We’ve been following here at the blog the fascinating debates in the U.S. surrounding the proposed Employee Free Choice Act, a labor law reform bill that is supported by President Obama.
You will recall that the two main features of the law would be (1) a move to a “card-check” method of determining if a majority of workers support unionization, and (2) the introduction of a process for mandatory first contract arbitration if the parties are unable to reach a first collective agreement themselves after the union is certified to represent the workers.
While the debates continue in the U.S., the opposition of a few Democrats to the law seems to have killed its chances of being accepted in Congress. It is hardly suprising that American employers went berserk at the prospects of a law that would make union organizing easier. Nothing scares the crap out of employers like the threat of a union (which, by the way, is why I have proposed elsewhere that the state harness that threat to encourage greater compliance with employment-related statutes).
But what I find very interesting about the American labor law reform debates is the complete polarization of economists into two distinct camps.
One group of economists that included big-whig classical law and economics gurus Richard Posner, Gary Becker, and Richard Epstein (here a podcast of Epstein and his take on the EFCA here) argued that the EFCA would destroy the American economy. Here’s a story about a “survey” of economists conducted by an anti-union lobby group apparently showing economists oppose the EFCA.
Another group of leading economists argued the complete opposite, that the EFCA was necessary to save the American economy. This latter group included many heavy hitters, including Nobel Prize winners Joseph Stiglitz (former Chief Economist of the World Bank) and Robert Solow.
What can explain the gaping difference of opinion among leading economists who, after all, are supposed to speak the same language and use the same analytical tools when analyzing labour markets?
I’m just a lowly lawyer, and economists have always confused me, so don’t ask me to explain. Although, I think there is some strong hints of the answer in Joseph Stiglitz’s writings. See, for example, “Employment, Social Justice, and Societal Well-Being”. Stiglitz argues that the economists in the Posner, Becker, Epstein camp have bound themselves to assumptions about how labor markets work that have no application to the real world.
Contrary to the classical economic models those economists rely on, in the real world, workers do not have near full information to make rational decisions, workers are not mobile, workers and employers do not make rationale choices driven by self-interest, and so on. Once you strip away the assumptions of the classical economic model, you are left with a model that has little predictive or prescriptive value for policy-makers.
Fascinating debates. Of course, what we can take from this fight among the economists is that economics can provide no answer to labour law debates. Economists can be found to back up any argument you want to put forward about whether unions and collective bargaining are good or bad. Just change your assumptions, alter your methodology, and “poof”, you have new “evidence” in support of whatever policy you like.
Is this an unfair assessment of economics contribution to labour law?