Regardless of what position you take on whether the Minnesota constitution should be amended to make it a “right-to-work” state, you probably can find an economist to support it. Unlike, international trade, which economists across the political spectrum generally find beneficial, or environmental economics, in which nearly all economists agree that emissions taxes or cap-and-trade plans are the most efficient ways to deal with pollution, there is little consensus on many areas of labor economics.
Moreover, disagreements in labor econ tend to follow political party sympathies more closely than in nearly any other subfield of the discipline. Republican economists tend to criticize minimum-wage laws; Democratic ones see them as useful. Republicans tend to see laws banning gender, race and other forms of discrimination as taking a high cost in terms of economic efficiency; Democrats don’t. Republicans similarly tend to view unions as reducing economic efficiency while Democrats tend to think they correct failures of unregulated market economies.
So it is no surprise that politically conservative economists tend to see any degree of compulsion in labor union membership as doing more harm than good, while liberal ones see important benefits from unionization. They also think that successful collective bargaining is nigh impossible if majorities of workers have no power to compel others to cooperate.
Conservatives see right-to-work laws primarily as an issue of individual liberty. Liberals tend to emphasize that unionization tends to increase labor income and decrease that of capital, to provide individual workers more power in resolving disputes with management and to decrease gender and race differences in compensation.
There are no definitive answers on any of these questions. But if the proposed constitutional amendment makes it to the ballot this fall, it is useful for voters to understand a few tradeoffs.
First, laws that force workers to join unions to work in jobs covered by collective bargaining agreements, or to pay a significant “fair share” portion of union dues anyway if they are allowed to opt out, do reduce individual liberty. If you think that maximizing the personal liberty of the individual is the highest or even the only value for society, then you should favor right-to-work laws.
Second, it is very difficult for labor unions to have any significant bargaining power compared to employers with such laws in place. Econ theory is clear that there will always be some individuals who will choose to not share in the cost of a union effort if they can still get some of the benefits. Workers as a whole will get at least slightly lower pay or have worse working conditions under right-to-work laws.
Third, conservative economists are right that union activity violates the assumptions of an idealized free-market economy that, in theory, allocates resources more efficiently than any alternative. Liberals are correct that this very model includes a crucial assumption that no one in the market, employer or employee, is large or powerful enough to have monopoly bargaining power. That obviously is not true when workers must act as individuals in dealing with employers with tens of thousands of employees and billions in sales. It isn’t even true in dealing with an employer of a few hundred people in a town of a couple thousand. So neutering unions does not return the real-world situation to an Eden-like perfectly efficient market.
Fourth, much research shows that over the past 40 years, employment growth has been faster in states with right-to-work laws than in those without them.
Tom Holmes, a University of Minnesota economist, has done very exacting work on this that isolates the effects of such laws from myriad other factors.
It is one thing, however, to show that if there is a nation divided into some states that favor employers over employees and others that do the reverse, employers will choose to expand in the states that tilt in favor of business. And thus employment will grow faster in those states. But that does not necessarily mean that if all states had uniform anti-unionization policies, they would all have more job growth.
Fifth, although history shows that unionization does increase the share of income going to workers rather than business owners, the degree to which this can occur depends greatly on the degree of competition faced by the businesses involved.
Employers isolated from competition, as airlines were before the Carter administration’s deregulation of airline routes and fares, could pass on to passengers the cost of high salaries paid to unionized pilots. But a contemporary manufacturer who must compete with suppliers in Asia has little ability to pass the cost of higher wages on to customers.
Sixth, in contrast to 1935, when the National Labor Relations Act that fosters unionization was first passed, private sector unions are much smaller and public employees’ unions are much more important.
Thus, the focus has shifted from the private sector, where workers and business owners clashed over how value created would be divided. Now much of the attention involves a struggle between public employees and the general citizenry over the cost of goods and services, including education and public safety, provided by government.
Finally, although the general public tends to focus on pay differentials, both employers and employees in unionized sectors place great emphasis on other aspects of collective bargaining agreements, such as working conditions, layoff procedures and protections against arbitrary firing.
The economic costs and benefits of these are even harder to identify and quantify than direct pay and benefits.
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