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Union Dues and the "Free Rider" Problem

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Tags Labor and Wages

10/06/2017

With the ending of Democratic Party dominance of politics in many state capitols, right-to-work (RTW) laws, which ban conditioning employment on the payment of union dues, are on a roll. Kentucky, Missouri, and West Virginia have recently adopted them, raising the total to 28 states. 

Unions have demonized RTW laws as unfair. However, it is hard to see abuse in what obviously advances individual workers’ freedom of association, which Thomas Jefferson called “the guarantee to everyone the free exercise of his industry and the fruits acquired by it.” In other words, individual freedom of association is an essential aspect of self-ownership, or economic liberty, which includes the right not to be forced to associate with certain groups, including unions, against one’s will. Consequently, preventing unions from violating individuals’ rights and wallets is not unfair.

So how do unions justify using their unique, coercive government backing to impose employment terms that violate government’s primary role — protecting individual rights? Supposedly to solve a “free rider” problem.

Again, the "Free Rider" Problem 

Unions have repeatedly asserted that labor law requires them to represent all workers, not just those who voted to certify their union. Given that mandate of exclusive representation, unions assert that that every worker must be forced to pay for their representation, or else workers not forced to pay would “free ride” on union representation services. So the rights of individual workers must be sacrificed to stop the potential for free riding. Unions have pushed that argument to the point that they have gone to court to get RTW laws overturned as unconstitutional takings of union property.

However, as the Wisconsin Court of Appeals recently held, rejecting such claims, “Unions have no constitutional entitlement to the fees of non-member employees.” 

Under the rules of logic, conclusions only follow when both the premises are true and the reasoning is valid. But if premises are false, even if the reasoning based on them was valid (a standard far from satisfied by unions’ arguments), the conclusions drawn exceed, and may well even reverse, what can logically be supported.

The union free-rider argument’s central premise — that they are required by law to represent all workers — is false. In fact, while the National Labor Relations Act (NLRA) allows unions receiving majority support in a certification election to choose to represent all employees (“exclusive representation”), it does not require it. A union can choose not to bargain exclusively, and only do so on behalf of those who have chosen to be its members (“members-only representation”). Since unions can choose members-only representation, they have the power to completely eliminate the free-rider problem at their sole discretion. Their own choice to exclusively bargain causes the problem they complain so loudly about.

Despite being given an option, virtually all unions choose exclusive representation. Consequently, they have no legitimate claim on others due to their own choices. With their premise falsified, their argument fails.

That, however, leads us to another question. Why would unions that decry the burden of free-riding workers when the unions can avoid those burdens by simply choosing exclusive representation?

Exclusive representation must advance rather than harm union interests. And if so, the union leadership must gain more from exclusive representation instead of members-only representation, even with any free-riding taken into account.

The Main Problem Is With Union Monopoly Powers 

In other words, the problem is monopoly unionism, created by exclusive representation, at union discretion, to the detriment of all workers who would not have chosen it. That list of those who lose from monopoly unionism include:  

  • Those who supported another union (including any members-only options) or other form of group representation and negotiation.
  • Those who wished to represent themselves, union-free, with management. 
  • Those hired after an exclusive representation union is certified, who are denied any effective chance to ever vote “no.”

This latter group is particularly important to recognize, given that many unions were certified so long ago (e.g., General Motors’ Michigan factories, organized by the UAW in 1937) that no one now working for GM there ever voted for the union, which they inherited rather than selected.

The primary way unions gain from exclusive representation is that it vastly strengthens their negotiating power. Labor law requires that firms negotiate with exclusive representation unions, but they need not negotiate with members-only unions. Therefore exclusive representation gives unions monopoly power they would otherwise lack. And the benefit to a union of such monopoly power, as revealed by their own choices, must be far greater than the costs of any actual worker free-rider problems that might go with it.

That is, instead of unions’ preferred story of free-riding workers, the central story is that adopting exclusive representation allows union leaders to free-ride on unwilling workers (who are therefore forced-riders more than free-riders) for their own benefit. And the fact that union leaderships could benefit themselves even more by coercing still more money out of those already coerced into exclusive representation, which is what they are actually seeking, is a far cry from being relieved of alleged harm others impose on them.

The monopoly power exclusive representation creates also provides unions the ability to sacrifice the interests of younger workers to older workers, who dominate union leaderships. Since younger workers cannot represent themselves except through their existing union, their interests can be sacrificed. Focusing on pensions, seniority systems, and preventing change that would threaten older workers’ jobs may benefit long-time members, but that imposes disproportionate costs on younger workers, which they could escape if they were offered the option of self-representation or members-only representation. Exclusive representation takes away that escape option, making many younger union members forced riders as well.

Union rhetoric may try to disguise forced riding that harms workers and benefits unions as necessary to solving a supposed free-rider problem, but that doesn’t make it true. 

Gary M. Galles is a professor of economics at Pepperdine University. He is the author of The Apostle of Peace: The Radical Mind of Leonard Read.

 

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
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