When Free Choice is Terrible

Thank God for the Republicans for opposing this. And may be some centrist Democrats, including the recently inducted Sen. Arlen Specter. I thought no sane, objective person could support the proposed Employee Free Choice Act (aka "card-check".) Yet it is favored by Jagdish Bhagwati and even more so by Paul Krugman, both outstanding economists. Apart of course by Obama and most Democratic lawmakers as a matter of political necessity to appease unions that helped in their election.

Despite its noble sounding name this deliberately misnamed Act subverts workers' free choice about whether to unionize or not. Instead of voting by secret ballot, this Act also requires unions to be formed and recognized if half or more of the workers in an establishment sign pledge cards in support of this. So say, Tony Soprano style thugs knock on workers doors, stare across the dining table and hold the pledge card for workers to sign. Those who refuse can be intimidated, and everyone knows who is unwilling, leaving them open to retaliation down the line, or ostracism by fellow workers, or other unpleasant consequences.

So how do Krugman & Co. favor this over a free and fair vote by secret ballot? They essentially say that the means however imperfect justify the end, which is more unionization. This in turn will improve the lot of workers by extacting concessions from employers, and better redistribute wealth, thus narrowing the gap between the classes. If such ends justify the means, how about allowing the poor to extort money from the rich, or burglarize their homes to achieve redistribution?

Thankfully, it looks like card-check won't be able to clear the Senate with a filibuster-proof majority. Though many people take it as a given, I question the value of unions in many situations, or at least the premise that the pros outweigh the cons.

Unions to me are the most needed when through collective bargaining they are a counterweight to (mostly tacit) collusion by employers to keep wages and benefits below what would prevail in a free market. One example is of US hospital chains that were hit with a lawsuit over colluding to keep nurses' salaries artificially low, despite a national shortage of nurses. Another is of players' unions in professional sports (even though players may be super-rich.) They bargain with a handful of sports team owners that collectively decide on salary caps or player pay structure. But such employer collusion is relatively rare, and generally illegal.

Other pluses of unions include workplace safety, health and social benefits that they can win from employers through collective bargaining and the threat of strikes. I'm certainly for such health and safety measures, but for most of them they are better realized through passage of broader laws applying to all, instead of individually won through unions with the most leverage for their limited set of workers. Thus we have OSHA, or the Workmen's Compensation Act, and even the Minimum Wage Act and can go further along this route.

On the downside unions can severely distort free market efficiencies, hurt consumers who are forced to pay higher prices, and reduce the international competitiveness of US goods and services. Unions are at least as much to blame as the management for the woes of the Detroit Big Three automakers. Wal-Mart opposes unionization (hopefully with entirely legal means) at a high cost to its image and political capital because it understands the threat to its competitive position.

Then there are illegal strikes like the 1981 Air Traffic Controllers strike, the 2005 New York city transit strike and fake "sickouts" by pilots and other airline staff. Except for the controllers whom Reagan rightly fired, the workers get away with holding the public to ransom and breaking laws aimed at protecting essential services. These, and even the legal 2008 American Axle strike where a few UAW workers crashed GM production seem like acts of collective extortion rather than collective bargaining.

Still, in a free society and functioning democracy I realize the need to allow the creation and existence of unions, even if (like trial lawyers) they do more harm than good. Only they should be created where workers exercise genuine free choice through vote by secret ballot, not through the charade of a deceptively named law.

Laws Gone Wild - Banning Old Age

To me this is another of the flawed anti-discrimination laws leading to absurd consequences. I'm talking of the Age Discrimination in Employment Act (ADEA) of 1967 and its subsequent amendments.

We hear much more about countering discrimination against minorities and women, and resultant affirmative action. Despite vigorous denials from its liberal advocates this often becomes a drive to fill quotas. Barack Obama last month quoted some gender disparities in pay and top executive positions to imply unequal treatment of women. Now if there is any real bias or violation of the principle of "equal pay for equal work" I'm all for vigorous corrective action. But just the numbers being thrown around do not establish this, and there are more benign explanations.

The fact that many working women opt for a better balance between work and family, and take some years off to raise children can explain their making 78 cents for every dollar that men make. Similarly, there may be very few women who are prepared to put in 14 hour workdays to have a shot at the corner office. That, rather than a glass ceiling, may largely be why only 3% of Fortune 500 CEOs are women. To use these statistics to equate salaries or senior executive elevations among the genders may very well be reverse discrimination against men.

Other countries like India have quota-based intake of disadvantaged groups (like caste-based reservations) into government or public sector jobs, or into many educational institutions. So similar US practices do not surprise me as much as the "protections" against age discrimination. In India I never questioned the logic of having a mandatory retirement age. It used to be 58 years for most government jobs, and was subsequently raised to 60 years. For a few, mainly high positions, it extends to 62 or 65 years. After that, retirees who are willing and able to work can seek employment as contractors or consultants, or even be re-employed in the public sector as special cases. Private companies are free to have or not have mandatory retirement policies.

These practices make a lot of sense. Employees are recognized for their years of useful service while accepting the effects of age, and are given a cordial send-off after reaching a threshold. They leave with their memories and morale intact, making way for younger, more vigorous successors. Employers are free to retain exceptional workers past that point. But the rank and file know and accept the retirement age as a natural conclusion of this stage of their careers. If they want to work more they'll see no shame or a blow to their self-image to seek lighter or different, less paying work that may be more suited to their present stage of life. Even usually more liberal Europe recognizes the right to set an age for forced retirement.

This was pretty much the case in the US as well, till the ADEA of 1967 was amended in a series of steps from 1978 till 1993 to bar mandatory retirement in most sectors. Remarkably, the biggest blow was struck in the sweeping restrictions of the 1986 amendment when a Republican (Ronald Reagan) was President. Ideology notwithstanding it's hard to resist signing legislation favoring a key voting bloc like seniors ahead of the next Presidential election (that was won by Bush Sr.)

Adverse consequences of the US ban on mandatory retirement (many of which I've seen at first hand) include:

• Older employees drawing the highest salaries have reason to stick it out as long as they can. Employers have to push them out for bad performance after documenting negative evaluations. Not only do the departing seniors feel humiliated at this ignominous end to their long career, but this can also hurt employees morale all around.
• Managers in these situations have to give negative evaluations and terminate employees which subjects them to needless stress. Incidents of workplace violence and other fears of retaliatory action make the managers' job even harder.
• Reducing "natural" turnover adversely affects the career prospects of promising younger employees, which can create friction among employees and again affect morale.
• Older employees who manage to coast or "get by" are not replaced for many years by better, cheaper and more energetic younger employees. This makes for suboptimal company performance that aggregates to a drag on the economy, making it less competitive.

Bad, populist laws like these are politically hard to resist and block. Worse, once they are passed they're almost impossible to undo. Anyone attempting to do so despite the merits is likely to be painted as "anti-senior " and risks political suicide. So despite the pressures it is still much better to stop such laws before they are enacted.

I hope lawmakers (particularly Democrats) draw this lesson while considering the proposed Employee Free Choice Act ("Card Check Law.") This awful law being pushed by unions and liberals would allow unions to be formed without needing workers to vote their preferences by secret ballot. But that's another story.