| Ian de Wet | March 4, 2018 |
As union membership across the public and private sectors continues to decline in the United States, the Supreme Court recently began hearing arguments in Janus v. AFSCME, a potential landmark case that will determine the fate of public-sector unions. The case centers around Mark Janus, a public-sector employee in Illinois, who argues that mandatory membership dues for public-sector unions violate his First Amendment right against compelled political speech acts. Since public-sector unions participate in financing political campaigns, collective bargaining, and other lobbying efforts, Janus contends that requiring him to pay union membership fees necessarily forces him to participate in political speech that he may disagree with.
Constitutionality aside, the Supreme Court’s decision in this case will have a profound impact on the organization and lobbying capabilities of public-sector unions across the country. If the Court rules in Janus’ favor and eliminates mandatory fees, the political power of public-sector unions, while not entirely eliminated, would likely decline precipitously. Such a decision would mirror the policies passed in states known as “right-to-work” laws. These policies prevent private-sector unions from requiring employees to join unions or imposing mandatory fair-share fees for non-members.
To understand the potential impact of the Supreme Court striking down mandatory union fees, one must first understand the nature of public goods. A public good is a specific type of good produced in an economy that has both nonexcludable and nonrival characteristics. Essentially, individuals who fail to contribute to the cost of producing a public good may still enjoy its benefits because no entity has the ability to exclude someone from consuming a public good. Additionally, one individual’s consumption of a public good has little to no impact on the ability of anyone else to consume it. Common examples of public goods include national defense, clean air, and free city parks.
As it relates to the case of Janus v. AFSCME, all of the benefits that union membership may provide to employees represent public goods in a world without mandatory fees. Under current law, public-sector unions may require non-member employees to pay partial fees for union services that non-members still benefit from, such as lobbying for improved working conditions and wages. A ruling in favor of Janus, however, would enable employees who opt to avoid paying membership fees to continue benefiting from union activities like collective bargaining. A recent article examining the effect of right-to-work legislation in select Midwestern states confirms the notion that eliminating mandatory membership and fees for employees results in higher rates of free riding. The study defines free riding as the amount of non-union members who benefit from collective bargaining. The data illustrate a decline in union participation due to right-to-work legislation even though these non-participating workers still benefit from unions’ political activities.
Substantial losses in union membership and bargaining power could spell out harsh consequences for employee benefits. The Economic Policy Institute has said that 94 percent of workers covered by union contracts have access to employee-sponsored health benefits compared to 67 percent of non-union workers. Additionally, the average union worker earns 13.2 percent more than workers not covered by union contracts. Since membership fees necessarily play a role in helping unions bargain with employers for higher wages and benefits, allowing employees to opt out of membership fees would curtail union bargaining power. Part of the impact of eliminating mandatory union membership fees is demonstrated by the fact that states with right-to-work legislation have average wages that are 3.2 percent lower than non right-to-work states “after controlling for a full complement of individual demographic and socioeconomic factors as well as state macroeconomic indicators”. This represents a 1,558 dollar average decline in wages for a full-time worker, showing a potential relationship between curtailed union political power and decreased labor earnings.
A ruling in Janus’ favor may not completely dismantle unions’ political power, however. One potential method for overcoming the free-riding problem involves unions shifting to members-only models of organizing to prevent union benefits from acting like public goods. Currently, most unions operate as exclusive representatives, meaning they represent all employees at a firm and extend their benefits even to non-members. If, however, members-only unions develop in response to the Supreme Court striking down mandatory fees, individuals who fail to contribute to unions’ political activities could be excluded from the benefits. In such a system, union benefits would operate as club goods, which are nonrival like public goods but excludable. Members-only unions would negotiate contracts with employers that include certain benefits applying only to paying members, such as health insurance policies. Non-members would either accept the employer’s own contract or pay the union’s fee to be included in the union’s contract. This would create new incentives for employees to pay union fees even if those fees stop being mandatory.
Setting aside the question of constitutionality, a Supreme Court decision overturning mandatory public-sector union fees will no doubt impact union membership and political power. Taking a lesson from right-to-work bills already affecting the private sector, eliminating mandatory public-sector union fees will likely reduce wages and other employee benefits by at least a few percentage points. One fact remains certain, however: a Supreme Court ruling in Janus’ favor will profoundly shape the way unions adapt to a changing labor climate in the 21st Century.