Thursday, January 24, 2013

Union membership declines and merit becomes more important

Union membership among American workers has tumbled to a new low, 11.3% overall and only 6.6% in the private sector. As recently as 1983, the combined rate was over 20%. And, of course, query whether public employee unions are really unions, per se, or political pressure groups out for their own share of the taxpayer's dime in return for votes and money.

If you are wondering whether collective bargaining is a good thing or not in any particular situation, ask whether individual merit and performance are important to the job in question. Why? Because unionization and collective bargaining, on the one hand, and pay for performance, on the other, are fundamentally incompatible.

In the vast majority of jobs, only the boss has both the interest and ability to measure an employee's relative performance. The boss's necessary power to assess individuals, compensate them differently, and fire under-performers means that different employees have highly divergent interests vs. the employer, and that is incompatible with collective bargaining. When faced with the choice to unionize, therefore, every employee with a ballot ought to ask whether individual performance is important to the long-term health of the employer and therefore the durability of his or her own job. If individual performance is important, then the employer will not thrive (and may not survive) with a union because collective bargaining cannot coexist with different pay and opportunities for employees who perform differently.

Because they cannot attract and retain employees who want to be rewarded more for doing a better job, the only way that unionized businesses can survive over the long term is if they have no competition from non-unionized firms. In today's world, the only way a business can limit competition is to persuade some government to impose barriers to entry or even to grant it a monopoly. It is for this reason that the union movement, crony "capitalists," and the statist left make common cause.

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