The Union Barons Strike Back with Legal Price Fixing and the Repeal of Right To Work Laws

by | Jun 2, 2023

Taxpayers will have to pay more for state construction due to the reinstatement of prevailing wage and workers will be compelled to pay for union representation they don’t want due to the repeal of Right to Work statutes.

What a difference an election can make. In 2022, the Democratic Party was swept into complete control in Michigan, winning the state Senate, House, and the governorship. Organized labor has always been the backbone of the Democrats in Michigan and, upon getting their allies into power, it demanded and got two key policy changes – repeal of the Right to Work statute and the reinstatement of the prevailing wage law.

Both moves will damage the state but benefit the labor barons.

“Prevailing wage laws” are legal price fixing schemes.

Let us begin with prevailing wage. Many states and the federal government laws mandating that on public construction projects, workers must be paid the “prevailing wage.” What is that? It is determined by government officials and the way they do so is to look at union contract rates in the construction area. So if, say, members of the carpenters union are paid $50 per hour in the Kalamazoo, Michigan area, then that is deemed to be the “prevailing wage” that must be paid to carpenters who work on a state project in or around Kalamazoo. It doesn’t matter if non-union carpenters are willing to work for less than $50, or if union carpenters often do. As long as the union contract says that carpenters must be paid that amount, then that’s the “prevailing wage.”

The impact of the prevailing wage law is obvious—it inflates the cost of construction by eliminating competition in an important element of the project, namely labor. In short, prevailing wage laws are legal price fixing schemes. Big Labor wants such laws since they make it difficult for non-union firms to underbid unionized ones for government construction jobs. Because they don’t have the high union wage scales and rigid union work rules, non-union firms have a big advantage; but with a prevailing wage law, that advantage is neutralized.

As I argued in this 2010 paper for Cato Journal, prevailing wage laws are special interest legislation that are contrary to the public interest.

The defense that’s usually raised for these laws is that they improve safety. That argument is bogus. Non-union construction companies are every bit as safety-conscious as are union ones. A bad safety record will lead to higher insurance premiums and difficulty in attracting workers.

Michigan had had a prevailing wage law since 1965, but repealed it in June of 2018, with a legislature that could see the sense and cost-savings of eliminating this anti-competitive relic.

How much does prevailing wage increase construction costs? In a recent study by the Mackinac Center for Public Policy, author Michael Hicks found that in road construction, the prevailing wage mandate adds at least $5,900 per mile to the cost. To the pro-union members of the legislature and Governor Whitmer, that additional burden on the taxpayers was of less concern than the need to keep Big Labor happy.

The other favor those politicians did for the unions was to repeal Michigan’s Right to Work statute, which was enacted in 2012.

Right to Work laws say that a worker can’t be fired just for declining to pay union dues.

What does a Right to Work statute do?

To understand, we need to review federal labor law, specifically the National Labor Relations Act, (NLRA) passed in 1935. Until FDR and his “New Deal,” labor law had been the domain of state law, since the federal government was not thought to have any constitutional authority to legislate in regards to employer-employee relations. But the Constitution was disregarded over and over during Roosevelt’s presidency and it was in this instance. The unions had backed him and wanted a payoff.

Among the many pro-union provisions in the law was that once a union was certified by the government (following an election where the union received majority support), it then became the exclusive representative of all the workers, even those who voted against it. Winning unions would then negotiate a contract with the employer (with “negotiations” slanted in favor of the union by the requirement that the employer bargain “in good faith,” which would be determined by union-friendly bureaucrats in the National Labor Relations Board). A term they always demanded was one stipulating that any worker who did not pay the union its dues would be terminated, a so-called union security clause. Therefore, workers unhappy with the union would have to quit or be fired if they declined to pay.

In 1947, Congress amended the NLRA with the Taft-Hartley Act. That law made the NLRA somewhat more even-handed (before it, only management could commit “unfair labor practices,” but Taft-Hartley added union unfair labor practices) and, crucially, it allowed states to legislate against labor contracts with union security clauses. RTW laws thus say that a worker can’t be fired just for declining to pay union dues. 

A number of southern and western states where organized labor was not a dominant political force soon enacted what came to be called Right to Work (RTW) statutes. Readers interested in the full history of this should consult my book Free Choice for Workers.

Labor unions prefer to obtain all their dues through the easy method of coercion. They hate RTW statutes because they give disaffected workers an escape hatch. Nationally, Big Labor has often sought to repeal the Taft-Hartley Act and kill off all state RTW laws; at the state level, it works with Democrats to prevent their enactment or, as in states that have enacted them, to have them repealed.

Unions always say that RTW laws allow workers to be “free riders” on the dues money of others. The problem with that claim is that the unions would have no cost for workers who don’t want their representation were it not for that “exclusive representation” aspect of the law they demanded. If workers were free to deal directly with management if they preferred, the union would incur no costs for them.

Furthermore, compelling workers to pay dues is actually a case of “forced riding,” since many workers oppose the union’s political agenda, where much of the dues money is spent. They must pay into the union and thus support its resolutely leftist activism or lose their jobs.

Moreover, RTW acts as a force to improve union accountability. In RTW states, where workers can stop paying if the union neglects their interests or shows corruption, the inflow of dues money will decline.

This recent Mackinac Center study summarizes the benefits of RTW.

So, Michigan politicians who are beholden to Big Labor have dealt the state a double-whammy. Taxpayers will have to pay more for state construction due to the reinstatement of prevailing wage and workers will be compelled to pay for union representation they don’t want due to the repeal of RTW. Those “progressive” politicians have made two blatantly retrograde moves.

Made available by the American Institute for Economic Research.

George Leef is director of editorial content for the James G. Martin Center for Academic Renewal. He holds a bachelor of arts degree from Carroll College (Waukesha, WI) and a juris doctor from Duke University School of Law. He was a vice president of the John Locke Foundation until 2003. A regular columnist for Forbes.com, Leef was book review editor of The Freeman, published by the Foundation for Economic Education, from 1996 to 2012. He has published numerous articles in The Freeman, Reason, The Free Market, Cato Journal, The Detroit News, Independent Review, and Regulation. He writes regularly for the National Review’s The Corner blog and for SeethruEdu.com.

The views expressed above represent those of the author and do not necessarily represent the views of the editors and publishers of Capitalism Magazine. Capitalism Magazine sometimes publishes articles we disagree with because we think the article provides information, or a contrasting point of view, that may be of value to our readers.

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