Texas public policy foundation
When Unions Become Government-Sponsored Cartels
 
BLOG
 

Note: This article originally appeared at National Review Online.

President Obama recently argued that right-to-work laws are not about economics, just politics: Proponents of right-to-work laws just want to "take away your rights to bargain for better wages and working conditions." In fact, what right-to-work laws seek to diminish it is the power to discriminate against non-union labor, extort artificially high wages from employers, and impose the resulting price-inflation on everybody. 

What the president says is simply false. In right-to-work states, people are perfectly free to form unions and and "bargain for better wages and working conditions." But in right-to-work states, you also have the right to bargain for those benefits even when you are not a union member. If you want to work for a company that employs union labor, you have a right to join a union or not join it, and the union cannot exclude you from employment.  

In union states, however, unions can prevent you from working if you are not a union member. If you want a job, you have to join the union, you have to accept whatever terms are negotiated for you, and you have to pay dues. Labor unions exist in all states. But in "union states," government allows labor unions to exist as cartels, akin to price-fixing schemes and conspiracies to monopolize. Were it not for the exception government makes for them, they would be illegal and possibly criminal under the antitrust laws, for the good reason that they extract special benefits for a few at the expense of the rest of society by suppressing free competition. Furthermore, the benefits are not zero sum: Aggregate social welfare is depressed by a significantly greater amount than the beneficiaries of the special privilege benefit.

In union states, unions are able to bargain for artificially high wages by restricting the labor force, namely by depriving non-union workers of the natural right to compete with them. That is how they extract higher wages from their employers than the wages at which an efficient market would clear. This has destructive consequences for everyone, including union labor. The constriction of the labor force raises per unit costs of production to the employer. That results in both restricted output and higher prices. The consumer faces higher inflation, and the employer struggles under a diminished ability to compete. The whole arrangement prevents the efficient allocation of labor, slowing innovation and economic growth for everybody, including union labor itself. And people who need to work so badly that they are willing to work for less are denied employment altogether. 

The president is simply wrong when he says that right-to-work laws deprive Americans of their right to bargain for benefits. What they deprive people of is the right to extort higher wages from their employer by excluding job seekers willing to work for less, a right that results in artificially higher prices, and artificially depressed economic growth, for everyone.

The time has come to roundly discredit the labor and agricultural cartels created by the New Deal, break their political power in Congress, and embrace free and fair competition for all.

"