Study: Labor Reform Would Boost Economy, Worker Freedom

Study: Labor Reform Would Boost Economy, Worker Freedom
March 11, 2010

A new labor reform model could help jumpstart America's economy and restore workers’ rights.

Sweeping the Shop Floor: a New Labor Model for America, from the Evergreen Freedom Foundation (EFF), describes how outdated labor laws have increased the political power of public-sector unions far beyond the purpose of representing members, wreaking havoc on state and local economies and individual liberty.

The study proposes the United States modernize its labor laws based on reforms successfully implemented several decades ago in New Zealand. That highly regulated nation found itself on the brink of bankruptcy by the late 1980s, causing political leaders to pass a series of sweeping economic and labor policy reforms.

Workers Get Choice
In 1991 the Employment Contracts Act gave workers the choice of whether to be represented by a union and made unions compete for members by removing their monopoly status over an entire workplace. Instead, individual employees were allowed to choose their own representative.

Over five years, unemployment dropped from 11 percent to 6 percent and productivity increased significantly.

The legislation not only boosted New Zealand’s economy but also had a strongly positive social impact on the nation’s citizens. People were allowed to create flexible working arrangements with their employers and receive compensation based on their unique skills and talents instead of rigid union contracts. By 1996, 70 percent of the nation’s employees were covered by individual contracts.

New Zealand’s labor reforms took effect nationwide and in a short amount of time, but such a model would apply differently in America’s federalist system of government. The EFF study uses the examples of two states—Colorado and Washington—to illustrate how states could adopt a labor-relations system based on freedom of association.

‘Boon for Workplace Freedom’
The two states differ greatly in political climate and union density: 22 percent of Colorado’s government workforce is unionized, compared to nearly 56 percent of Washington’s public employees.

"Labor lawyers don't call Colorado 'the wild West' for nothing. Local governments have a great deal of latitude to decide whether to recognize a union and how to go about it. For all practical purposes, the state already is neutral when it comes to public-sector collective bargaining," says Ben DeGrow, education policy analyst for the Independence Institute and a coauthor of the study.

Yet it is becoming more common in Colorado for unions to enjoy legal and contractual privileges, particularly in the public school system.

"Adopting a new free agency labor model would be a boon for workplace freedom in schools as much as in any other government agency. Teachers would be represented by groups more directly accountable to them. Policymakers and school officials would face fewer obstacles in enacting needed reforms in how teachers are paid, evaluated, and retained," says DeGrow.

Union Power in Washington
In the state of Washington, the roots of organized labor run deep. Mandated union dues from many state employees have expanded the role of special interests in elections and policymaking, with little evidence increased collective bargaining for public employees has improved the state’s economy or efficiency.

Because of the political climate in Washington, altering its labor laws would be difficult. Yet co-author Scott Dilley is optimistic.

“Washington state has strong traditions of both collective bargaining rights and rugged individualism,” Dilley said. “These two traditions could be melded together to optimize freedom of association in our state.

“This is exactly what the New Zealand model of reform proposes to do,” he added. “It respects individual freedom of choice. Workers can choose to bargain as a voluntary, yet legally respected, collective or to negotiate as individuals directly with their employers.”

Fitting to Changing Economy
Dilley says in changing times, rigid union contracts and bargaining models have to be adapted to accord with market forces.

“Our current collective bargaining model is based on a manufacturing economy that used to involve discrete units of workers with similar concerns. Because our economy has changed, we need to have a more fluid definition of what a collective bargaining unit is, how unions are understood, and what they accomplish for their members.”

Rachel Culbertson (rculbertson@effwa.org) is a policy analyst at the Evergreen Freedom Foundation in Olympia, Washington.

Internet Info

Sweeping the Shop Floor: http://www.effwa.org/laborstudy2010