Possible Insight

My wife has an Art History degree from Princeton.  However, she often has excellent insights into economics. So I think either (a) one of the reasons she fell in love with me is that she’s a latent economics geek or (b) she loves me so much that she actually pays enough attention to my economics ramblings that some of it rubs off.

About a year ago, she came up with a solution to the “employee union problem”.  With the recent public employee union showdown in Wisconsin, I thought I should share it with you.  What’s particularly ironic is that she’s out in front with some pretty serious economists in thinking about issue.  For example, check out this Wall Street Journal article by Robert Barro, a Harvard professor and author of my undergraduate macroeconomics textbook.

Most people think that unions are simply workers exercising their rights to band together.  Actually, this isn’t the case.  As Barro points out, unions are a monopolies that are specially exempted from anti-trust law. Moreover, the government actually enforces their monopolies.

The key law here is the National Labor Relations Act (NLRA) as administered by the National Labor Relations Board (NLRB).  The NLRB protect the rights of employees to collectively “improve working terms and conditions” regardless of whether they are part of a union.  In addition, the NLRB can force all employees at a private firm to join a union, or at least pay union dues.  This process is called “certification”.  Once a union is certified, it has the presumptive right to negotiate on behalf of all employees at the firm, and collect dues from them, for one year.

After that, it is possible to “decertify” a union.  However, the union usually has enough time to consolidate its power and then use it to keep the rank and file in line.  When you have monopoly power, you have the opportunity to abuse it.  In fact, there’s a whole government agency devoted to investigating such abuses: the Office of Labor-Management Standards.  UnionFacts.com has helpfully collated the related crime statistics for 2001-2005.  Assuming that only a fraction of abusive behavior faces prosecution, these statistics are pretty sobering.

Of course, federal, state, and local government employees are exempt from the NLRA.  You might think this exemption is a good thing for limiting union power.  However, what it means in practice is that each level of government is free to offer special treatment to their employee’s unions without oversight from the NLRB.  As you can imagine, the politicians and public employee union leaders get nice and cozy.  The politicians give the unions a sweet deal and the unions give politicians their political support.  Everybody wins.  Except ordinary citizens.

Personally, my solution would have been to completely eliminate the government-enforced monopoly of unions.  However, I admit this blanket approach could swing power too far towards management in some industries.  My wife’s solution is better.  She says the unions can get monopolies, but only for a set period of time.  Say 3 or 5 years.

From an economics standpoint, this approach is really insightful.  First, it removes union leaders’ incentive to form a union just to accumulate power.  It will all go away pretty soon.  Second, it prevents originally well meaning union leaders from getting corrupted over time.  Pretty soon they’re ordinary workers again.  Third, it does provide help to those workers who feel management is truly abusing them.  They can form a union and get better treatment.  When the union’s existence terminates, they can still bargain collectively, just not exclusively.  If management tries to screw them again, they will have the example of how to work together.  An economist would call this “moving to a better equilibrium”.

I’ll admit this solution isn’t perfect.  Some management abuses will slip through the cracks.  But I’m pretty confident they’ll be less extensive than the current union abuses.  It’s also probably better than my original thought of banning unions altogether.  And there’s some small chance my wife’s approach would actually be politically feasible.  Nice work, Jane!