Employee "free choice" may drive economic uncertainty

From an op-ed by Michael J. Lotito published in today's San Francisco Chronicle:

The world economy is in turmoil. Detroit automakers are asking Congress for a bailout. And organized labor chimes in with a demand for Congress to pass the Employee Free Choice Act to save the day. According to the unions, implementing the act would stimulate the economy by allowing unions to organize workers more easily and share any largess of an economic stimulus package with the individual worker. Organized labor is mistaken.

The Employee Free Choice Act contains a mandatory arbitration provision that has received little attention. This arbitration provision presents economic concerns that run contrary to labor's assertions that the bill would rehabilitate the economy.

The bill would permit a government-appointed third party - who has no stake in an employer's business or any understanding of the company's inner workings - to impose a binding two-year collective bargaining agreement upon a company.

A quick review of history shows why this is a bad idea. In Canada, all 10 provinces once operated under a law similar to the Employee Free Choice Act. Today, that law has been abolished in all but four provinces. Recently, an arbitrator in one of the Canadian provinces still operating under the free-choice-act-like law increased wages by 33 percent. The company eliminated jobs. Basic labor economics show that when jobs are eliminated, unemployment (supply) increases and wages elsewhere (demand) decrease.

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