On September 5, the Michigan Supreme Court gave a green light to the so-called “Protect our Jobs Amendment” (POJA) for the November 6 ballot. The proposed amendment text would make collective bargaining a constitutional guarantee, and any state law that brought any limit to it would be repealed. But critics warn it will give more power to unions as well as prevent the state from ever passing a "right-to-work" law impeding unions from demanding dues from employees.
Supporters of the initiative claim that this amendment to the constitution will bolster workers protection. That’s what can be read on ProtectOurJobs.com: “Collective bargaining protects all Michigan’s families, giving workers the right to negotiate fair wages and benefits.” On the site, a testimonial states: “A Constitutional right to collective bargaining gives workers' a voice at work and a seat at the table with management. We support this important right and the ballot proposal to ensure it's there for Michigan's citizens.” A scapegoat is easily found in CEO’s: collective bargaining “helps level the playing field for employees so that CEOs aren’t the only ones benefiting from a company’s success. They make millions while the people who actually do the work have seen their wages stagnate and cut.”
Behind this propaganda is a whole bunch of money: unions have donated more than $8 million. As Michigan Live reports, the UAW in Washington has donated $1.25 million, with the Detroit-based UAW Solidarity House adding $1.25 million as well. The Michigan Democratic Party contributed $250,000.
I was born in a very regulation-friendly country, Italy, and I can tell you that this will not work. If Michiganders want to “protect their jobs,” passing laws may bring some temporarily relief for some workers, but ultimately will lead the labor market down the wrong path.
Does broader unionization or more power for unions even help employment? According to the Italian statistical office (ISTAT), collective bargaining agreements at the end of July 2012 represented 70.3 percent of Italian employees. Moreover, the effective proportion of workers that the contracts cover is even higher because labor courts use the “minimi tabellari” (minimum wages in the different sector of activity) as “guiding parameters” when determining the “fair” wages -- mandated in the Italian constitution -- for sectors not covered by collective bargaining. Enrollment in unions is widespread, as in 2010 the number of unions members as a whole was around 20 million (believing to what unions declare): that would mean 50 percent of all Italian workers and pensioners. That’s fifth highest trade union density in the Eurozone between 1999 and 2010, according to the Labor statistics database that survey the advanced economies associated with the Organization for Economic Co-Operation and Development (OECD).
And between 1999 and 2007, unions did succeed in having their voice heard: on average, Italy has seen 716 strikes annually -- Europe third to highest (after Denmark and Spain), according to the European statistical office database (Eurostat). Striking in Italy overtook its original purpose, actually. If you travel to Italy remember not to rely on public transportation services on Friday: that’s usually when most of the strikes take place, and that’s no coincidence (everyone likes a long weekend).
Still, powerful collective bargaining laws powerful and hyperactive unions weren’t enough to protect Italian jobs, as few jobs were actually created in the last decades. Just look at the employment rate in the OECD Labor Statistics database. In 2011 this rate was 56.9 percent in Italy, the fourth to lowest in all the OECD countries, eight percentage points below the OECD average (64.8). The United States, by the way, reached 66.6 percent. Nor have those laws and big unions protected Italian workers' wages from languishing. On average, an Italian worker earned in 2011 US$33,517 (PPP adjusted), below many European countries: Finland ($36,676), France ($38,128), Germany ($40,223) and Norway ($43,990).
Between the countries surveyed by OECD, United States actually ranked first, with $54,450 annual average wage (earned by full-time workers). Furthermore, a huge amount of income taxes and social security contributions are deducted from an Italian worker’s wage. According to the “Taxing Wedges” OECD database for 2011, a large 47.6 tax wedge is levied on the cost of hiring an Italian worker (single with no sons), versus 29.5 percent in the U.S.
The Italian labor legislation framework hasn’t created jobs, but it has created a deeply segmented market where a few are over-protected from firing and wage downward mobility while most are not protected at all -- mainly women and young people. This means protecting the jobs for those who already have them and creating an impossible labor market for those who do not.
In the European public discussion, Italy’s poor labor performance is often compared to the Northern European countries’ successes. The benchmark countries are usually Germany and Sweden that did succeed in creating an environment particularly friendly to labor unions: examining employment rates (i.e., employed working-age population), Sweden reached an enviable 74.1 percent and Germany 68.7 percent. A comparison less cited by the Italian press is the one concerning economic freedom, the base ingredient of economic growth. There are many differences between Italy -- and Mediterranean countries in general -- and Northern European countries. In the Heritage Foundation’s 2012 Index of Economic Freedom -- which incorporates parameters such as rule of law, limited government, regulatory efficiency, and market openness -- Germany and Sweden rank, respectively, 26 and 21. On the other end of the spectrum, Italy ranks 92 (after Azerbaijan, but before Honduras), while Greece 119.
No wonder that in 2011 Germany and Sweden GDP grew by 3.0 and 3.9 percent, respectively, while the Italian economy by 0.4 percent.
What actually protects jobs: regulations or a free, dynamic, growing economy? What will provide more opportunities for those who want to work? And who really wants the labor laws to regulate their wage and their bargaining power with their employer?
Dear Michiganders, if you really want to protect your jobs and those of your children, don’t waste time in lobbying for labor laws and powerful unions. Lobby for economic growth -- for economic freedom.