Collective bargaining or collective collusion?

It is illegitimate for the Histadrut to take advantage of their concentrated organization to influence public policy on issues that affect the entire electorate.

By ASHER MEIR
Histadrut labor federation chairman Ofer Eini is doing what labor bosses are supposed to do: threatening a strike if his constituents’ demands are not met. But let’s see what his demands are: raising the minimum wage of ALL workers, and lowering prices of certain staples for ALL consumers. These are political demands, not economic ones, and they are illegitimate ones for a labor union or federation.
To understand why, let’s see what unions are good at, and what they are bad at, from a public-policy point of view.
Unions engage in what is known as “collective bargaining.” Each individual worker is entitled to negotiate over working conditions with the employer and to stop working if acceptable terms can’t be agree to, just as the employer is entitled to refrain from hiring someone if it won’t be advantageous.
But many people feel this bargaining is not really very evenhanded.
Employers may be forbidden to organize together into cartels, but since a single non-cartel employer may hire hundreds or even thousands of employees, the employer is de facto a bit of a cartel. So it makes some sense to allow workers to bargain collectively and to offer or withhold their labor depending on how they, as a collective, fancy the employer’s offer.
Economist John Kenneth Galbraith used the term “countervailing power” to describe how the union’s market power may be a counterweight to that of the employer or employers. For this reason, the law in free countries allows and often even encourages this kind of organization, feeling it can make for better functioning labor markets.
Therefore, it is reasonable for the unions to say to the government: Our wages were adequate when the cost of living was low, but now that gas and water are much more expensive, we need a raise. Of course the employer can decide whether to take this offer or leave it; like any bargain, it depends on what the other side has to offer.
However, it is certainly unreasonable for unions to say if their demands are not met, they will take actions to harm the employer.
If a single employee says if his wage demands are not met, not only will he withdraw his labor, he’ll also interfere with the smooth operation of the workplace: that would be extortion, not bargaining at all.
Doing this collectively would be an abuse of the privileges given unions. This is a particular danger in a labor federation. When one union strikes to support the demands of another, then the labor action starts to take on the characteristics of a true cartel. This is a punitive action, not the mere withdrawal of services on the part of the bargaining unit.
Not all “identification strikes” have this character. Sometimes these can be justified, such as when an employer adopts a strategy of “divide and conquer” in wage negotiations. Countering this ability of a centralized employer is part and parcel of the reason we favor unions.
It is equally illegitimate for the union to make political demands.
That the employer happens to be the government has nothing to do with the reasons unions are encouraged, even though the government happens to be a very large and centralized employer with much bargaining power. There are various reasons this is so.
One is that it is an abuse of the special rights granted unions.
Unions have special rights to bargain on behalf of workers to secure well-functioning labor markets. But when they extend their power to the political sphere, they gain an unfair advantage over their fellow citizens. If 80 percent of the voters oppose a policy, there is no reason it should be adopted because the 20% who support it just happen to be government employees who can go on strike.
Another reason is the governance issue. It is problematic to assume that the union leadership actually represents the membership. Just as the individual worker may be helpless against a monolithic employer, he may feel helpless against a monolithic union leadership. This issue is managed by limiting unions’ right of representation to a very narrow list of topics where it may be fairly assumed they do represent the workers’ interests.
This should never extend to issues of wide public controversy.
Just as 20% of a union’s members shouldn’t be able to railroad a public issue against 80% of the public, likewise the small number of union leaders shouldn’t be able to railroad a public issue against the better judgment of even a minority of union members.
The latest wave of price increases adversely affects the living standards of workers, including union members. It is reasonable for the unions or the union federation to use this as a basis for demanding an increase in the wage. However, as a matter of labor policy and public policy, it is illegitimate for them to take advantage of their concentrated organization to influence public policy on issues that affect the entire electorate.
ethics-at-work@besr.org Asher Meir is research director at the Business Ethics Center of Jerusalem, an independent institute in the Jerusalem College of Technology (Machon Lev).