Live Better, DON’T Work Union

May 26, 2009

Live Better, Don’t Work Union

By INVESTOR’S BUSINESS DAILY | Posted Friday, May 22, 2009 4:20 PM PT

Labor Policy: Card check legislation appears to be dead in Washington. Companies, shareholders and employees don’t know how narrowly they missed the financial trouble that comes with a union shop.

The card check bill, with the Orwellian title of Employee Free Choice Act, was an effort by Democrats to make it easier to unionize a company. It would have virtually killed the traditional process for forming a union: the secret ballot in which a majority of voters is needed to approve organization. Under card check, a union would be certified if a simple majority signed the cards used to measure workers’ interest in voting on unionization.

Card check would also authorize federal arbitrators to set the terms of an initial contract if the newly formed union and management can’t agree on a deal three months after certification.

Should the legislation fail to become law, both workers and owners should be thankful — workers because certifying a union through card check rather than a secret ballot invites intimidation and workplace tension, and businesses because of the risk of our now-pro-union government forcing unfavorable contracts on them.

A new report, moreover, has found another reason to breathe easier: Unionization hurts stock prices.

The National Bureau of Economic Research studied unionized public companies between 1961 and 1999, focusing on stock performance 24 months before their union votes to 24 months after.

It found the average loss per company was $40,500 in 1998 dollars for each worker eligible to vote. Equity values fall, the study concludes, for two reasons: (1) “A combination of a transfer to workers,” and (2) “lost profit due to inefficiencies caused by the union.”

The losses aren’t limited to firms with organized workers. Research indicates a doubling of unionization in the U.S. would “lead to a 4.3% decrease in the equity value of all firms at risk of unionization.”

In our era of class envy, some may say falling equity values aren’t a problem. But it’s not just the rich who are hurt. Retirees depend on their stock and mutual fund investments.

Average families — more than half of America has some type of equity investment — are in the market, both for retirement and present gains. Workers, many of them union members, have invested in the companies that employ them, as well as firms that are subject to the unionization effect identified by the NBER researchers.

Two weeks ago Vice President Joe Biden made the astonishing claim that “We can’t achieve a strong middle class without a strong labor movement.” Clearly, he isn’t paying attention. While it’s obvious that unions can help some, but not all, workers on an individual level, organized labor’s effect on the overall economy is negative.

• Unions play the role of protector of the working class, but the truth is they are a cartel that shuts potential workers out of jobs. A company that could use 500 workers at a lower nonunion wage instead employs only 400 when it has to pay a higher union wage.

• Unions cut into company profits because they demand — and receive — ever-higher wages and benefits. Multiple studies have found that profits at unionized companies are 10% to 15% lower than those at similar nonunionized companies. This goes on until union demands drive companies out of business. Chrysler and GM, both struggling for their corporate lives, are real-time examples.

• Platinum labor contracts inflate prices for goods and services produced by union shops. This pinches some consumers and causes others to go without. It also discourages investment in those companies and diminishes the value of workers’ retirement accounts.

Do these facts align with organized labor’s claim that greater unionization through the card check bill will boost middle-class prosperity? Here’s hoping that reports of the death of that legislation aren’t greatly exaggerated.


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