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Howard Foster

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The Obama Labor Department Suppresses the Facts

Posted: 02/ 6/2012 12:59 pm

The Department of Labor recently issued a new regulation requiring all employers to post a notice in the workplace advising employees of their rights under the National Labor Relations Act to organize a union. This is true, and it is also the law that employers cannot retaliate against employees who do so. Of course, if the Obama Labor Department were really interested in informing employees of their rights, the notice would go on to inform workers that in 23 states (including newly added Indiana), they have the right not to join a labor union or pay union dues. So if their employer is operating under a "collective bargaining agreement" negotiated by a union, workers can choose not to pay dues, most of which are used to promote Democratic party candidates and causes or union organizing campaigns. That is, most of those dues do not help workers.

Labor unions raise the price of employment above the market price. So if the going rate for semi-skilled construction workers in a particular county is $20/hour, and a union organizes a large contractor, it will be able, through its collective bargaining power, to demand, and get the contractor to pay an hourly rate considerably above $20/hour plus generous benefits. The unionized firm will have to pay that supra-competitive (above market) price or face a strike. When the firm capitulates, it is obligated to pay wages it cannot afford. In a competitive market, firms cannot raise their prices as costs increase. A price increase will lower the firm's market share to zero. So the unionized firm will be on the road to bankruptcy.

It is especially bad to promote unionization in times of high unemployment, like we have had, and continue to experience. Any unionized firm in a competitive market must reduce the number of people it employs in order to absorb the shock of paying supra-competitive wages. So employment will immediately fall. The Obama administration has, contrary to basic labor economics, increased the pace with which the National Labor Relations Board has issued pro-union decisions. The most prominent example is the levying of a huge fine against Boeing for moving employees from pro-union, high-cost Washington State to right-to-work South Carolina. Republicans in the Senate refused to confirm two of the president's nominations to the NLRB. He responded by filling the nominations with his recess powers, which were designed to allow presidents to make nominations when Congress was out of session for prolonged periods. There are no such periods of inactivity today.

Union membership is down to about 12% of the workforce and most of that is in the public sector, a very dangerous state of affairs. Not only are public employees paid supra-competitive compensation (you must consider their lavish pensions, which are bankrupting Illinois), but they can strike and shut down the government including public schools and public safety. Union membership by public employees was banned until the 1960's. Now it is commonplace and causes the taxpayers billions of dollars for those pensions.

Governor Scott Walker of Wisconsin took the most aggressive step to rein in union power in decades. He won that fight, which simply abolished the power of public employee unions to bargain over non-wage terms of employment, i.e., pensions and other benefits. No longer can the unions threaten to shut down state government if they don't get their demands. Now he will have to defend himself in a recall election. If he wins, one of the most pro-union states will have definitively changed course. He can then make Wisconsin the 24th right-to-work state.

 

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