Competition Is Good For Business People and Workers


GUEST COMMENTARY: The ethical case for right-to-work

For decades, federal and state labor laws that compel the individual employee to allow an unwanted union to negotiate his or her terms of employment have been defended by many of their proponents on the grounds that such statutes promote “democracy†in the workplace.

This contention cannot withstand more than a moment’s scrutiny. Sadly, however, in many discussions about monopolistic unionism and Right to Work laws, Big Labor’s “democracy†excuse isn’t scrutinized at all.

In an op-ed that has appeared in several Indiana newspapers over the past few days, Ball State University economist Cecil Bohanon exposes the excuse’s absurdity by applying the same principle to restaurants operating in the same locality. (The version linked above appeared in the Munster-based Northwest Indiana Times.)

If it’s democratic for a union bargaining agent to have “exclusive†power to negotiate with an employer over how the business allocates resources for front-line employee compensation, Dr. Bohanon wonders, why shouldn’t the restaurant business be similarly reorganized? He explains:

Suppose a bare majority of the eateries in your town forces all the others into a dues-imposing “restaurant association†that fixes prices, hours and terms of service for all of them.

In this example, it is illegal for customers to negotiate with a restaurant without first going through the association. Moreover, all new restaurants must join the association, pay its dues and abide by its rules.

Economists call such an arrangement a cartel. The industry is monopolized by its trade association. Some members and the organizers are better off; customers and members who do not wish to be subject to the cartel’s control are worse off.

Substitute workers for restaurants, employers for customers, and labor unions for the restaurant association and the framework outlined above describes U.S. labor policy since the Wagner Act.

In this terse commentary, Dr. Bohanon doesn’t have the space to mention the fact that, for a brief period in American history, federal policy actually did seek to manage pricing and other competition in virtually every type of business. A key provision in the National Recovery Act (NRA) of 1933 (sometimes also called the National Industrial Recovery Act) obliged businesses to form committees with their competitors to write “codes†prescribing the “rules of fair competition†for their industry. Businesses that refused to report how much they charged customers or charged less than what was mandated by an NRA code could be subjected to fines of up to $500 per “offense,†with each day considered a separate offense.

When the NRA was first enacted, many journalists, intellectuals and celebrities enthusiastically endorsed this scheme to eliminate what President Franklin Delano Roosevelt viewed as “unfair competition and disastrous overproduction.†For example, Al Jolson, beloved singer and star of The Jazz Singer, the first feature-length movie in which sound was used to advance the story, exclaimed to an interviewer who asked him what he thought of the new law: “NRA? NRA? Why it’s better than my wedding night!â€

But the NRA “honeymoon†ended within just a few months. Even business owners who theoretically liked the idea of not having to compete for customers on price began to chafe at the loss of their independence. Journalist Eugene Lyons, who returned to the U.S. in 1934 after a six-year stint in the Soviet Union, later recalled the mounting discontent with the NRA codes: “The Blue Eagle, symbol of the regimented industries, soon became the butt of radio and vaudeville humor and derisive cartoons that mirrored the popular confusions and dismays.â€

After the U.S. Supreme Court put the NRA out of its misery in 1935, some Roosevelt Cabinet members advised the President to propose enactment of a revised NRA that might pass constitutional muster. But FDR refused, telling Labor Secretary Frances Perkins: “You know the whole thing has been a mess. It has been an awful headache. Some of the things they have done are pretty wrong.â€

Today, virtually no elected official, academic or journalist anywhere in America still claims that businesses need to be protected from “cutthroat†or “unfair†domestic competition, or that the public interest is served when government furnishes such protection. But the very corporatist policies that have been repudiated with regard to business remain fully in force with regard to employees. Today, the amended Wagner Act still authorizes unions to seek and obtain “exclusive†bargaining power over all the front-line employees in a business or other federally-delineated “bargaining unit.†Yet there is no credible argument that workers benefit, economically or otherwise, more from government-backed cartelization than businesses do.

As Dr. Bohanon observes, Right to Work laws only “partially offset the injustice of forced association†and mitigate the harmful impact of labor cartels. Under such laws, employees are still forced to accept union representation they don’t want, and never asked for. But they are no longer forced to pay dues for unsought representation.

It boggles the mind that, nearly eight decades after the NRA’s demise, Big Labor continues furiously to oppose this very modest limit on its special legal privileges.