The Decline of New Deal-Style Unions
A perfect example of these intellectual risks is found in the current debate over the adoption of a right-to-work law in Michigan, an economic basket case and the cradle of American unionism. Right-to-work laws are understood on both sides as a real threat to union power because they allow workers to keep their jobs without having to join a union, or to pay union dues (at least for union-related activities) if they choose not to join. The key question for conservatives and libertarians is how to defend a proposal that curbs union power.
In this connection, Michigan Governor Rick Snyder, a Republican who signed the right-to-work law in his state this month, gets top marks for political courage and skill in dealing with the Michigan legislature, notwithstanding receiving threats of political retribution from the Democrats. State Representative Douglas Geiss, a Democrat, chose his words carefully when he said “there will be blood,” on the floor of the Michigan House of Representatives.
The effects of the legislation confirm the classical liberal defense of competitive federalism, which argues in favor of state, not national, control over local labor markets. As Snyder pointed out, Michigan has to compete for new jobs and industry with its next-door neighbor, business-friendly Indiana. The data support him. As F. Vincent Vernuccio and Joseph G. Lehman of Michigan’s Mackinac Center for Public Policy report in their recent Wall Street Journal op-ed, since Indiana adopted its right-to-work legislation, the state has gained about 43,000 new jobs — chiefly from new businesses that have chosen to locate there. In contrast, Michigan, during that same period, lost about 7,000 jobs, and its key automotive business remains on life-support from the federal government.
The gains from right-to-work laws are not just confined to Indiana. As Vernuccio and Lehman report, between 1980 and 2011, overall employment levels rose by 71 percent in right-to-work states. In non-right-to-work states, they only rose by 32 percent. That differential does not come at the expense of wages, which grew four times as fast in right-to-work states: 12 percent versus 3 percent elsewhere. The explanation is clear enough. The productivity gains from escaping union work rules are shared with employees as employers bid up wages. The short-term monopoly gains to unionized workers eventually are, over time, more than offset by productivity losses. The New Deal union model is an economic mistake of major proportions.
Governor Rick Snyder’s Mistake
When Governor Snyder went on MSNBC’s “Morning Joe” show last week, his opening remarks stressed these economic facts. His interrogators did not challenge him on that, but they had a field day with him when he tried to defend himself on theoretical grounds. The governor maintained that his legislation was not anti-union but pro-worker. He argued that a worker should have a choice whether to join a union. Governor Snyder insisted that a worker should not be forced to join a union unless he thinks it is “a value proposition,” which immediately played into the standard progressive objection that rational workers will indeed free-ride on unions to expend their resources to get wage increases that the non-union holdouts will then enjoy for free.
At this point, the governor — and, for the record, Vernuccio and Lehman — claim that they are not against the collective bargaining arrangements that right-to-work laws subvert. But here the governor sounded hypocritical, uninformed, and evasive in the face of organized labor’s most insistent argument, which led a delighted Andrew Rosenthal of The New York Times to chortle at the naïveté of thinking that right-to-work laws did not hurt the unions that so fiercely opposed them. He’s right on the small point, but wrong on the big one: unions do not serve any useful purpose.