News broke earlier that Senate Democrats, seeking to save the Orwellian-named “Employee Free Choice Act,” have agreed to ditch the provision that would enable unions to rapidly expand their membership ranks by denying workers a right to a secret ballot on unionization. However, the new bill would preserve the other major element of the bill, which would force businesses that failed to reach a contract agreement with unions to accept terms imposed by a mediator. The Associated Press reports that unions are on board with the move. Many conservatives had predicted that if EFCA was in serious danger, Democrats would drop the controversial “card check” provision and settle for binding arbitration. But while the arbitraton provision has received less attention, it is no less damaging to the economy or workplace freedom.
Last week, the Wall Street Journal published an op-ed by Shikha Dalmia describing the nightmare Michigan got itself into when it passed a compulsory arbitration measure that saddled its cities with unsustainable compensation obligations to police and firefighters. “We now know that compulsory arbitration has been a failure,” Detroit mayor Coleman Young declared in 1969.
But as Dalmia writes, it would have even more damaging consequences for the private sector:
In a dynamic economy, a business’s survival depends upon its ability to constantly cut costs and innovate. But a company forced into binding arbitration will be frozen for two years (the duration of the initial contract) from making any changes to any aspect of its business that is covered by the contract. Literally every issue — from its 401(k) contributions to its reliance on outside labor — could potentially become subject to review by a government panel that has neither the company-specific knowledge nor the incentive to turn a profit.
Businesses are not the only losers in compulsory arbitration. Currently, any contract negotiated by union officials has to be ratified through a vote of rank-and-file members. Under compulsory arbitration, workers do not get this vote. In other words, EFCA will take away the right of workers to vote to form a union, and then binding arbitration will take away their right to vote on a contract.
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