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Thursday, April 26, 2012

What’s Wrong with Right-to-Work

The Indiana legislature recently approved a “right to work” law, the 23rd of its kind in the United States.

A “union shop” agreement between an employer and a union commits the employer to ensuring that new hires join the union within a specified period. Right-to-work laws ban union-shop agreements.

Let’s put it another way: They violate freedom of contract.

If employers choose to conclude union-shop contracts with unions, what gives the Indiana legislature the right to interfere?

Employers own the wages they will pay and the sites where work will be performed under such contracts. So it’s their right to dispense the wages and make the sites available specifically to union members, just as it’s their right, more generally, to trade with anyone they choose.

When a legislature interferes with voluntary employment contracts, it infringes people’s freedom to bargain with their own labor and possessions. Treating this kind of interference as acceptable means licensing arbitrary interventions into the market by politicians, who are ill-equipped to second-guess the decisions made by the real people making work agreements with one another.

And there’s no principled way to draw a sharp line here: Once it’s okay for a legislature to interfere with bargaining in this way, there’s no stopping politicians from setting wages and prices, or requiring or prohibiting the hiring of particular people.

Supporting a free society means embracing people’s freedom to form unions. And it means acknowledging that unions—and union-shop agreements—can offer both workers and employers something valuable.

Unions can help to secure workers predictable terms of employment and protect them against arbitrary dismissal. And a union contract can help make workplaces more predictable for employers, ensure that information is disseminated to workers, and reduce a variety of workplace transaction costs.

Proponents of right-to-work laws defend them on several grounds:

  • The laws lower wage costs, and thus consumer prices.
  • The laws benefit workers in non-unionized workplaces, who will earn less in their absence.
  • The laws give particular workers opportunities to negotiate for better, or different, terms of employment.

It’s not the job of the government to interfere with free agreements to lower costs or boost incomes. Presumably the government could force lots of people to work for no wages at all. That would also do what right-to-work laws do, albeit much more dramatically: It would treat people as slaves. The same would be true if it mandated wages for everyone.

All that people need in order to negotiate for themselves is freedom of contract. (Of course, sometimes they might not be able to do so if an employer is bound by a union contract that prohibits individual negotiations. But if the contract is a voluntary one, the government has no business interfering with it.)

U.S. Labor-Law Background

Defenders of right-to-work laws also sometimes point to the background labor-law framework in the United States as a justification for these laws. The National Labor Relations Act (NLRA) and its successors established a system that requires an employer to bargain with a union enjoying majority support in a given workplace. Right-to-work proponents argue that the laws they favor only help to level the playing field created by government action—by reining in special privileges granted to unions under existing labor law.

But those laws actually presuppose the restrictions inherent in that framework, while extending them further. One goal of the NLRA and later federal laws was to reduce conflict—and in effect reduce workers’ choices—by ensuring that just one union, moderate enough to win majority support (and therefore moderate enough to be cooperative with employers), would operate in a given workplace, while suppressing more radical unions and labor actions.

If right-to-work laws were really about individual freedom, they would simply allow unions to represent voluntary dues-paying members only while respecting employers’ right to recognize or not recognize unions. In other words, the laws would permit states to opt out of federal labor law entirely—and nothing more. But these laws do much more, perhaps because allowing this kind of flexibility and variety would undermine the interests of politically influential employers by unshackling upstart competitors.

Of course, laws that respected freedom of contract wouldn’t mandate particular bargaining rules. Just laws would protect people from violence and leave them free to work out the arrangements that make sense to them. There’s nothing sacred about the existing labor-law framework. In a free society bargaining over employment terms wouldn’t be constrained by anything like the NLRA. As Freeman contributor Percy L. Greaves, Jr., wrote in a tribute to Ludwig von Mises: “[T]he agitators for ‘right-to-work’ laws forget . . . that the problem is basically one of getting the government out of moral business transactions and not into them. . . . The economic answer is to repeal the bad intervention and not try to counterbalance it with another bad intervention.”

The NLRA framework wasn’t created out of sheer benevolence. Rather, the historical record shows, big businesses wanted something like it because they thought it would reduce conflict and increase costs for their competitors.

Even when union activity was legally disfavored, or actually illegal, unions like the Industrial Workers of the World won contract victories with strikes and work slowdowns. The eight-hour working day, for instance, wasn’t a gift from benevolent politicians: It was an achievement of union struggles that took place well before the Wagner Act framework was in place.

Years before the New Deal, big, politically influential businesses wanted to diminish conflict, increase predictability, and reduce the appeal of radical unions. So they supported federal labor legislation, and some contributed to the development of the approach embodied in the NLRA. Although most of the corporate elite was unhappy with the NLRA as written, key business figures cooperated with the secretary of labor to implement it, hoping the law would help to handle grievances and prevent instability in the workplace.

Big businesses that supported the emergence of modern labor law liked the fact that it had the potential to keep unions tame and manageable, ensuring that they would operate within a predefined legal framework in order to enjoy legal privileges. (This is not to say that everything worked out exactly as the corporate elite would have liked.)

It should be no surprise, then, that viewed as a package, existing labor law limits workers’ options. For instance, since bargaining is required only when a union enjoys majority support, a union that represents a significant fraction of employees—but not a majority—will tend to be treated as irrelevant.

Right-to-work laws typically assume, as does the federal labor-law framework, that if workers are represented at all, they’ll all be represented by one union—a single, certified bargaining agent. One practical effect of this arrangement is to undermine “minority unionism”—labor action by any number of workers acting on their own behalf, functioning as a bargaining unit without official certification. The practical effect is to reduce flexibility for workers and to ensure that they have to choose between an established union or no representation at all.

Other aspects of the existing legal framework are troubling, too.

Legal rules that let courts order workers back to work treat workers as slaves, as the State’s property.

A secondary boycott—a work action in which one group of workers refuses to work with or for an employer involved in a dispute with another group of workers—can be a powerful, nonviolent tool for achieving workplace goals. But current law bans secondary boycotts and “sympathy strikes,” as well as strikes across plants or industries, again treating workers as slaves.

Existing laws provide for “cooling-off” periods before strikes can proceed. They require arbitration of some labor disputes, denying workers access to the courts, and precluding continued, tough negotiation. They encourage collective bargaining to focus just on some fairly specific issues related to the terms of employment rather than broader workplace concerns like plant closings and governance. They rule out contracts that require hiring-hall arrangements in which unions funnel new workers to employers. They even allow a U.S. president to decree an end to a strike. The existing labor-law regime is designed to tame workers in the interests of “industrial peace,” not to promote their interests.

So, by all means, repeal the NLRA and all the state right-to-work laws. The government needs to get out of the labor-law business. It needs to respect freedom of contract.

But don’t stop there. Eliminate the full range of privileges and restrictions that boost employers’ influence over people’s terms of employment. For instance: Get rid of the rules that reduce the available alternatives to paid employment by raising the costs of working for yourself—rules like occupational licensing requirements and zoning codes that keep people from running businesses from their homes. And eliminate rules that make self-employment riskier by raising the cost of living—like building and zoning codes, and rent control and land-use controls that limit the availability of housing—and that therefore channel people into the predictable, even if less appealing, world of work for wages. People who have other options can afford to bargain for good terms. It’s also important, therefore, to remove the various restraints that limit the number of startup businesses: The more employers there are, the more competition there will be for labor, and the better the terms will be for those who choose to work for others.

To the extent that right-to-work laws might seem to make sense as mechanisms for dealing with union abuses, the solution is to eliminate the whole body of modern labor legislation. Unions have shown they don’t need it, even in the unfreed market we have today. And in a genuinely freed market, workers would find it significantly easier than they do at present to work for themselves, to say no to abusive work environments, and so to bargain effectively for appealing wages and working conditions and opportunities to direct their workplaces. They certainly wouldn’t need the NLRA.

Right-to-work laws limit workers’ and employers’ freedom of contract. They prevent workers and employers from making mutually beneficial agreements. They don’t belong in a free society.


The author thanks Kevin Carson, James Tuttle, Tom Knapp, Keith Taylor, Tennyson McCalla, and Sheldon Richman for comments on earlier drafts of this article.