Last week an eye-opening study by economist Dr. Anne Layne-Farrar was released concerning the possible impact of the Employee Free Choice Act on unemployment. As unemployment in the U.S. topped 8% last week, the study’s findings might give lawmakers pause before embarking on a major rewrite of American labor law.
The bottom line of the study is clear and stark:
The precise effect on unemployment will depend on the degree to which EFCA increases union density, but for every 3 percentage points gained in union membership through card checks and mandatory arbitration, the following year’s unemployment rate is predicted to increase by 1 percentage point and job creation is predicted to fall by around 1.5 million jobs. Thus, if EFCA passed today and resulted in an increase in unionization from the current rate of about 12% to 15%, then unionized workers would increase from 15.5 to 19.6 million while unemployment a year from now would rise by 1.5 million, to 10.4 million. If EFCA were to increase the percentage of private sector union membership by between 5 and 10 percentage points, as some have suggested, my analysis indicates that unemployment would increase by 2.3 to 5.4 million in the following year and the unemployment rate would increase by 1.5 to 3.5 percentage points in the following year.
The study explains that by increasing unionization, EFCA will have an adverse impact on current and future employment:
I find that, while card check union certification backed by mandatory two-year “contract” arbitration could be expected to increase union membership as hoped by EFCA proponents, EFCA is unlikely to achieve its main goal of improving social welfare, which should take into account possible consequences not only for union members but for all other individuals, because the proposed rules would likely have detrimental effects on the unemployment rate and job creation. These are two adverse effects that America can ill afford at any time, but especially at this time of recession. … Starting from the finding in the literature that card check systems increase in union density in comparison to an election system, I demonstrate empirically that an increase in union density this year would lead to an increase in the unemployment rate and a drop in the job creation rate in the following year.
The study also disputes a central premise of EFCA, namely that employers’ purported illegal tactics have prevented employees from unionizing. In fact, unionization has been decreasing worldwide and “there is ample evidence that modern employees have an array of likes and dislikes that differ significantly from past generations such that workers have found it less attractive to join unions than they have in previous years.” Dr. Layne-Farrar notes that other studies have already undercut the argument that alleged unfair labor practices by employers impede union organizing attempts.