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Monday, June 25, 2007

Unions as Businesses, Not Democracies

The Employee Free Choice Act (EFCA) is scheduled for a vote in the Senate tomorrow.  The Act has already passed the House and thus far has 46 Senate co-sponsors.  Although the bill has three sets of reforms, the focus has been on the bill's "card-check" option for union certification.  The National Labor Relations Act (NLRA) currently requires that employees choose union representation through a secret ballot election (unless employers waive that requirement).  The EFCA would allow a union to be certified by presenting cards signed by a majority of employees stating that they wanted to join the union.

Opponents of the bill, such as Secretary of Labor Elaine Chao, have argued that the card-check provisions are undemocratic.  As she argues: "It is no secret that maintaining the integrity of free and fair elections depends, in part, on maintaining the right to cast secret ballots. . . [But] Congress, at the behest of organized labor, is preparing to undercut the ability of workers to vote in secret ballot elections."  It has been interesting in the past week to see so many market proponents drape themselves in the flag of democracy when it comes to unions.  This rhetorical move may seem satisifying, but I believe it is short-sighted.  Ultimately, it would make more sense to start treating unions not as political democracies, but rather as businesses within a specialized service industry.

Why is a secret ballot election so important in the union context?  Basically, opponents of the EFCA make two arguments: (1) secret ballot elections are necessary for a democracy, and (2) secret ballot elections prevent employees from being coerced into signing cards.  But these arguments misconstrue the nature of the representation decision.  The secret ballot election here is not used to elect leaders; it is instead used to make a collective choice about a purchase of representation services. 

Unions have long held a special place in the hearts of those who believe in a kinder, gentler economy.   But the reality is that unions are service providers, just like lawyers, HMOs, and cable operators.  They are big, financially-savvy organizations that send their salespeople (organizers) out to sign up new customers (members).  When employees sign up to join a union, they are really signing up to pay a service fee (dues) in exchange for collective representation services.  Just like many other industries, these services appeal to certain groups and have an ideological cast to them.  But this doesn’t change the fact that unions are businesses, and we need to start thinking of them this way.

For a true market supporter, the EFCA card-check provisions should not be a problem.  Why shouldn’t unions be able to sign up members just like any other service provider?  After all, a home buyer isn't required to let the seller campaign against the buyer's choice of a realtor.  If employees want the services that a union will provide, then they should be able sign up for those services without running the employer’s gauntlet.  Union skeptics would thus be best served by dropping “democracy” and pursuing a consumer-protection approach.  Unions are certainly not the only industry in which coercion may potentially be used to influence a purchasing decision.  Why not handle this coercion as it would be handled in any other consumer context?  If salespeople use force or intimidation to get you to buy their product, they can be fined or put in jail.  Those who fear union coercion should be advocating for similar penalties – not secret ballot elections.

Union advocates and opponents fall predictably into a set of policy responses that were set back in the 1930s.  It’s time for some fresh perspective. A competitive, market-oriented perspective on labor unions is not knee-jerk pro-union or pro-employer.  Instead, this approach would free (and force) unions to be what they really are: market players in an era of dynamic, fluid, and rough-and-tumble capitalism.  Rather than fighting for the secret ballot election, market supporters should look to bring market principles to bear in developing a new approach to union regulation.  For those who are interested in this approach, I develop it further with respect to union representation elections in Information and the Market for Union Representation.

Posted by Matt Bodie on June 25, 2007 at 11:11 AM in Corporate | Permalink


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Several thoughts. First, I'm not willing to give up on the "industrial democracy" rationale for unions.

Second, what proponents of the EFCA argue -- quite correctly, in my view and experience -- is that the NLRB election process is so tilted to one side in terms of what it allows the employer and union to do that it typically doesn't represent anything like the "free choice" that is necessary for democracy. There is a ton of stuff written on that.

Third, what opponents of EFCA never explain is this. Under EFCA, *workers* but not the employer could demand an election. As Matt says, under current law, unions can be recognized without an election and on the basis of cards if -- but only if -- the *employer* agrees to do it that way. Under EFCA, while an employer cannot force an election in the face of a legitimate showing of majority support through cards, employees can. Under EFCA, if 30% of the employees want an election, an election must be held.

Thus, one major impact of EFCA would be to transfer the power to demand an election from the employer to the actual workers.

EFCA would have other beneficial effects -- including but not limited to making the penalties for employer violations of the NLRA something other than the trivial and oft intentionally-ignored slaps on the wrist they are now. That's something else the opponents of the bill don't get into.

Posted by: Joseph Slater | Jun 25, 2007 9:14:04 PM

"The National Labor Relations Act (NLRA) currently requires that employees choose union representation through a secret ballot election (unless employers waive that requirement)."

My understanding is that, the NLRA allows employees to choose union representation through any method they would like, so long as it evidences majority support. Employers, though, can insist on a representation election (unless they have waived that right by implicitly recognizing that the union has majority support).

This distinction may not be that significant in practice, but it undermines some of the democracy rhetoric surrounding the EFCA.

Posted by: SR | Jun 25, 2007 3:00:41 PM

Your proposition is intriguing, but could you explain to those of us unlearned in Labor Law a bit more? Isn't Union representation binding even on those who vote against having a Union? Aren't businesses legally required to deal with a Union voted in (rather than ignoring the Union and looking for scabs)? Perhaps I misunderstand the law, but I thought many of FDR's reforms regarding Labor Law were specifically addressed to problems in the market for labor by authorizing local workers to void that market.

Posted by: Anonymous Skeptic | Jun 25, 2007 2:31:47 PM

Isn't the obvious difference between unions and the other types of service providers you mention the fact that unions can compel unwilling people to pay dues, whereas lawyers, cable operators, etc. cannot? Therefore, coercion is much less likely in these situations because the benefits are lower: coercing a cable subscriber only gets you one more cable subscriber, but in a large bargaining unit, coercing a few employees may brings hundreds of new dues payers.

Posted by: Joe | Jun 25, 2007 2:27:53 PM

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