RAISE Act Restores A Little Bit Of
Freedom In Labor Relations Law
Should workers have the freedom to make their own contracts?
Long ago, they did. Back in 1905, the Supreme Court held in Lochner
v. New York (which I discussed recently on Forbes) that the
state could not dictate to bakery employees how many hours they were allowed to
work in a week.
Unfortunately, freedom of contract is one of those rights
that “progressives” and collectivists regard as unimportant – one
that legislators and bureaucrats can whittle away as long as they claim that
doing so somehow advances “the public good.” One of the many federal
statutes that interfere with freedom of contract is the National Labor
Relations Act.
Under that law, once the government has certified a union
because it seems to have majority support, it becomes the exclusive
representative of all the employees in the “bargaining unit.” No one is
permitted to contract with a different union; nor are workers allowed to
negotiate on their own if they think they can do better than the union’s
collective agreement. While the language of the statute does not specifically
prohibit individual agreements, in a 1944 case, J. I. Case Co. v. NLRB, the Supreme Court held that the NLRB had
correctly ruled an employer in violation of the law by dealing individually
with some workers and granting them pay increases.
By 1944, the Supreme Court was composed entirely of justices favorable
to the New Deal’s socialistic philosophy and the resulting decision (written by
Justice Jackson) made it plain that individual rights could be extinguished if
politicians thought that doing so advanced the collective good. Justice
Jackson wrote that even if deserved, increased individual compensation “is
often earned at the cost of breaking down some other standard thought to be for
the welfare of the group, and always creates suspicion of being paid at the
long range expense of the group as a whole.”
Thus, it is the law that if a unionized employer wants to
offer some workers a raise, it cannot do so unless the union agrees. Often,
the union will not agree. When some workers get a raise while others
don’t, that undermines “solidarity” and could cause support for the union to
deteriorate. From the standpoint of union leadership, it’s better to stick with
contracts that base raises on seniority rather than on individual achievement.
Laws usually have
unforeseen consequences and this is no exception.
After comparing firms where a union narrowly won
certification with firms where it was rejected, he found that average wages in
the unionized companies declined by two to four percent compared with those
that remained non-union. His explanation for that result is that after
unionization, some of the most productive employees leave for greener
pastures. Because their replacements are less productive, average wages
decline.
Whether and to what extent it may be true that unionization
gets in the way of companies retaining their best workers, the law should be
changed in any event. Individual workers and their employers
should be free to come to their own compensation terms, no matter what impact
it might have on union solidarity and the welfare of “the group as a whole.”
It’s time for us to get rid of the barnacles of 1930s collectivism.
The ultimate solution
is to repeal the National Labor Relations Act. As I have argued here
before, the NLRA is a horrible piece of special interest legislation that
tramples all over the rights of workers and employers in order to help unions
organize and extract money. There’s no baby in this bath water to worry
about.
Sadly, there is no immediate prospect of repealing the NLRA,
but Senator Marco Rubio (R-FL) and Representative Todd Rokita (R-IN) have
introduced a bill they call the Rewarding Achievement and Incentivizing
Successful Employees Act – the RAISE Act. The bill amends the NLRA to allow employers to
give individual workers pay increases without first pleading for union
approval.
Regarding the bill, James Sherk and Mitchell Tu of the
Heritage Foundation comment, “Economists have found that workers’ pay
rises by an average of 6-10 percent after companies introduce performance-based
pay. Employees work harder and earn more, and the company has higher profits.”
It would be fascinating to see what would happen if Congress were to
pass the bill, forcing President Obama to decide whether to sign it and
actually help stimulate the economy, or veto it to stay on the good side of Big
Labor that puts so much money and manpower behind the Democratic Party.
