OpEd Contributor
Card Check would magnify union damage to the economic recovery
By: Rick Berman, OpEd Contributor
-
March 17, 2009
A radical shift in labor law was introduced last week in Congress. Politicians supporting the absurdly named Employee Free Choice Act are seemingly willing to pay back labor leaders for their strong financial support.
But should this bill pass Congress, our faltering economy will have to absorb another shock that we may find worse than bank failures.
The Employee Free Choice Act, or EFCA, would be more accurately named the “Union Bailout Bill.” The proposal boosts the number of union-dues paying members by effectively taking away all employees rights to decide by secret-ballot vote if they want to join.
The new law will provide a surge of unionization by pressuring employees to state their position publicly on union membership. And if their position is “no,” employees will suffer repeated “sales calls” until they change their vote to “yes.”
The labor law overhaul is almost guaranteed to hurt an already sinking stock market. A study led by Princeton economist David Lee looked at the effect of union victories on companies’ stock prices.
He found “substantial losses in market value following a union election victory -- about a 10 percent decline, equivalent to about $40,500 per unionized worker.” Should EFCA pass, Lee’s data suggest that the market value of firms will decline by as much as 11 percent.
If that’s not enough to make President Barack Obama reconsider his support of the bill, he should listen to the director of his National Economic Council, Lawrence Summers. In 2007, Summers noted that one “cause of long-term unemployment is unionization. High union wages that exceed the competitive market rate are likely to cause job losses in the unionized sector of the economy.” (Think “Detroit.”)
Summers’s warning couldn’t be more relevant today. As two UCLA economists established in 2004, pro-labor policies during the Great Depression that manipulated wages and prices further depressed economic recovery for seven years. Will we repeat the same mistake again?
Compare the 10 states with the highest and lowest rates of union membership in 1997. By 2007, those state with the highest rates had two-thirds less total job growth than those with the lowest rates.
A recently released study by the U.S. Chamber of Commerce found that for every three percent increase of workers organized after EFCA is passed, America will see a one percent increase in unemployment. In other words, a loss of 600,000 jobs in the year following passage of EFCA.
In a 2002 study, economists Richard Vedder and Lowell Gallaway calculated the burden that labor unions had on American economic productivity. They found that between 1947 and 2000, “the economic cost of unions” in cumulating lost income, investment, and output was $73 trillion. That’s more than the gross world product last year.
Union officials present their proposal as a beneficial economic stimulus. This comes as a surprise to anyone who has tried to operate a business with stifling labor rules. The last UAW contract with General Motors ran roughly 2,000 pages. It doesn’t take a forest of trees to print wage and benefit levels. Most of these pages reflect union work rules that translate into restrictions on management’s flexible decision making.
When we eventually climb out of this economic hole, it will be because of the dynamism of America, the industriousness of its workers, and its vigorous market filled with inventive entrepreneurs.
Nothing will hinder recovery more than a shockingly irresponsible law that will encourage more of the inflexibility and lost productivity we have already witnessed in Detroit.
Rick Berman is executive director of the Center for Union Facts, a 501(c)3 union watchdog organization.
1.jpg){kind=small}
1.jpg){kind=small}
.jpg){kind=small}
.jpg){kind=small}
