All Commentary
Thursday, August 31, 2017

Unions Are the Worst Labor Day Deal

They certainly won't save you any money.

Every Labor Day, unions repeat assertions of advancing the interests of all workers. But those claims are false. Unions harm most American workers.

Project Labor Agreements

Unions use government-delegated powers to restrict competition from other workers, extracting higher wages for their members. But higher wages mean fewer job openings because each worker is more expensive to the employer. That forces workers to move to other jobs, increasing the supply of labor services in non-union employment and reducing wages for all workers in those jobs. With far less than 10 percent of private sector workers in unions, more than 90 percent of them are injured by that exercise of union power.

Other union-backed initiatives also show how unions feather their own nests at the expense of other workers. Among the best examples are Project Labor Agreements (PLAs), such as the one recently adopted in Santa Ana (despite a staff report that estimates that it would increase construction costs by 10-20 percent).

PLAs are agreements negotiated between government bodies and unions (but excluding non-union workers and contractors), establishing in advance the terms and conditions that will be imposed on all workers for designated projects.

PLAs are rationalized as buying labor peace, “leveling the playing field” for competitors, guaranteeing projects are completed on time, holding down costs, increasing quality, and safety, etc. But they advance none of these goals. They restrict competition, raise costs, and pick taxpayers’ (i.e., other workers’) pockets. As Wharton Professor Herbert Northrup wrote in the Journal of Labor Research, PLAs “have little or no economic rationale, nor can they be defended on the grounds of labor peace, enhanced safety, or other reasonable criteria.”

Non-union workers must also contribute to union health and pension funds with nothing in return.

PLAs supposedly buy labor peace because unions promise not to engage in disruptive activities. Of course, strikes still hit the San Francisco International Airport expansion project, the largest PLA at the time. Such PLAs punish nonunion workers and contractors, who do not threaten strikes, to buy labor peace from unions who threaten strikes–penalizing the innocent (including taxpayers) to reward the guilty. As the New York Supreme Court described it in the Albany Specialties case, it reflects “capitulation to extortion” by unions.

PLA backers assert they just impose equal labor terms on all project bidders, allowing equal competition. But those “equal” terms are anything but even-handed. As in San Francisco and Santa Ana, all workers on the concerned projects, including non-members, must pay union dues and fees, for which they will receive no benefits. Non-union workers must also contribute to union health and pension funds with nothing in return.

Restricting Competition

Virtually all new workers are forced through union hiring halls and even apprentices are union-controlled. Union wages, work rules, job classifications, and hiring and grievance procedures are mandated, raising costs, particularly for non-union bidders. In 2009, John McGowan estimated that PLAs faced employees of non-union contractors with 20 percent cuts in their take-home pay, while increasing non-union employers’ costs by about 25 percent.

PLA terms are so onerous to non-union contractors and workers that most will not even bid on PLA projects (86 percent, in a 1997 survey of non-union contractors in Washington). Bids rise as restrictions eliminate bidders (particularly lower-cost non-union contractors), raising costs for taxpayers. For instance, a 1995 study of the Roswell Park Cancer Institute in New York found that the winning bid without a PLA was 26 percent lower than the one with a PLA.

PLAs harm other workers both directly and as taxpayers financing public projects.  

Such results reinforce the repeated failure of PLAs to demonstrate an increase in either quality or safety, and a 1998 GAO investigation that could document no cost efficiencies from PLAs.

Just as with their other exercises of their unique, government-granted power to restrict competition, PLAs harm other workers both directly and as taxpayers financing public projects.  

Rather than living up to union claims, Diana Furchtgott-Roth concluded that a PLA “drives out small businesses from competing for these projects; raises their cost to the taxpayers; and funnels a larger stream of union dues from taxpayers’ pockets to union treasuries.”

So, if we want to make the workers whose contributions we claim to celebrate on Labor Day better off, we should give them more freedom, rather than subjecting them to so many harmful union impositions.

  • Gary M. Galles is a Professor of Economics at Pepperdine University and a member of the Foundation for Economic Education faculty network.

    In addition to his new book, Pathways to Policy Failures (2020), his books include Lines of Liberty (2016), Faulty Premises, Faulty Policies (2014), and Apostle of Peace (2013).