FORBES

BY: JEFFREY DORFMAN

Right-to-work laws are suddenly in the spotlight because Wisconsin’s state legislature looks likely to pass one and its governor, Scott Walker, is likely to sign it at a moment when his presidential candidacy is having an early bout of success. The additional focus brought to these laws makes it worth reviewing why unions hate them, why workers love them, and why taxpayers need them.

At a simple level, right-to-work laws accomplish two things for workers. First, a worker cannot be compelled to belong to a union in order to obtain a particular job. Second, workers who do not join a union cannot be compelled to pay “fair share” dues to the union in place of membership dues as compensation for the services that the union provides to all workers (such as collective bargaining).

Unions hate right-to-work laws because they face a classic free-rider problem: each worker’s optimal decision is to not pay union dues while hoping somebody else pays so they can gain any benefits the union secures for all workers. The union still negotiates contracts for all workers, and even defends non-union members in workplace disputes that would fall under their purview if the worker involved was a union member.

The money at stake for unions is far from trivial. In the state currently in question, Wisconsin, when mandatory union membership and dues were repealed for state employee unions, the drops in membership and dues collected were enormous. The government employee union, the AFSCME, saw membership drop from 32,000 to 13,000 in its Madison local (the state capitol) and from 9,000 to 3,400 in Milwaukee. Union revenue in those same two cities went from $10 million annually to $5.5 million in Madison and fell even more steeply in Milwaukee, going from $2 million per year to $730,000.

While the numbers from these two locals of a single government employee union suggest a lot of workers want to free ride on the union’s actions, it does appear that the locals should still have enough money left to represent the workers.

From a worker’s point of view, the money at stake is, again, far from trivial. By not paying dues to the union, a worker can save $200-$600 per year at common union dues levels. Given the paucity of raises over the past few years, the chance for what likely amounts to a one or two percent raise in take home pay is something that, based on the drops in union membership, is obviously tempting to many workers.

Finally, the big impact comes when you look at right-to-work laws from a taxpayer’s point of view. At a national level, union membership in the U.S. is down to 11 percent or about 14.6 million workers. Union membership rates are 35.7 percent for public sector employees and only 6.6 percent for private sector employees. These union workers pay about $8.6 billion per year in dues and the unions spend at least $1 billion of those dues on political donations.

What that political spending buys is politicians who support unions and will vote favorably on raises and generous pensions for public employee union members. In a very real sense, that means politicians are giving public sector employees money, the employees pay part of that money in dues to their unions, the unions donate part of the dues to the politicians’ campaigns, and the cycle repeats.

Just looking at state employee pension funds, the current estimate of the total unfunded liabilities is $4.7 trillion. That means that state governments have promised their (mostly union) employees generous pensions without bothering to pay enough money into their pension funds to actually keep those promises. The unions have allowed this situation to develop, taking the risky bet that courts will eventually force state governments to pay the pensions no matter the damage it does to other state programs or taxpayers’ wallets.

Reducing the number of public sector union members and the revenue flowing into their public sector unions should translate over time into less generous compensation for government employees. Given that the unfunded liabilities of just state employee pensions works out to $15,000 per American which is close to $40,000 per tax return unit (a family of four filing a single tax return would be a single unit), taxpayers need to support anything that might help reduce the financial generosity state politicians have showered on state employees.

Unions sound fine in concept, but in the government sector a union is negotiating over pay and benefits with a politician, not with the taxpayers who have to pay the bills. The fact that the unions can and do donate huge sums of money to the very politicians they negotiate against proves the system is broken and is not operating in the best interest of taxpayers.

Right-to-work laws give workers some important rights, allowing them not to pay dues to unions they do not support. They also put unions in the unusual position of representing workers who refuse to pay for those services. The balance between these two positions (fair to workers, unfair to unions) might be difficult to resolve. However, the interest of the taxpayers should tip the scales in favor of right-to-work laws.

Taxpayers need the reduction in union power that right-to-work laws will bring. To be fair to unions, unions could be allowed not to represent workers who do not pay them dues, eliminating the free rider problem. The important thing is that anything which reduces the power of public sector unions to capture taxpayer money is worth doing. Because of that, right-to-work laws are a step in the right direction.

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