Organized Labor and Economics

It is a fundamental law of economics that when the price of something goes up, people buy less of it. We see it at work in many ways in our daily lives. Opponents of smoking advocate higher taxes on cigarettes so that people won't smoke as much. When the price of gas increases, people drive less.

This isn't really so hard to understand, unless, of course, you are John Sweeney and the Executive Committee of the AFL-CIO. In that case, as you see the number of union members steadily withering away year after year, you know just what to do. Raise the price.

Organized labor is in trouble. The working people of America are not buying the union product. In the last ten years, despite the fact that the economy added about 18 million new jobs, the total number of union members has declined by about 300,000. The unions' Pooh-Bahs believe that the answer to their problem is political. If they could just control the political process they could change the law so that they could corral more unwilling workers into their unions. How do you control the political process? Well, with money, of course.

Unions spend an estimated $500 million a year on activities that are essentially political in nature. That doesn't include the more than $50 million from union political action committees. For some reason, however, public attention gets focused on the millions of dollars the AFL-CIO brags about spending each election cycle in its Quixotic quest to recapture control of Congress for the Democratic Party. In 1996 it was $35 million, then in 1998 $28 million and in 2000, another $46 million. This year the AFL-CIO has budgeted another $33 million to pour down this rat hole, but the cupboard, while not quite bare, was rather thinly supplied. So the board of directors of Sweeney and Company took a look at their obsolete product, which hasn't really changed much since 1935, pronounced it to be the best in the land and decided to make up the shortfall in revenue from declining sales by raising the price.


They did this by levying an additional 4 cents per member per month assessment on unions that are members of the labor federation. Four cents per member per month doesn't sound like much, but they expect it to raise another $6 million a year. For a union the size of the Teamsters, with about 1.4 million members, it will add up to another $672,000 a year.

There is growing dissention in the ranks of the Federation's members. Much of that dissention is about their political direction. Some union officials, and apparently many union members, think that the AFL-CIO is too closely tied to the Democratic Party. Last year the Carpenters Union left the AFL-CIO complaining that the Federation was constantly hounding them for "contributions" for political causes their members didn't support. The Carpenters' departure is rumored to have cost the Federation about $6 million. If the additional assessment induces just one more union to leave the Federation, they will have to wonder whether it was worth it.

Interestingly, concern about the political direction seems to come somewhat along public sector/private sector lines. The public sector unions, seeing the Democratic Party as the party of big government, are quite content with the present direction. Opponents of the extent to which the unions are wed to the Democrats include the Teamsters, Machinists and Steelworkers, unions, which along with the building trades once dominated the Federation. But the public sector has been the growth industry for unions for the last fifty years. In 2001, despite the fact that only about one in seven jobs are in government, 44 percent of all union members are public employees.

Putting politics over economics was evident in another aspect of the story about the dues increase. News reports indicate that the industrial unions' concerns were somewhat allayed when the Federation agreed to create a new Industrial Union Council to develop a political strategy for reviving the industrial and manufacturing sectors of the economy.

There, in a nutshell, is organized labor's problem. Too much is politics and not enough is economics. Politically, they are out of step with increasingly larger segments of the electorate. Economically, they are out of touch with reality. It should come as no surprise that in an effort to gain political power to solve their economic problems they begin by thumbing their collective noses at one of the most basic laws of economics.


David Denholm is the president of the Public Service Research Foundation, an independent, non-profit organization the studies unionism and union influence on public policy.

May 23, 2002