Big Labor’s Privileged Position

Today, an important hearing gets underway in Washington, D.C. that started with a billboard. Well, not quite. But that phrasing makes for better copy. Hearings at the National Labor Relations Board may not be the most exciting topic. But this one could overturn an election and have wider repercussions across the nation. Sometimes, boring is better.

Last spring, Tennessee commuters passed a series of billboards featuring a photograph of a blighted urban landscape featuring the caption, “Auto Unions Ate Detroit: Next Meal? Chattanooga.” The issue at stake (and the real reason for today’s hearing) was the United Auto Workers union’s attempt to organize foreign automakers, known as “transplants,” in Southern states, specifically the local Volkswagen plant. My colleague Trey Kovacs tells the story in a new paper.

The UAW had been targeting Volkswagen since setting up shop in Chattanooga in 2011.  With significant assistance from IG Metall, a powerful German steelworkers union, the UAW tried to pressure VW to ask its local employees to join the UAW, which the union claimed was necessary to create a worker-management “works council” like it has in Germany. There was only one problem: Many VW workers did not want to join the UAW.

In response, a group of VW workers opposed to unionization banded together under the banner Southern Momentum. They were supported by local and national groups (including my organization) concerned about heavy-handed tactics and the anti-competitive impact of unionization. In February 2014, workers voted 712-626 against UAW representation. End of the story? Hardly. The UAW quickly cried “not fair.”

Today’s NLRB hearing is the result of a series of appeals filed by the UAW, claiming “political interference” by outside groups and elected officials as the cause of the union’s defeat—as opposed to the opinions of free men and women. The paternalistic arrogance of such a claim aside, did anybody find dark humor in that filing? As if the UAW’s own activities and assistance from a federal labor board stacked with union partisans could not be construed as “political interference”?

It is important to note: There is nothing philosophically wrong with voluntary worker associations, especially those that attract members by providing services of value. Such groups should be able to negotiate labor contracts, serve as clearinghouses for workers to learn best alternatives, monitor employee benefit plans, and be able to institute legal proceedings against abuse by employers. Defenders of free enterprise and individual liberty should always plant a flag alongside all things voluntary.

However, the unfortunate reality is that today’s unions enjoy legal privileges and immunities that have turned them into cartels that raise wages above competitive levels by capturing monopolies over who companies can hire and what they must pay. “Not fair?” You betcha.

If you’re unfamiliar with the ins and outs of U.S. labor law, you may be surprised by the privileges unions can enjoy—and the list is long.  Labor cartels are immune from taxation and most antitrust laws.  When government ratifies a union’s position as representing a group of workers, it represents them exclusively, whether certain employees want that representation or not. Since they are monopolies, unions can raise wages above competitive levels, and then ration the jobs that remain. As the late Nobel laureate Friedrich Hayek said: “We have now reached a state where [unions] have become uniquely privileged institutions to which the general rules of law do not apply.”

How does Big Labor maintain its privileged position? Quite simply, politics. While liberals scream “foul” over the political contributions of the Koch brothers, “corporations”, or “special interests” like the tobacco and pharmaceutical companies, the truth is that organized labor accounts for 10 of the top 15 political campaign contributions between 1989 and 2014, with nearly all of their giving going to Democratic candidates.

It is a good thing, and perhaps unsurprising, that the monopoly success of private-sector unions has brought their decline. Private sector union membership peaked at 17 million in 1970.  It is now sits around 7 million. And it is unlikely to bounce back, regardless of what happens in Chattanooga. Just look at what a once-mighty union bastion looks like today.

Last week, Detroit’s city government launched a website,, to auction off homes starting with the bargain price of $1,000.  Detroit did not fare well during the “Great Recession”, and has not recovered as the city continues to struggle out of bankruptcy. As a consequence of tax lien foreclosures, Detroit owns over 16,000 vacant homes. Now it will try to unload them for those who are willing migrate into the city.

A thousand bucks!?  Hmm. Maybe it’s time for another billboard—facing the NLRB’s headquarters. America’s economy could use some more boring days inside that building.