In Wake of Daimler-Chrysler Merger, Michigan Needs Labor Law Reform

If the generally favorable consensus proves correct, the recently announced merger between automakers Daimler-Benz and Chrysler Corporation will be a positive development for Michigan. But if we want Daimler-Chrysler and other companies to bring their jobs and opportunity here in a big way, Michigan must work harder to ensure a business climate second to none in its long-term potential.

Other states—including twenty-one with right-to-work laws—have an advantage over Michigan, which is burdened by its policy of compulsory unionism. To make Michigan more competitive, policy makers must undertake positive reforms to free the state’s labor market from cumbersome handicaps. This summer’s General Motors strike and the negative message it sends around the nation only underscores this point.

In many respects, Michigan’s labor laws do compare favorably to those of Germany, the home of Daimler-Benz. German businesses must abide by numerous costly regulations and mandates we don’t have here. Firms located in Germany, for example, must provide all employees with 20 days of paid leave and sick pay equal to 80 percent of compensation—costly benefits that are a major reason for Germany’s chronically high unemployment. But Daimler-Chrysler won’t have to locate new production facilities in either Germany or Michigan; it can shop around for sites almost anywhere.

Michigan government officials should implement three key reforms that would increase the state’s competitiveness and heighten its attractiveness to expanding international firms. They are as follows:

Pass Right-to-Work legislation. Twenty-one other states currently enjoy right-to-work laws, which prohibit mandatory membership in a labor union as a condition of employment. Daimler and BMW each chose right-to-work states for their first American production plants. Likewise, General Motors established its Saturn operation in right-to-work Tennessee. A 1994 National Institute for Labor Relations Research study verified the advantage that right-to-work states have over states with more restrictive labor laws when companies are looking to build new facilities.

Workers clearly benefit from the law as well. Bureau of Labor Statistics data confirm that manufacturing jobs in right-to-work states exploded by 493,300 over the last 16 years, while states without right-to-work suffered a loss of 1,063,200 jobs. A study by economist James Bennett reveals that, on average, families in right-to-work states enjoy $2,852 more in after-tax purchasing power than their counterparts in non-right-to-work states.

A right-to-work law would accomplish two additional goals. First, it would enhance workers’ political and economic freedom by providing an alternative to forced union membership and making unions accountable to the employees they represent. Second, it would encourage the flexibility in labor relations that is not only attractive to employers, but a "must" for many.

Publicize and enforce workers’ Beck rights. Absent a right-to-work law, the second-best alternative is to expand employee rights by publicizing and enforcing their Beck rights. The U. S. Supreme Court’s 1988 Beck decision established the right of workers to refunds of that portion of their dues spent on the union’s political or ideological activities, but it has not been widely enforced. An Executive Order by Governor Engler could further awareness of Beck rights among workers and protect forced dues payers from political exploitation. Enacting a "paycheck protection" law requiring unions to obtain written consent before they can use their members’ dues for political or ideological purposes would be a further step toward union accountability and responsibility.

End union abuse and manipulation. Confronted with declining membership, unions have turned to the practice of "salting" to expand their ranks. Salting occurs when a union recruits pro-union workers to apply for positions in non-union firms with the intent of either organizing the firm after the applicant is hired, or crippling the firm by peppering it with unfair labor practice charges if the applicant is rejected. Michigan companies have spent tens of thousands of dollars in attorney fees as a result of this practice. Salting is a union terrorism campaign that creates a hostile environment for businesses. This abusive practice should be ended.

Michigan will compete with its fellow states and the nations of the world for investment capital in the 21st Century. Adopting these reforms will enable it compete on solid footing by restoring freedom to Michigan’s workers and requiring accountability from its unions. Michigan must take these bold steps today to ensure its competitiveness for job-creating investment tomorrow.