IV. Reforming Labor Law to Protect Worker Rights (1 of 2)

Michigan's image as a place to do business has improved in recent years as the state has reduced burdensome regulatory costs and taxes. But one major roadblock to consolidating and expanding those improvements remains: an unfriendly labor climate. Sometimes unfairly, but often with good reason, Michigan is perceived in other parts of the country as a place where labor unions wield inordinate and harmful influence. And improving the labor climate in Michigan is more than a positive economic policy approach: It is necessary to thwart abuse of the rights of Michigan workers. The following recommendations will help enforce Michigan workers' moral and legal rights as well as have a positive impact on the state's economic climate. See Chart 6.


17. Enforce the Beck rights of Michigan workers and enact "paycheck protection."

Under the 1988 ruling of the U.S. Supreme Court in Communication Workers of America v. Beck, workers are entitled to a refund of any union dues that are used for purposes unrelated to collective bargaining activities, contract administration, or grievance processing. Unfortunately, these Beck rights have gone largely unrealized because workers are unaware of them and governments have shown virtually no desire to enforce them. The result is that labor unions routinely spend half or more of their members' dues on causes and candidates that many of those members oppose.

Michigan took a limited step in this area by enacting Public Act 117 in 1994. Under this legislation, individual workers must give their consent each year before payroll deductions can be used for political action committee contributions. Full protection of Beck rights, however, would require worker approval for all noncollective bargaining-related dues expenditures.

Either by act of the Legislature or by executive order of the governor, Michigan should act to protect workers' freedoms of speech and association by enforcing the Beck decision. Requiring the posting of Beck information notices in all private-sector firms that contract with the state would be a step in the right direction. An April 1996 survey of 1,000 union members nationwide revealed that 78 percent were not aware of their right to have an independent accounting of how their unions spend their dues money and to secure a refund for that portion spent for noncollective bargaining activities.

"Paycheck protection" for all Michigan workers would put real teeth in the effort to enforce Beck rights by requiring that unions which compel dues and fees secure from each worker a prior, annual, voluntary, written authorization to use any dues for noncollective bargaining activities. Workers could automatically shield their money from noncollective bargaining activities upfront when dues are collected, instead of having to jump through hoops to recover those dues after they have been extracted.

Details about the Beck decision and suggestions for specific wording of an order to enforce it in Michigan are provided in the Mackinac Center for Public Policy study, "Compulsory Union Dues in Michigan." Information about paycheck protection is provided in the Mackinac Center report, "Paycheck Protection in Michigan."

For further information, please see www.mackinac.org/235, www.mackinac.org/1021, and www.mackinac.org/790.

18. Enact a right-to-work law.

With the September 2001 passage of a "right-to-work" law in Oklahoma, 22 states now protect the right of every worker to abstain from union membership without fear of losing his or her job. Michigan, unfortunately, is not one of those states.

The lack of a right-to-work law is a drag on Michigan's economy. While right-to-work states have a solid record of economic growth, new jobs and rising wages, Michigan's economic performance has been lackluster by comparison. According to economist and Mackinac Center adjunct scholar William Wilson, for the period 1977-99, Michigan's economy grew an average of 1.8 percent annually-well below the 3.4 percent annual growth registered in right-to-work states (see Chart 3). Only three states (Montana, West Virginia, and Louisiana) had slower growth than Michigan during this period.4

A comprehensive study in the early 1990s by George Mason University economist James Bennett demonstrated that adjusting for the cost of living, including taxes, families in the 21 (pre-Oklahoma) right-to-work states earned $2,852 more in real income per year than did their counterparts in Michigan and the other 29 states that lacked right-to-work laws.5 Between 1970 and 2000, the 21 right-to-work states created 1.4 million manufacturing jobs, while Michigan and the other states without right-to-work laws lost 2.3 million manufacturing jobs. This, in turn, led to an unemployment rate that in Michigan was 2.3 percent higher on average than in states with a right-to-work law.6 The evidence is clear and compelling: Right-to-work really means the right to work for more-more individual freedom, more jobs, and more income in real terms.

Nothing could do more for worker rights and Michigan's image and economic development than a right-to-work law. The only thing union officials have to fear from right-to-work is the free choice of the very workers they purport to help.

For further information, please see www.mackinac.org/74, www.mackinac.org/3354, and www.mackinac.org/112.

19. Pass a "Union Accountability Act."

The Michigan Public Employment Relations Act allows for the collection of mandatory union dues as a condition of employment. But government employee unions are not required to account — either to the state or to their members — for how that dues money is spent. This leaves the door wide open for corruption, as well as political spending of dues that are contrary to the interests of workers themselves. Just as publicly held corporations are required to report their financial condition, unions should be required to account for how they spend their members' money.

A "Union Accountability Act" would require unions that represent state and local government employees to file annual reports outlining their financial condition and showing the extent of their political spending. These reports would be audited by certified public accountants, using the same standards that apply to businesses. Unions that do not file accurate reports would be required to refund dues money and after a second offense would face an automatic decertification election.

A Union Accountability Act would not prevent workers from exercising their First Amendment right to support their union's political agenda, but would help citizens to "follow the money" and make it easier for those workers who oppose the union to enforce their right to not support union politics. As a consequence, workers would have the accurate and verifiable information they need to determine whether or not their money was being used wisely and to root out waste, fraud, and corruption by union officials.

The Mackinac Center estimates that government employee unions in Michigan take in over $95 million of membership dues annually. Much of this money is used for political initiatives, giving the unions tremendous clout in Lansing and Washington. Loopholes in campaign finance laws allow union officials to hide the extent of their spending.

The state of Michigan gives unions a wide range of powers, including the ability to extract forced dues. But with power comes responsibility. Officials of government employee unions should be willing to bear the burden of accounting for their expenditures as a legitimate cost of business and a natural consequence of the favorable treatment they receive under current law.

For further information, please see www.mackinac.org/3944 and www.mackinac.org/4113.

20. Create a "Teacher Bill of Rights."

Gov. Engler, in a major address to the Legislature in October 1993, stated that no teacher in Michigan should be coerced into joining and paying dues to a union. Unfortunately, a coercive employment situation persists for most Michigan public school teachers. Therefore, it's high time for the Legislature to pass, and the governor to sign, a "Teacher Bill of Rights" that would make exclusive representation optional for each individual teacher in Michigan and remove unions' duty of fair representation toward any teacher who opts out of his or her workplace union.

The monopoly bargaining privilege of the Michigan Education Association (MEA) and the Michigan Federation of Teachers (MFT)-afforded by Michigan's existing Public Employment Relations Act (PERA)-is the basis of the power of these two labor organizations to prevent teachers from negotiating their own terms of employment. As the exclusive representative, school employee unions inevitably end up bargaining education policy with local school boards and state government. The interests and objectives of individual teachers are often subordinated to the "collective whole" even when the individual teacher's employment opportunities may suffer as a result.

Accordingly, current legal requirements that force teachers to accept union membership or pay dues or fees as a condition of employment should be repealed. PERA should be further amended to permit unions to represent only those teachers who affirmatively elect such representation in writing. Employees who do not agree to such representation should be permitted to negotiate for themselves.

Under a Teacher Bill of Rights, teachers would be allowed to opt out of the bargaining unit and negotiate their own wages, benefits, hours, and other terms of employment. Unions would owe no duty of fair representation to any teacher who elects independent (non-collective bargaining) status, but would be prevented from discriminating or retaliating against any teacher on the basis that he or she has elected not to join or be represented by a union.

Relieving unions of any legal duty toward non-members eliminates their claim that they are forced to represent all without being compensated for their services-the so-called "free rider" argument. Forced dues would neither be needed nor allowed.

A Teacher Bill of Rights would allow teachers to act autonomously, getting the best deal for their services as independent professionals or joining a union when they believe it is in their best interest to do so. This freedom will bring new dignity to the teaching profession in Michigan and appropriately reward the skilled teachers who should be free to negotiate for the value of their specialized expertise.

For further information, please see www.mackinac.org/1660.

21. Remove the state government's ability to act as a union collection agent for union political funds.

If workers' wages are the source of union funding, then employers are the pipes that convey the flow of dues to labor organizations. Payroll deduction is a convenient and popular method of funds collection that springs from a contractual provision between the union and the employer. Without such an agreement, unions would bear the burden of collecting funds from their memberships after the money has made its way into workers' pockets. This would require union collection agents to persuade members to consciously and voluntarily part with their hard-earned money.

The state has a compelling interest to remove partisan politics from government workplaces. One solution, the banning of "wage check-offs" for political purposes, has withstood judicial scrutiny. Political action committee (PAC) funding is already regulated in Michigan: Public Act 117 of 1994's ban of "reverse check-offs" (which stipulate that a worker must take action if he does not want political contributions deducted from his paycheck) and requirement for annual, worker consent of PAC payroll deduction authorizations were significant steps toward greater worker freedom and union accountability. According to the Michigan Chamber of Commerce, after union legal challenges resulted in Public Act 117 being upheld in court, worker contributions to union PACs declined in 1998, indicating many workers' desires were previously being thwarted. The Legislature should build on these reforms by prohibiting government collection of all political funds via payroll deduction.

Prohibiting political payroll deduction would serve three additional purposes. First, it would afford greater protection of workers' free speech rights by returning direct control over disbursement of union political funds to the wage earner before it goes to union coffers. Second, it would compel unions during collection periods to persuade their members that the unions' political expenditures properly represent the political views of their memberships. Third, it would save Michigan taxpayers the cost of having the government acting as the dues collector for unions, which are private enterprises and ought to absorb such costs themselves.

See Chart 4 for an illustration of PAC contributions.

22. Repeal the Prevailing Wage Act of 1965.

Imagine a law that subsidizes the well-off, discriminates against large segments of the workforce, wastes tens of millions of dollars every year, and hurts the competitiveness of Michigan businesses. Unfortunately, there is no need to imagine such a law: Those are the effects of the Michigan Prevailing Wage Act of 1965. It is a classic case of special-interest legislation that benefits a narrow few at the expense of the many.

The act, which covers construction projects in Michigan that receive full or partial funding from the state, requires workers to be paid "prevailing" wages and benefits.7  In practice, this invariably means the rates fixed in local collective bargaining agreements-in other words, union wages and benefits. The competitive compensation packages established by nonunion contractors and their employees-who make up almost two-thirds of Michigan's construction workforce-simply are ignored in determining "prevailing" rates. Less expensive nonunionized firms, along with their competent and qualified workers, are effectively frozen out of work on a host of projects from school construction to road repair. In a Mackinac Center report, Ohio University professor of economics Richard Vedder estimates that Michigan's prevailing wage law increases the cost of construction on applicable projects by at least 10 percent.8 That means the Prevailing Wage Act cost Michigan taxpayers an extra $421.2 million in 1999, an amount equal to 6 percent of the revenue generated by the state's income tax on individuals.9

The prevailing wage law also reduces employment in construction. Between December 1994, when the law was found to be pre-empted by federal law, and June 1997, when the law was reinstated, Michigan saw construction employment rise by 17,600 jobs, compared to only 4,000 jobs that opened up in the period immediately prior to the court decision that temporarily struck down the law.10

The Legislature should apply common sense and sound economics by repealing this costly special-interest legislation. At the very least, it should follow the example of the Ohio Legislature, which in 1997 exempted public schools from having to pay the excessive costs mandated by that state's prevailing wage law. Hillsdale College economist Gary Wolfram estimates that by following Ohio's example, Michigan would save over $150 million in school construction costs annually.11

The evidence on employment and construction costs shows that the state prevailing wage law has adverse consequences. The Legislature would do well to repeal it.

For further information, please see www.mackinac.org/2380.