Renewed help for Big Labor

It looks like "card check" is dead. Several senators have balked at voting against the secret ballot. But Big Labor's hopes and Democrats' desires to reward those hopes are not dead. Senator Harkin has proposed a new labor bill that contains several items that would be major giveaways to labor. The most damaging element is "compulsory arbitration" that would send labor disputes that have lasted longer than 90 days to an appointed mediator and both sides would be forced to accept the decision. And workers wouldn't even get to vote on the final decision. Last week Shikha Dalmia described what a catastrophe compulsory arbitration has been for Michigan which voted in such provisions for police and firefighters in 1969. The result has been a disaster for Michigan communities. The arguments at the time were that, since such public employees are forbidden from striking, it was only fair to provide this method to help workers.

This process is supposed to install a contract expeditiously. But a review of 29 arbitration cases in 2005 and 2006 by the Michigan-based Mackinac Center for Public Policy found that the average time involved in a case was almost 15 months -- not the four-and-a-half months that the law prescribed, defeating its whole purpose. Moreover, because an arbitration board doesn't have to live with the consequences of its decision, it has no reason to come up with a workable solution -- just one that is politically expedient.

Thus a board, convened at the request of Detroit police and firefighters in 1978, ordered the city to pay $46 million in cost-of-living adjustments. This destroyed the city's already fragile budget, ultimately triggering layoffs of a quarter of its police force. The police eventually accepted a three-year wage freeze in 1981 -- but not before the crime rate, which had been falling before the layoffs, began soaring again.

Compulsory arbitration also nudged other Michigan cities, including the working-class towns of Hamtramck and Highland Park, into bankruptcy. In 1999 an arbitration panel awarded Hamtramck police officers $2.1 million in pay raises and back pay, pushing it into state receivership. Under receivership, which is only used in extreme situations, the state government takes over the city's finances and appoints its own manager to run the city. Hamtramck was ultimately forced to impose a combination of service cuts and tax increases, all of which accelerated the exodus of its residents. Highland Park, wishing to avoid similar arbitration, gave its public safety officers raises it couldn't really afford and was also forced into receivership.

A 2006 task force convened by Gov. Jennifer Granholm, who supports compulsory arbitration, found that local government costs in arbitration states are 3%-5% higher compared to nonarbitration states. "While small in percentage terms, the impact in dollar terms is huge," the task force concluded. Given that local governments in Michigan alone spend over $23 billion annually, this works out to over a billion in extra spending for them.

Compulsory arbitration has been so disastrous for Michigan that the bill's sponsor now regrets its passing.

Years later, Detroit mayor Coleman Young -- who had authored the original law as state senator -- rued what he had done. "We now know that compulsory arbitration has been a failure," he lamented to the National Journal in 1981. "Slowly, inexorably, compulsory interest arbitration has destroyed sensible fiscal management and has caused more damage to the public service than the strikes it was designed to prevent."

Maybe the Republicans can get Mayor Young to testify about Harkin's bill. Chambers of Commerce worried about the new bill to help labor just need to put out an ad with his words and some of these statistics about what such provisions have done to the states that have them.

Just because the more iniquitous aspects of Big Labor's push to pass card check, doesn't mean that they have given up on urging Democrats to pass major legislation to help them achieve what they can not achieve on their own. But compulsory arbitration will be a job-killer that will bankrupt companies that, unlike governments can't tax their ways out of debts that arbitrators have imposed on them.

UPDATE: Mickey Kaus comments,

Opponents may need to come up with a new name for the bill (though "card check" is working pretty well for them). How about "federal pay determination"? Keep in mind that not only does the apparent "compromise" propose abandoning the hoary idea that wages should be set in the marketplace, it also abandons the New Deal's substitute idea that wages should be set in labor contest where unions threaten to use their strike power and management threatens to survive a strike. Unions seem to have given up strikes. Instead they want to authorize an official--maybe even an actual federal bureaucrat--to simply swoop down and impose what would undoubtedly be a wage increase. That's more akin to FDR's notorious, failed National Recovery Act--except the NRA at least let industries set their own rigid wage scales. ...

Note also that the arbitration provisions give now-unorganized workers a new, powerful incentive to unionize: Vote for the union, wait a few months, and an arbitrator will fly in and give you a raise. No strike. No fuss. No muss. ...