How Unions Just Shot Workers in the Foot
Union bosses are excited that they have prevented their members from getting raises.
It's a bit mind-boggling, but that's what happened. Last week, the Service Employees International Union (SEIU) celebrated defeating a bill in the Senate that would have allowed raises, declaring that the legislation would have stripped workers' "fundamental rights." The union's blog encouraged tweeting and sharing the "good news" on Facebook.
The RAISE (Rewarding Achievement and Incentivizing Successful Employees) Act, introduced this year by Senator Marco Rubio (R–FL), would lift the ceiling on unionized workers' wages by allowing employers to pay individual workers more—but not less—than the union contract specifies. It was defeated in a 45-54 vote along party lines.
When you're in a union, raises are usually all or nothing. They are not necessarily forbidden; the unions just have to sign off on them. Only about 20 percent of union contracts permit performance-based raises, less than half the rate in nonunion firms. This means 80 percent of workers can't get an individual raise for doing good work—a raise must be negotiated for everyone. That certainly takes away the incentive to go above and beyond, because there are no performance-based bonuses or even merit increases.
Instead, unions typically base pay on seniority and job classifications—not individual effort or productivity. Workers cannot bargain individually for more. By law, hard-working union members get the same pay as those who slack off.
The RAISE Act, which has yet to garner a vote in the House but has been introduced there by Representative Todd Rokita (R–IN), would enable 2.8 million women and 4.8 million men to earn higher wages through their individual effort. Heritage research indicates that if Congress passed the RAISE Act, the average union member's salary could rise between $2,700 and $4,500 a year.
But union bosses don't want that. They want to preserve the collective bargaining agreements that keep union members' wages down.
"Collective bargaining agreements are intended to prevent employers from making arbitrary decisions about wages," said SEIU International President Mary Kay Henry. The word "arbitrary" can have negative connotations, often meaning that someone made a decision that wasn't rooted in fact. But really, what worker would mind if his boss "arbitrarily" decided to give him a raise? He probably wouldn't argue too much.
Some employers have tried, but the National Labor Relations Board (NLRB) strikes down attempts to raise wages without union permission. The Brooklyn Hospital Center rewarded its best nurses with $100 gift cards; the NLRB told the hospital to cease and desist. The Register Guard Publishing Company gave a bonus commission to employees who sold advertising contracts that the company wanted to promote. The NLRB also ordered it to stop.
Why? Because employees earning performance-based pay know they do not need a union. Why would a worker making more than the union rate pay union dues?
They prefer, in Teamsters President Jimmy Hoffa's words, that "[c]ollective bargaining agreements create uniform standards for all employees."
This makes even less sense because performance pay would help employers, too. It increases workers' job satisfaction—one of the reasons more and more businesses offer it—and increases the firm's productivity. In fact, firms can pay their workers more when the business is more productive and profitable, so rewarding productivity creates a positive cycle.
The fastest-growing jobs are those that require individual skills: professional specialties (engineering, computer science, and nursing), executive and managerial jobs (such as in marketing and human resource management), and technical and sales jobs. America's outdated labor laws, which ignore individual effort, do not appeal to workers in the modern economy. Is it any wonder that thousands of union members fled when Governor Scott Walker (R) opened the door for them in Wisconsin?
In effect, federal law caps the wages of 7.6 million middle-class workers. This doesn't make sense. Even President Obama has said:
We believe in the free market, we believe in capitalism, we believe in people getting rich, but we believe in people getting rich based on performance and what they add in terms of value and the products and services that they create.
In a tough economy, workers are seeking opportunity, and many are fighting to be rewarded for their hard work. It's time union bosses stopped blocking their efforts.