Unions remain a force to be reckoned with in Michigan's economy and government. Granted, union membership in Michigan (and the rest of the country), has been slipping, with the number of Michigan workers covered by union contracts falling from more than 1 million in 1997 to just 878,000 or so in 2006. Still, the 2006 figure represents slightly more than one-fifth of Michigan's work force, and our state remains one of the most heavily unionized in the country. Only Alaska, Hawaii, New Jersey, New York and Washington State have higher percentages of their work force covered by union contracts.[1]

Michigan workers have the right to expect that their unions will use their dues money to provide them with quality representation in the workplace. Whether through collective bargaining or pursuing grievances, unions are expected to protect workers and win for them the advantages of fair wages, generous benefits and safe working conditions.

Michigan's policy for decades has been to promote unionization and to ensure that unions have a steady stream of resources, in particular by allowing for the enforcement of "agency fee" clauses in collective bargaining agreements. These clauses mandate that all workers covered by the contract must either join the union or pay an agency fee equivalent to regular membership dues. While individuals can legally protest their agency fee payments that exceed a pro-rata share of the cost of representation, this process has proved to be convoluted and difficult to enforce. As a consequence, a union will generally receive the full dues amount from all workers it represents, whether individual workers are satisfied with the union's representation or not.[2]

At a minimum, this provision for a guaranteed revenue stream ought to have some basic responsibilities attached to it — namely that union officials will not abuse the privilege of collecting mandatory dues, and that their operations will be efficient and focused on providing effective representation. This responsibility to use mandatory dues wisely is grounded not in free-market theory — forced support of a private organization is contrary to a free economy — but in basic morality that should be recognizable to all regardless of ideology. Agency fees are permitted because it is widely believed  that unions need these funds to represent workers in the workplace; unions bear the responsibility of using these funds for that end and doing so thriftily. The same basic principle applies to government officials and the use of tax funds; tax money is to be used for public purposes, not the personal interests of government agents. Whether the source is taxes, dues or agency fees, misuse or excessive waste is a betrayal of trust.

For most of the period in which the National Labor Relations Act has been in effect, lax union financial reporting standards made it difficult to assess whether or not union officials met their ethical obligation to use union dues and agency fees, misuse or excessive waste is a betrayal of trust.

For most of the period in which the National Labor Relations Act has been in effect, lax union financial reporting standards made it difficult to assess whether or not union officials met their ethical obligation to use union dues and agency fees for the benefit of the men and women they represent. The LM-2, LM-3 and LM-4 forms required by the Department of Labor under the Labor-Management Reporting and Disclosure Act contained minimal financial information and, aside from officer compensation, said almost nothing about how unions spent their dues money.

This flaw was at least partially corrected by new LM-2 forms and rules issued by the U.S. Department of Labor in 2003. These new LM-2 forms, which cover the operations of nearly all international, national and regional union organizations, as well as many larger union locals, call for the itemization of union expenditures larger than $5,000, as well as a categorization of all union spending into functional categories such as representation, politics and lobbying, grants and charitable programs, overhead and administrative expenses. In addition, union officials and staff are expected to account for their own time using these same functional categories. While the new LM-2 forms and rules are not perfect, they do provide workers, employers and citizens with valuable knowledge of union operations and spending.

As a consequence, the residents of Michigan, a state with some of the most powerful unions in the nation, are in a better position to determine for themselves if unions are using their dues and agency fees appropriately. Are unions acting as responsible stewards of the mandatory dues money that they collect from the men and women they represent? Are unions in Michigan and around the nation focused, as they ought to be, on workplace representation? Are unions efficient or wasteful? In an attempt to answer these questions, we have carried out a systematic review of LM-2 reports filed for fiscal year 2006 by unions with a significant presence in Michigan.

Our examination of LM-2 reports indicates that a relatively small amount of union dues money is actually used for representing workers. While we cannot say for certain that a large proportion of union dues goes into political activism, there are indications that funds supposedly allocated for representation or charitable activities are instead redirected towards political or social activism on matters far removed from their members' workplaces. At best, the picture that emerges from many LM-2 forms is of bloated, directionless union organizations with excessive overhead and administrative costs.

These findings call into question the entire rationale behind the state's policy of allowing unions to negotiate for agency fee clauses in collective bargaining agreements. Even if one accepts the argument that it is appropriate for individual workers to be forced to support a union in order to ensure that said union has the resources it needs to be an effective representative, it is not at all clear that Michigan unions actually need all the money they receive in mandatory dues in order to represent those workers well.

[1] Hirsh, Barry, and Macpherson, David, Union Membership and Coverage Database, available online at: bhirsch/unionstats/.

[2] For a more thorough discussion of the agency fee, see Hunter, Robert, Compulsory Union Dues in Michigan, The Mackinac Center for Public Policy (1997) Online at: article.aspx?ID=235.