What do the Big Three automakers, big city newspapers and the U.S. Postal Service have in common? All are hemorrhaging money, all are in danger of insolvency...and all are unionized.
In this deep downturn, most sectors of the U.S. economy are suffering, but a common thread among those in the deepest trouble is their heavily unionized work forces. That's an inconvenient truth that needs to be acknowledged as Congress prepares to consider legislation that would make it dramatically easier for unions to organize in the American workplace — the misnamed Employee Free Choice Act.
Studies show that while unionization can raise worker productivity, it typically raises wages and benefits even faster. Restrictive workplace rules, gold-plated health and pension plans, and inflexible hiring and firing rules add to the burden on employers, and cut into employer profitability.
In a major study of unions and the American workplace, Professor Barry Hirsch of Georgia State University found that unionized companies suffered not only lower profits but lower investment in physical and intangible capital and slower growth.
As a result, unionized firms tend to lose market share to nonunionized firms, whether foreign or domestic.
Companies can survive unionization as long as every other competitor faces the same "tax," or if markets are not competitive at all. This is why government is the only area where unionization has been growing.
But in a dynamic, open and competitive market, unionization can be a killer. In manufacturing, virtually all the job losses between 1973 and 2006 occurred among unionized workers.
The U.S. auto industry is a prime example of the link between unions and profitability. Management at Ford, Chrysler and General Motors have all made many mistakes, but arguably their biggest has been to approve lavish and unsustainable contracts with the United Auto Workers union.
Consequently, the cost of labor for the Big Three has been 50% higher than labor costs for the nonunion, foreign-owned auto plants elsewhere in the United States. This burden has driven GM and Chrysler to the verge of bankruptcy.
At a time when many American manufacturers are fighting to survive, Congress and President Obama appear poised to saddle them with another burden that will only accelerate the decline of struggling sectors.
The so-called Employee Free Choice Act would ease the task of union organizing by essentially jettisoning the secret ballot for union elections. Instead, workers will be asked to sign cards until a majority in a given workplace agrees to be represented by a union. Without a formally announced election date, the so-called "card check" process could be conducted largely in secret.
This would deny dissident workers as well as management any meaningful opportunity to present alternative views that would give workers a more complete picture of what is at stake, and limit the information available to workers.
This process also strips anonymity. Workers who refuse to sign will be known to union organizers and obviously open to intimidation. The secret ballot, long a pillar of representative government, would be abolished in the workplace.
Once a majority of workers were persuaded to sign a card, the employer would have 120 days to agree to a collective bargaining agreement with the newly organized union. If an agreement is not reached, terms would be imposed by a government arbitration panel. No appeals would be allowed. Employers would be forced to accept terms that could imperil the survival of their business, violating the basic American principle of the freedom of contract.
Under the imperfect but workable system currently in place, Americans who want to join a union can do so, but they also enjoy the protection of a secret ballot after hearing both sides of the argument, all administered by the National Labor Relations Board.
U.S. labor law should be neither tilted against noncoercive efforts to organize unions nor biased in favor of organizing. It certainly should not short-circuit long-standing protections for individual workers.
American workers deserve a free and fully informed choice before deciding whether to join a union.
It is a decision that could affect not only their future pay and working conditions but the very survival of their employer and their job.