Still engaged in an atavistic class struggle, organized labor operates as a monopoly—long outlawed in every other sphere of the economy
This essay originally appeared in Law & Liberty on February 5, 2020 (here)
On January 1, a law took effect in the union stronghold of California that poses a dire threat to the so-called “gig economy,” by drastically restricting the use of independent contractors, upon which many tech companies depend. The law, referred to as AB 5, was apparently directed primarily at transportation network companies such as Uber and Lyft, which treat their drivers as contractors instead of employees. AB 5, which was promoted by labor unions wishing to organize the drivers, sought to remove the legal impediment of IC status by effectively banning the use of contractors in California. Instead of forcing Uber and Lyft to capitulate, as intended, the overly-broad law has backfired by also threatening long-established practices in the trucking industry, and even the livelihoods of free-lance writers in the Golden State.
Lawsuits, adverse publicity,
and even referendum campaigns to repeal the law have engulfed AB 5 in
controversy and turmoil. Now in a national media spotlight, the California
Labor Federation is pledging a full-blown war to defend AB 5, which unions hail
as a significant worker victory. How did
organized labor become embroiled in mortal combat with Silicon Valley? The
answer lies in the “class struggle” origins of the labor movement, which seem
oddly out of date in a 21st century digital economy.
The Industrial Revolution
occurred over a century ago, but the archaic Marxist rhetoric once in vogue as
a reaction to the emergence of factories continues to inspire the labor
movement in America. Although the percentage of the private-sector workforce
represented by unions has declined to the lowest level since the passage of the
National Labor Relations Act in 1935–from a high of about 35 percent in 1954
to less than seven percent (6.4%) at present—unions maintain substantial
influence due to their ability to spend members’ dues and mobilize them as foot
soldiers in political campaigns. A few non-right-to-work states, including
California, account for a disproportionate share of unionized employees.
The free market system rests on economic competition, enforced through Progressive Era antitrust laws– from which labor unions are inexplicably exempted. Collusion and price-fixing by corporations are severely punished, yet represent the theoretical foundation of the labor movement: collective bargaining and “exclusive representation” are the hallmark of the NLRA. Unions essentially operate as labor cartels, prohibiting dealings between employers and individual employees, and restricting competition among workers. In a recent article for the peer-reviewed journal The Independent Review, entitled “The Exploitation of Labor and Other Union Myths,” I explain how organized labor perpetuates the myth that employees are necessarily “exploited” by corporate employers.
This myth, which was the central premise for the New Deal-era NLRA, rests on the notion that individuals are always at an unfair disadvantage when engaged in commerce with a corporation. Because corporations are composed of shareholders (making them “combinations of capital”), union advocates contend that employees must be allowed to organize into bargaining groups—cartels, in economic terms–to maintain a fair balance. Otherwise, the inherent “inequality of bargaining power” between employee and employer would supposedly result in the “exploitation of labor.” All workers, no matter how skilled or well-educated, are helpless serfs. This is a superficial—and discredited—view of the economy.
Through withering
competition, large corporations such as Walmart and Amazon have dramatically reduced
the cost of consumer goods. The imagined “disparity in bargaining power”
between individuals and businesses simply does not exist in a competitive
market. Digital platforms (such as Airbnb, HomeAway, and VRBO), smart phone
apps, and e-commerce have revolutionized the delivery of goods and services,
creating unprecedented flexibility and convenience for both buyers and sellers.
Disruption abounds. Unlike the situation in 1935, when the NLRA was enacted, relatively
few workers are employed in factories, and many telecommute. The nation is no
longer reeling from a Great Depression; unemployment is at a record low. Untethered
from rigid constraints imposed by antiquated legal restrictions (such as wage
and hour rules), workers in the gig economy have the opportunity to set their
own hours and to decide when, where, and for whom to work. Employers must compete
for qualified workers, and frequently offer lavish benefits. Even fast food
jobs often start at a higher pay level than the minimum wage.
Most drivers for companies
such as Uber and Lyft prefer the autonomy conferred by contractor
status. On-demand workers do not consider themselves helpless, “exploited,” or
needing union “protection.” They want to be left alone. Nonetheless, AB 5 would
force all contract drivers to become employees, allowing unions potentially
to represent them (and compel the payment of dues as a condition of
employment), while sacrificing their independence and limiting the
transportation options of millions of Americans who have grown to rely on them.
As the legal and political
showdown over AB 5 plays out during 2020, one is entitled to question whether
labor unions are outmoded institutions, standing in the way of progress.