New Report Projects Card Check Law Will Create Joblessness

The Employee Free Choice Act (EFCA), as this publication has noted several times, is a classic case of deceptive packaging. The proposal, now pending before Congress, would effectively eliminate the secret ballot as a means of allowing workers to decide whether to join a union. Specifically, it would force an employer to recognize as binding the result of a union “card check” campaign that generates signatures from more than 50 percent of affected workers who indicate a desire to join. Labor leaders from the start have admitted they seek to boost their ranks and retool themselves as a formidable economic and political force. What they won’t admit is the possibility that EFCA, once enacted, would be counterproductive to the interests of workers as a whole. A new study concludes, however, that such a possibility is very real.

The study, released on March 3 and authored by University of Chicago-trained economist Anne Layne-Farrar, is titled, “An Empirical Assessment of the Employee Free Choice Act: The Economic Implications.” Layne-Farrar, director of the Emeryville, Calif.-based research firm LECG Consulting, concluded: “(P)assing EFCA would likely increase the U.S. unemployment rate and decrease U.S. job creation substantially.” How substantially? She projects that for every 3 percentage points in rising membership generated by card checks and mandatory arbitration, the following year’s unemployment rate would rise by 1 percentage point and new jobs would drop by 1.5 million. Moreover, if Congress were to pass EFCA today, the portion of the American work force belonging to a union would rise from 12 percent to 15 percent, but the number of unemployed workers would rise by 1.5 million. And if the law triggers a rise in private-sector union membership by between 5 and 10 percentage points (as some are predicting), the unemployment rate would rise from 1.5 to 3.5 percentage points during the following year.

Why would the Employee Free Choice Act produce such adverse consequences? The reason, argues Layne-Farrar, is because it is a radical piece of legislation, a political reward to the labor unions rather than an economic reward to American workers as a whole. The measure contains three key provisions. First, as mentioned above, EFCA would mandate employer recognition of a union-sponsored card check that produces a majority of employee signatures, and thus would override attempts to hold a secret-ballot election. The legislation does not specify guidelines for the often high-pressure signature-collection process, instead granting rulemaking authority to the National Labor Relations Board (NLRB). Second, and perhaps less known, the measure would require collective bargaining to begin within 10 days after union certification. If the union and the employer fail to reach an initial agreement within 90 days, an additional 30-day period would be added for mediation after either party requests help through the Federal Mediation and Conciliation Service. And if 30 days of negotiation produces no agreement, both sides would be subject to automatic arbitration whose outcome would be binding for two years. EFCA provides no opportunities for employee ratification for arbitration-related terms and conditions. Third, EFCA would mandate triple back pay plus civil penalties of up to $20,000 per violation for unfair labor practices committed by an employer during either the organizing or negotiation process. The law also would require NLRB to seek an injunction against unfair practices by an employer, with no corresponding sanctions against the union.

Organized labor can be counted on to denounce the study as readily as embrace the bill it critiques. This is because passage of EFCA, something that almost happened in 2007, represents everything union leaders have been fighting for. The bill is an attempt to rewrite the National Labor Relations Act to give the unions enormous legal advantages. Union officials don’t put it this way, of course. For them, EFCA represents a belated attempt to lend balance to a playing field too long tilted in favor of employers. The result, they argue, has been economic stagnation. AFL-CIO President John Sweeney calls the card check bill “critical to rebuilding our economy.” Anna Burger, chairperson of the Change to Win federation, argues that EFCA would “create good jobs that support a family.” And she doesn’t like someone standing in her way. She recently sent a letter to Steve Bartlett, head of Financial Services Roundtable, indicating that all financial services firms receiving federal bailout money should “immediately cease all lobbying and advocacy” against EFCA. While there’s an overwhelming case for denying government aid to failed banks, brokerages and other financial institutions, it’s quite a jump from that to denying freedom of speech to these institutions. Yet that’s exactly what Burger wants.

The trump card for opponents of the bill is economic reality. The nation’s Fourth Quarter 2008 Gross Domestic Product fell by an annualized rate of 3.8 percent, the biggest drop in over 25 years. And the unemployment rate exceeded 8 percent for the month of February. In the face of this, some union allies in the Senate are backtracking, even with President Obama having stated his intent to sign the measure. At least six senators who two years ago voted to move ahead on EFCA now say they are either opposed or not sure. One of them, Sen. Blanche Lincoln, D-Ark., explains her shift this way: “I have 90,000 Arkansans who need a job. That’s my No. 1 priority.” The legislation, she said, would be “divisive.” Appearing on the March 8 edition of the ABC-TV Sunday morning talk show, “This Week,” Sen. Claire McCaskill, D-Mo., a supporter, admitted to host George Stephanopoulos, “I’m not sure that we have the votes.” Backers of the bill need 60 votes to prevent a filibuster. The last time around they came up short following House approval by a 241-185 margin. If everyone in Congress read Anne Layne-Farrar’s study, even a simple majority might not materialize. That would be bad news for union officials. But it probably would be good news for millions of workers concerned with keeping or finding a job. (LECG Consulting, 3/3/09; ABC-TV, 3/8/09; Wall Street Journal, 3/10/09).