Deliverance?

Richard A. Epstein

Stephen Lerner's impassioned call to arms for American labor is an invitation to institutional suicide for the union movement. The short, blunt truth is that organized labor has faltered badly in the face of global competition and new technology, and no militant effort will restore its former glory days -- period.

No militant effort will restore the former glory days of the organized labor movement.

The union movement is born of mass production, of large numbers of workers performing similar or complementary assembly-line tasks in huge plants or factories. Within that setting a single bargaining agent may well organize like-minded workers in order to gain the benefits of the monopoly wage that all unions covet.

But with the radical transformation of industry production, the rise of the service and information sectors, and the ability to hire labor in spot markets, these large plants have become incongruous relics of the past. The effort to unionize these institutions will in some instances lead to an increase in domestic relocation and off-shore production, in others to a shift to capital intensive goods, and in still others to downsizing and perhaps bankruptcy. There will be fewer places for janitors along with everyone else. To stop these consequences, Lerner will have to persuade Congress to pass laws that impose high tariffs, limit plant closings, prevent outsourcing, or provide extensive worker protection against dismissal or wage cuts for economic reasons. The labor movement simply does not have that kind of clout.

This aggressive program, even if implemented, might increase union membership by some small amount, but that effect will be offset by other consequences. Widespread adoption of his approach will promote ceaseless strikes and other forms of industrial conflict that catch innocent consumers and producers of other goods and services in the crossfire of ever more heated labor-management relationships. The public will not stand for the "nonviolent" shutting down roads, schools, hospitals. It will turn more sharply against unions than it already has today.

And for good reason. Unionization is not a cure for what ails American labor markets. We have today too much taxation and regulation of the employment contract. The adverse consequences of social security and Medicare taxes themselves are enormous, as we have accumulated huge obligations to current retirees that must be funded out of the earnings of younger workers with families who need every penny they can get. We have placed such heavy obligations on permanent employers -- e.g. state mandates for health insurance -- that the market has shifted to temporary employment and independent contractors to minimize or avoid those costs. We have imposed heavy taxes on capital, which have made it, and not labor, the scarce commodity that attracts the greatest rate of return. We have made management of the workplace more difficult through unjust dismissal suits and through a plethora of antidiscrimination laws, and thus have given employers still greater reason not to hire risky workers of protected groups whom they could not fire without a protracted struggle. Remove some of these impediments to the free movement of capital and labor and we could see in America the same burst of productivity that has taken place in New Zealand, which for the past five and a half years has witnessed an increase in real wages and a decline in union membership after the liberalization of its employment laws.

Lerner does not even begin to address these fundamental structural and regulatory difficulties in labor markets. Instead he hurls baseless accusations about corporate greed and corporate oligarchy, which are no more true today than they have been at any time in our past. (The labor market is highly competitive, and the percentage of total revenues that goes to wages is about the same today as in the past.) His demonology hyperventilates without purpose, and is selfish at that, for he does not seem to care one whit whom he hurts in the single-minded pursuit of unionization, the main beneficiaries of which are not union members, but union organizers. Even so simple an observation as that the pension plans for retired union workers are invested in the stocks and bonds of the companies he is determined to bring to their knees does not constrain his single-minded passions. My one regret is that his call for direct action was not published in every magazine and newspaper in the land. Better than any criticism I could mount, it shows the political desperation and intellectual bankruptcy of the extreme elements in the labor movement.

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