. Third, binding arbitration could impose huge liabilities on a newly unionized companies without the management having a say. One particularly dangerous liability would be the obligation to pay into dangerously underfunded union pension funds.

Finally, EFCA’s increased employer penalty provision would give unions another tool with which to pressure employers, by filing unfair labor practice complaints with the NLRB.

5. Unions have the Democrats in their pocket.

They wish. Despite their diminished numbers, unions still pack a powerful punch in national politics — exit polls show that white, working-class union members in key swing states such as Pennsylvania, Ohio and Michigan vote for Democrats at far higher rates than white, working-class voters who are not in unions. And unions certainly have a seat at the table now after lacking one during the Bush years. Whereas then-AFL-CIO President John Sweeney was invited to the White House only once — for the pope’s visit in 2008 — Service Employees International Union President Andy Stern is now among the most frequent visitors to 1600 Pennsylvania Ave.

But what do they have to show for it? Obama has held off on pushing the Employee Free Choice Act. Union leaders were told to wait until health-care reform was done, and now even the compromise labor bill may be doomed with the loss of the 60th Democratic vote in the Senate. Obama’s and the Senate’s preferred funding source for universal health care is a tax on high-cost health plans, opposed by the unions; the White House had agreed to labor-friendly revisions, but they are now in doubt.

And then there is Becker. Obama has indicated that he will not install him in a recess appointment, even though his predecessor, George W. Bush, used recess appointments to install seven of his eight NRLB nominees. The unions are grumbling: If this is how their hard work in 2008 is repaid, don’t expect much from labor’s foot soldiers this fall in Altoona, Akron or Fort Wayne.

Organized labor may not be getting everything on its wish list from the Obama administration and Democrats in Congress, but it’s not for lack of trying by the latter. In fact, events over the past year suggest that Obama and some of his fellow Democrats have pursued union-friendly policies that have proven unpopular among the general public. And Democrats have a good reason to keep trying. According to the Center for Responsive Politics, during the 2008 election cycle, 12 of the top 20 (and six of the top 10) campaign donors were unions, which gave nearly exclusively to Democrats.

Moreover, if personnel is policy, then SEIU, arguably the most powerful union in America today, has been rewarded with administration appointments and access. Patrick Gaspard, who served as national political director for much of Obama’s presidential campaign, was previously vice president for politics and legislation for SEIU Local 1199. He was named White House political director in November 2008. And in February 2009, SEIU treasurer Anna Burger was named to Obama’s Economic Recovery Advisory Board. According to a November review of official visitor logs, SEIU President Andrew Stern had visited the White House 22 times since Obama’s inauguration, making him the most frequent visitor during most of Obama’s first year.

It’s not just SEIU. Vice President Joe Biden’s chief economic adviser, Jared Bernstein, was chief economist at the union-backed Economic Policy Institute before joining the administration. And Obama’s Labor Secretary, Hilda Solis, is about as pro-union as any union boss could want.

One appointment that would have had serious policy implications was that of Craig Becker to the NLRB. A former associate general counsel for SEIU, Becker has stated that employers should have no say in the unionization process. As MacGillis notes, Becker’s nomination failed on a cloture vote. AFL-CIO President Richard Trumka quickly demanded that President Obama recess-appoint Becker. That Obama hasn’t done is unlikely to be due to a lack of desire to see him on the Board — he is, after all, his nominee. Given his mounting political troubles in advancing his agenda, especially his health care plan, Obama may just need to avoid another fight with Republicans.

Furthermore, it’s not like organized labor hasn’t gotten anything. The jobs created by the year-old stimulus package have been mostly in the public sector, where union membership remains heavy. And the first piece of legislation signed by President Obama was the Lilly Ledbetter Fair Pay Act of 2009, which, as the Manhattan Institute’s James Copland notes, “gutted statutes of limitation in employment lawsuits.”

Expect the Obama administration and Hill Democrats to push more union-friendly legislation. For example, Rep. Earl Pomeroy (D-N.D.) is sponsoring a bill to bail out underfunded union pension plans. Something else to look out for is new versions of EFCA. Having failed to advance it in its current form, union-friendly Democrats have good reason to try to amend the current bill or break it up into parts.

Unions haven’t gotten everything they want, but they’re going to keep trying. Given the unions’ support, many Democrats have good reason to keep helping them.

UPDATE: On February 26, SEIU got another major appointment. President Obama named SEIU chief Andy Stern to the federal deficit commission.

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