Biden’s Pro-Union Gambit


President Biden has claimed that he has been “America’s most pro-union president ever,” and he took a major step toward making good on that dubious distinction in his executive order of February 4. In it, he announced strong steps to make sure that only firms that agree to hire union labor on jobs worth more than $35 million can land those contracts. The order, if and when implemented, is anticipated to cover $262 billion in federal contracts annually. As one might expect, the provision generated divided opinion, with Secretary of Labor Marty Walsh announcing his full-throated endorsement while construction firms have expressed their strong doubt about the proposal, which is bad as a matter of both law and economics.

There are two fatal flaws to his order. The first is that the executive order is in flat contradiction to the rules governing the formation of labor unions under the National Labor Relations Act (NLRA). The second is that the labor law defects are not cured by the general language of the Federal Property and Administrative Services Act of 1949, which at an abstract level is intended “to promote economy and efficiency.” Indeed, the entire mishmash is so far off base that employers and dissenting employees should be entitled to get a preliminary injunction so that the executive order never goes into effect at all.

Start with the key command of the executive order: each government agency “shall require every contractor or subcontractor engaged in construction on the project to agree, for that project, to negotiate or become a party to a project labor agreement with one or more appropriate labor organizations,” under a pre-hire agreement, that is, one that has to be negotiated prior to bidding. These contracts are supposed to contain safeguards against “strikes, lockouts, and similar job disruptions” and to “set forth effective, prompt, and mutually binding procedures” to resolve disputes.

The Decline of Unions Is Good News


The United States Department of Labor released a report last week that chronicled the continued decline of the American labor movement in 2019. In our boom economy, more than 2.1 million new jobs were added to the market last year, but the number of unionized workers fell by 170,000. The percentage of union workers, both public and private, fell from 10.5 percent to 10.3 percent, or roughly 14.6 million workers out of 141.7 million. The percentage of unionized workers dipped even lower in the private sector, from about 20 percent in 1983 to 6.2 percent of workers in 2019, a far cry from the 35 percent union membership high mark last seen in 1954. Decline was lower in the public sector, where just over one-third of workers are union members, as a modest increase in state government employees partially offset somewhat larger declines in federal and local unionized workers.

This continued trend has elicited howls of protest from union supporters who, of course, want to see an increase in union membership. It has also led several Democratic presidential candidates to make calls to reconfigure labor law. Bernie Sanders wants to double union membership and give federal workers the right to strike, as well as ban at-will contracts of employment, so that any dismissal could be subject to litigation under a “for cause” standard. Not to be outdone, Elizabeth Warren wants to make it illegal for firms to hire permanent replacements for striking workers. They are joined by Pete Buttigieg in demanding a change in federal labor law so that states may no longer pass right-to-work laws that insulate workers from the requirement to pay union dues in unionized firms. All of these new devices are proven job killers.

The arguments in favor of unions are also coming from some unexpected sources in academia, where a conservative case has been put forward on the ground that an increase in union membership is needed to combat job insecurity and economic inequality.

Beware the Big-Government Right


Traditional conservatives and modern progressive intellectuals have had pointed, often bitter, debates in recent years over the future of American domestic policy. One of the major arenas in that struggle is the law of labor and employment. The left wants to toughen minimum wage and overtime laws, strengthen antidiscrimination laws, and promote diversity, affirmative action, and, increasingly, inclusive hiring. They also hope to restore unions to their pre-1970 glory days. The right opposes each of these initiatives by seeking to deregulate labor markets in order to let competitive forces increase overall productivity, indirectly benefitting workers through higher wages. My classical liberal credentials put me squarely on the conservative side of this debate.

Oren Cass, a senior fellow at the Manhattan Institute, has written a forceful and well-received book, The Once and Future Worker, which he hopes will change the terms of the debate.  He has also summarized his position at length in an article in the American Interest, titled The Working Hypothesis, to which I also refer.  Cass rejects the gospel of growth that is touted by traditional conservative economists, whom his book berates for insisting that things would be better “if only government had been smaller, with lower taxes and spending, and thus more room for economic dynamism.”  It then chides progressives for wishing that government had been bigger, “with more infrastructure investment, more checks on the market, a more generous safety net, and thus a prosperity widely shared.” In contrast to both, his bottom line is that “we can provide a subsidy for low-wage work, funded with higher tax rates and reduced transfer payments”, and thereafter “we can repurpose unions to help workers and employers optimize workplace conditions.”

Cass treats these as conservative arguments that “prize self-sufficiency, assign a central role to family and community and prefer the private ordering of markets to the centralized dictates of government.” But he refuses to go the whole way with libertarianism because of its blindness to other conditions that are needed for flourishing.  As a classical liberal, I think that his thesis is wrong on both the broad and narrow points.  I believe that insuperable obstacles stand in the path of this utopian vision.  First, the ends of the system are underspecified.  How much of a subsidy?  How high the taxes?  Who decides and when? And even if we could answer those questions, is there any way to reduce transfer payments that are made, for example, to the elderly and the disabled?  And can we do better if growth becomes weaker?  Next, the mechanics of transformation are underspecified as well. Cass makes frequent use of the dangerous royal “we.”  Unions are large and powerful organizations.  Just who will take the lead in their redesign, and who will be able to increase their membership from the under 7% today?

The NLRB’s Labor Market Mischief


shutterstock_62462134Under last week’s decision by the Democratic majority on the National Labor Relations Board, we are about to see a dramatic shift in what constitutes an “employer.” Before this ruling, that term covered firms that hire their own workers, and the NLRB subjected those firms to the collective bargaining obligations under the National Labor Relations Act. Under its new definition, the majority expanded that term to cover any firm that outsources the hiring and management of employees to a second firm over which it retains some oversight function. In its decision, the NLRB refers to such firms and those to whom they outsource the hiring as “joint employers.” No longer, the majority says, must the employer’s control be exercised “directly and immediately.” Now “control exercised indirectly—such as through an intermediary—may establish joint-employer status.” As I note in my new column for Defining Ideas:

…[T]he new joint employer rules will likely batter today’s already grim labor market, as they will not only disrupt the traditional workplace but will completely wreck the well established franchise model for restaurants and hotels. As the majority conceded, the so-called joint employer does not even know so much as the social security number of its ostensible employees. It has no direct control over the way in which the current employer treats its workers, and yet could be hauled into court for its alleged unfair labor practices. That second firm knows little or nothing about the conditions on the ground in the many businesses with which it has forged these alliances, which eases the operations for both. Those advantages will be lost if the joint employer rule holds up in court. At the very least, the majority’s decision would require each and every one of these contracts and business relationships to be reworked to handle the huge new burden that will come as a matter of course, leaving everyone but the union worse off than before.

It would be one thing, perhaps, if the majority saw the light at the end of the tunnel. But over and over again it disclaims any grand pronouncements, making the legal question of who counts as an employer a work in progress that will be finished no time soon. Against this background it is irresponsible to undo the current relationships by a party-line vote. That point should also be clear to the courts and to Congress. The quicker this unfortunate decision is scrubbed from the law books, the better.