President Obama says the big problem in Washington is that politicians focus on pleasing special interests at the expense of the general public. But his curious definition of “special interests” exempts one key political force: organized labor.
Even during a recession, the public is ambivalent toward organized labor. In September, a Gallup poll found that 48% of Americans approved of unions. This was an 11-point drop from the previous year’s approval rating and the lowest recorded since Gallup started asking the question in 1936. In 2008, just 12% of all workers belonged to unions, and the number of unionized private-sector employees was even smaller, at 7.6%.
So why, then, does organized labor hold more political power today than it has in decades?
In part, it’s thanks to Obama. The president has put on his Santa Claus cap and lavished unions with gift after gift. Days after taking office, he issued three executive orders reversing Bush-era labor policies. In February, he approved a stimulus bill that contained “buy American” provisions. In a move that would have made Jimmy Hoffa proud, the $400-billion omnibus spending bill that Obama signed into law in March eliminated funding for pilot programs allowing Mexican trucks in the United States as mandated by the North American Free Trade Agreement.
In June, the president oversaw a restructuring of General Motors that left the UAW owning 17.5% of the company. The union is GM’s second-largest shareholder (the largest is Uncle Sam). Early in September, in a speech to the AFL-CIO convention in Pittsburgh, Obama said he was “standing behind” the Employee Free Choice Act, which would make it easier for workers to organize by seriously diminishing the secret ballot in union elections. And on Sept. 11, the president imposed a 35% tariff on Chinese tire imports, a policy straight from the wish list of the United Steelworkers.
Now, a cynic might say that Obama feeds labor a steady diet of goodies in order to secure its backing for healthcare reform, or maybe to reward it for its efforts in the 2008 election. But it’s just as likely that Obama thinks higher unionization will lead to middle-class stability.
The problem with this argument is that despite the recession, the middle class has done pretty well during the period of low unionization. Don’t take my word for it. When Obama’s budget director, Peter Orszag, ran the Congressional Budget Office, he released studies that showed the average income of the poorest families grew by 35% between 1991 and 2005, and there was no substantial income volatility recorded between 1980 and 2003.
The costs of a heavily unionized workforce outweigh the benefits. Organized labor often politicizes the workforce and hinders economic efficiency. Once a workplace is unionized, it’s more difficult to fire unproductive workers, and thus a lot harder to hire good ones too. In their new book, “Rich States, Poor States,” Arthur Laffer, Stephen Moore and Jonathan Williams rank all 50 states based on economic performance over the last decade. Seven out of the 10 best performing are right-to-work states. Eight of the 10 worst performing are not.
Nor is it an accident that as union membership has declined, global markets have become increasingly integrated and the price of consumer goods has fallen. Unions seek to close markets in order to bid up wages. This is good for the union members but lousy for the rest of us, because it means we pay higher prices for the stuff we buy at the mall.
When union membership was at its height in the 1950s, the American economy was highly regulated and dominated by men in gray flannel suits who worked at corporate behemoths like GM and GE. Today, union membership is at a low, and the global economy encourages diversity, individuality, adaptability and innovation. Not only U.S. citizens but people around the globe are richer. They live longer. They have more options than ever before. Would we really want to trade all this for a 1950s-style economy?
The best thing Obama could do for the middle class is to pursue economic policies that create jobs.
Unfortunately, he’s been doing the exact opposite by playing to organized labor. The rest of us will foot the bill.