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Wednesday, October 1, 2008

Worker Freedom in Peril

State Right-to-Work Laws Could Be Abolished

The Alliance for Worker Freedom (AWF) recently published its 2007 Index of Worker Freedom (IWF).The index ranks each of the 50 states on the basis of ten variables that affect the freedom of workers. “Freedom” is defined properly as the absence of interferences with individual worker choices.

After explaining the ten variables used and identifying the five states with most, and the six states with least, worker freedom, I will explain why I think Congress may eliminate interstate differences in some of these variables in the next few years. This “harmonization” will significantly reduce both worker freedom and the usefulness of the IWF.

The ten variables, and the reasons for their inclusion, are:

Right to work (RTW) laws. Twenty-two states have RTW laws. They receive a 1; the others receive a 0. RTW laws protect workers from being forced to pay union dues.

Minimum wage (MW) laws. States with MWs lower than the federal minimum, and the five states with no such laws, receive a 1; the others receive a 0. A free worker is one who decides the minimum he will accept for himself.

Union density (UD). This is the percentage of the workforce, both private and government, who are union members. States with UDs below the national average (12 percent) receive a 1; the others receive a 0. In states with high UDs the usual union apparatus of coercion, intimidation, and wholly owned politicians will be more prevalent and well established than in states with lower UDs.

Paycheck protection (PP) laws. States with them receive a 1; the others receive a 0. PP prevents union bosses from using dues forced from government employees for political purposes without their express permission. A free worker is one who decides for himself whether to engage in political advocacy.

Prevailing wage (PW) laws. States without them get a 1; the others get a 0. They stipulate that union wage rates must be paid—even by union-free firms—on construction projects funded with tax money. A free construction worker is one who may work for a union-free firm on terms to which he and his employer agree.

Defined contribution (DC) pension plans. States that offer them to their government employees get a 1; those that don’t get a 0. Workers have control over their DC plans, and they are free to move from job to job without losing benefits.

Government-employee collective bargaining (CB) laws. The 13 states without them receive a 1; the others, a 0. While the National Labor Relations Act (NLRA) exposes private-sector workers to coercive unionism, the states, at least for now, are free to decide whether to do the same to their government employees.

Government-sector union membership (UM). States with UM lower than the national average (36 percent) receive a 1; the others, a 0. UM indicates the extent to which government-sector unions can override decisions by individuals as to whether they will be represented by a union.

Entrepreneurial activity (EA). This is measured as the number of entrepreneurs who start new firms in a year as a percentage of total adult population. The national average is 0.3 percent. States with EA above the national average receive a 1, while the others receive a 0. EA activity creates additional union-free employment alternatives for workers, and states with more worker freedom are more hospitable to EA.

Workers compensation (WC) premiums. States with premiums below the national average ($2.49 per $100 of payroll) receive a 1; those above the national average, a 0. WC premiums are most often paid to government monopoly agencies rather than private insurance companies, which would compete with each other. High monopoly premiums reduce the amount of money for capital and other business expenses, thus reducing worker employment alternatives.

Ranking Worker Freedom

A state’s ranking is determined by summing up the scores for the ten variables. Utah, the state with the best score, received a 9 (out of 10); it does not offer DC plans. Colorado, Idaho, Mississippi, and South Carolina each had 8. The six worst states—Connecticut, Hawaii, Minnesota, New York, Pennsylvania, and Rhode Island—received 0.

The IWF is a helpful resource for employers and employees alike who are trying to locate in states with a more favorable labor environment than others. Just as the Heritage and the Fraser–Cato indices of economic freedom have resulted in healthy competition among nations to increase economic freedom, the IWF might be expected to result in healthy competition among states to increase worker freedom. For this, union bosses have called AWF an antiunion group. But AWF is concerned with worker freedom. It is antiunion only insofar as unions decrease worker freedom.

There are ominous noises in Congress that suggest interstate competition in worker freedom will be thwarted by naked government force. For example, the Public Safety Employer–Employee Cooperation Act was passed in the House in 2007, and the Senate voted 69–29 to limit debate on the measure (cloture) in May. At this writing the Act has not received a final vote in the Senate, but the margins in both bodies are veto-proof. The Act would force state and local governments to submit to the unionization of their police and firefighters. Before this, states could decide whether to expose their employees to unionization or not. Remember the camel’s-nose-under-the-tent strategy of the New Deal: Get part of what you want first and later use that base to grab it all. Today it is police and firefighters. Later, the union bosses pray, all state and local government employees will be herded into unions. This would eliminate any interstate differences in AWF’s collective-bargaining and union-membership variables. Individual state CB laws will be moot, and each state’s UM will be 100 percent.

By any reasonable reading of the Tenth Amendment, the federal government has no power over state- and local-government labor relations. But in 1935 Chief Justice Charles Evans Hughes wrote in the Gold Clause Cases, “We are under a Constitution, but the Constitution is what the judges say it is.” Any five justices of the Supreme Court can reinvent the Constitution anytime they wish. In Garcia v. San Antonio Metropolitan Transit District (1985), five justices decided that state and local governments are mere players, on an equal footing with unions, in the game of influencing Congress on questions of labor relations. Alas, the federal government may pass any state and local labor-relations statutes it likes.

Further, union bosses have long sought to eliminate the right-to-work clause of the NLRA. If they have their way with the new Congress and president, state RTW laws will be abolished. And the recent attempts by Congress to apply the federal Davis–Bacon Act’s prevailing-wage provisions through legislation concerning farms, cap-and-trade, global warming, clean water, school construction, and housing bailouts suggest that individual state PW differences may not survive for long.

Just as the bureaucrats in Brussels seek to “harmonize” economic policy among members of the EU, the new Congress and the new president are likely to try to restrict interstate competition in worker freedom. This is “change we can believe in.”

  • Charles Baird is a professor of economics emeritus at California State University at East Bay.

    He specializes in the law and economics of labor relations, a subject on which he has published several articles in refereed journals and numerous shorter pieces with FEE.