Monday, April 26, 2010

Collective Sacrifice: Why would unions want to destroy millions of jobs?

For the past five years, our efforts have been to awaken the American people to the devastating consequences of a job-destroying bill misleadingly named the Employee Free Choice Act (or EFCA, for short).
As the bill that just won’t quite die a deserved ignominious death, unions and their Democrat pols know that 2010 might be the last time they have an even slim chance for bringing it out of the graveyard of bad legislation.

While we have always based our opposition to the job-destroying effects of EFCA on our experience in the field and, more importantly, the history of unionized jobs, companies and industries, there has been of late studies to back up what we've known all along.

The Evidence is There: Unions Add to Unemployment

While unions, in order to build support for EFCA, still try to convince an already wary public that unions are good for jobs, there is a plethora of evidence out there that completely contradicts their claims.  Such evidence exists in the American auto, steel, textile and trucking industries, just to name a few.

In fact, even President Obama's Director of the National Economic Council, Larry Summers, wrote that unionization is a cause of long term unemployment:
Another cause of long-term unemployment is unionization. High union wages that exceed the competitive market rate are likely to cause job losses in the unionized sector of the economy. Also, those who lose high-wage union jobs are often reluctant to accept alternative low-wage employment....

There is no question that some long-term unemployment is caused by government intervention and unions that interfere with the supply of labor....

Last year, a study by Dr. Anne Layne-Farrar (in PDF) found that the hallucinogenically-named Employee Free Choice Act could, in fact, destroy up to five million jobs.
The precise effect on unemployment will depend on the degree to which EFCA increases union density, but for every 3 percentage points gained in union membership through card checks and mandatory arbitration, the following year’s unemployment rate is predicted to increase by 1 percentage point and job creation is predicted to fall by around 1.5 million jobs. Thus, if EFCA passed today and resulted in an increase in unionization from the current rate of about 12% to 15%, then unionized workers would increase from 15.5 to 19.6 million while unemployment a year from now would rise by 1.5 million, to 10.4 million. If EFCA were to increase the percentage of private sector union membership by between 5 and 10 percentage points, as some have suggested, my analysis indicates that unemployment would increase by 2.3 to 5.4 million in the following year and the unemployment rate would increase by 1.5 to 3.5 percentage points in the following year.

A Disproportionate Impact on Small Business and Workers With Low Skills and Education

To add to the already-big pile of evidence on EFCA's job-destroying ramifications, a new study (in PDF) has just been released by the American Enterprise Institute* that pretty simply sums up the effects of the delusionally-dubbed Employee Free Choice Act as: EFCA = Unemployment.
  • If the EFCA returns unionization rates to 1970s levels, it could reduce economy-wide employment and gross domestic product by close to 4 percent. This translates to about 4.5 million jobs lost and over $500 billion in lost output and income.
  • Job loss resulting from EFCA will tend to fall disproportionately on workers with relatively low levels of education and skills. Ironically, these are the very workers the proposed legislation is intended to help.
  • EFCA will be particularly costly to small businesses, which typically start out with small profit margins, face high initial failure rates, and are less likely to have specialized human resources staff to deal with labor disputes and union organization. Between 2003 and 2006, 84 percent of new union certification elections were held at companies with less than 100 employees.
  • In this increasingly globally competitive economy, increasing wages and expanding the pool of high paying jobs requires increasing worker productivity, not suppressing competition through increased unionization. Alternative policies, including subsidies for education and job training, can promote wage growth for lower-skilled workers more efficiently than unionization.

So what gives?

While unions have tried to downplay the negative effects of EFCA by using such bromides as "unions will help restore the middle class," the reality is, there is very little credible argument from the unions or the Left on EFCA's job-destroying effects. This raises the question as to why?

If union leaders understand the fact that EFCA will destroy jobs, why do they continue pushing it?

The answer to this question lies in the hope that the growth in union membership will supercede the job losses EFCA will cause.  According to outgoing SEIU president Andy Stern, EFCA could add "1.5 million members annually for the next 10-to-15 years with passage of EFCA."

Clearly, for the unions, the addition of a greater number of new members would offset the losses of workers whose companies could not compete in a unionized environment and, as unions have moved more toward the services sectors of the economy, they believe that the ends justify the means.

For those whose jobs are lost due to their companies closing or their jobs being outsourced as a result of unionization, the union justification seems to be:  Too bad.  They can always apply for a union job somewhere else. 

* - hat-tip: Stop the Assault

“I bring reason to your ears, and, in language as plain as ABC, hold up truth to your eyes.” Thomas Paine, December 23, 1776

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