Employee Free Choice Act - Good for the Economy?

Yesterday American Rights at Work issued a new "research report" arguing that the economy needs the Employee Free Choice Act now more than ever. This report is basically a repeat of all the usual suspects who make the same basic arguments in favor of EFCA:

1. Unions increase wages and benefits of their members as compared to non-union workers.
2. "Living wages" will redistribute wealth and improve the economy; and
3. The current system makes it very difficult for working people to join unions.

These arguments are all false. The research on the "union benefit" is laughable. Even this report notes that when you start to account for things like experience and skills the so-called wage benefit of being in a union shrinks to around 15%. And I have yet to see one of these studies that accounts for probably the most important factor which is geography.

Case in point: the article uses the fact that primarily non-union hospitality workers in Reno are paid less than unionized workers in Las Vegas as proof that the union benefit is real. But that is exactly the point. The cost of living (and headache factor) of living in Vegas, coupled with the competition for talented people there, is what makes the wages higher - even at the non-union properties in Vegas. When you add in the costs of belonging to a union this differential shrinks even further. Even the BLS data (which doesn't account for geography at all) shows that in some jobs non-union workers make more than unionized ones. I don't think that is accurate either (for the same reasons) but it proves that you can't believe any of these statistics that unions and their supporters throw out as fact.

The second argument for a massive wealth redistribution is the most dangerous. While I agree as much as anyone that CEOs who are paid huge wages while navigating their companies into the rocks is stupid, the market works if you give it time. And again unions don't make this go away. The Detroit 3 is the best recent example but there are many others. These companies need to go out of business for their stupid actions. They will be replaced by better, smarter competitors. And even if you grant that paying above-market rates for talent is good for the economy in the short run (which is silly, because as best I can tell CEOs consume at least as well as working people) it doesn't work. Socialism failed. Again, look at Detroit - if you pay uncompetitive wages and benefits (oh, and make crappy cars nobody wants to buy) you lose.

You can get away with paying monopoly rents for labor for a short period of time, especially if you make it impossible for others to compete against those "favored" companies, but in the end the house of cards falls under its own weight. Meanwhile everyone else who does not receive the benefits of these monopoly rents suffers by having to buy over-inflated products. It is no different than the overpaid CEOs. And the best study on the subject estimates that the cost of unions on the overall economy has been trillions of dollars.

The current system, despite its flaws, will work if you let it. Bailing out companies that screwed up (and I include the financial services industry along with the automakers) is the worst thing you can do.

Oh, and about the current system being unfair to unions? Well, it was working in the 1970s when union density was near its peak. Unions are winning elections under that same system at the same rate today, even with all the "virulent, unionbusting" behavior of employers. In the end unions are just looking for another bailout for themselves. And by the way, this "good for the economy" stuff is how unions will try to tack the EFCA onto the trillion-dollar "middle class bailout" package now winding its way through Congress. Watch for it. And if you haven't already, start preparing your company for the employee free choice act.