Government Mediation and Wage Setting - in 2008

A lesser known provision of the Employee Free Choice Act, described beautifully here, would allow government to mediate contract disputes between labor and management if they don't come to agreement fast enough - 90 days. And if another 30 days of mediation doesn't produce, government can go ahead and fix wages as it sees fit.

If you think unions wouldn't welcome this, you haven't thought hard enough about their corporatist tendencies. And when companies complain? Subsidies to shut them up. Of course they would come with price controls, but that's OK. Then we just have full blown corporatism.

Here is the relevant section of the bill, with my emphasis:

(2) If after the expiration of the 90-day period beginning on the date on which bargaining is commenced, or such additional period as the parties may agree upon, the parties have failed to reach an agreement, either party may notify the Federal Mediation and Conciliation Service of the existence of a dispute and request mediation. Whenever such a request is received, it shall be the duty of the Service promptly to put itself in communication with the parties and to use its best efforts, by mediation and conciliation, to bring them to agreement.

(3) If after the expiration of the 30-day period beginning on the date on which the request for mediation is made under paragraph (2), or such additional period as the parties may agree upon, the Service is not able to bring the parties to agreement by conciliation, the Service shall refer the dispute to an arbitration board established in accordance with such regulations as may be prescribed by the Service. The arbitration panel shall render a decision settling the dispute and such decision shall be binding upon the parties for a period of 2 years, unless amended during such period by written consent of the parties.

Lets sum up: if after 90 days the union doesn't want to give in to the company, the union may call in the government in the form of a Federal Mediation and Conciliation Service. They may then filibuster for another 30 days until that Service sets the wages, benefits, hours and so forth for them. The government shall render a decision binding upon the parties. It is binding initially for two years, at which point the process can begin again.

This effectively removes any market mechanism from any industry in which unions are able to entrench themselves. If unions gain power in a given industry (and they will find it easier without the secret ballot) they will be able to leverage government for their purpose. At that point, it will be simple to obtain compensation far exceeding the workers' worth; this will threaten to bankrupt firms so they will complain to government; government, wanting to please everybody, will offer subsidies and price controls; and we will have corporatism.

Note that once a union has taken hold at a firm, even if the union doesn't want mediation, the firm may, and so the firm can be the one to filibuster. Some firms, especially inefficient ones which are having a hard time competing, will decide that it would be better to have government step in - especially if they have a friend in congress. They may then set unrealistic demands and hold out for arbitration. This could provide an easy way to introduce new subsidies and regulations for corporations currently missing out.

Why the gloomy outlook? Perhaps government will simply arbitrate effectively between two parties, such that wages will reflect worth and no subsidies or controls will be necessary!

This might be possible if there were no rent-seeking by unions or firms or if politicians didn't or couldn't reward it. However, such behavior will be rewarded if reality is any guide.

So efficient firms with low cost and potentially low paid (perhaps unskilled) workers, if unionized, will be at the mercy of the union which can choose to filibuster until government steps in on its behalf; and inefficient firms can make wild demands of labor until government steps in, at which point it can wield its big corporate power and lobbying influence to extract subsidies from the taxpayer. If you don't think this would be a big step toward corporatism, you haven't been reading this blog enough!