Michigan became the 24th state to establish a right to work without joining a union the other day. It’s provoked considerable discussion and debate.
I can understand why some people might be on one side or the other. What I don’t understand is how someone can support labor monopolies to obtain above-market wages in every other industry but favor government using its buying power to obtain below-market wages for everyone who works in health care.
As I wrote at Townhall last weekend, a labor union is an attempt to monopolize the supply of labor to one or more employers. The goal is to obtain above-market wages. This is almost an impossible task without private and public coercion. Without the threat of violence or without government interference, employers faced with above market wage demands will hire workers who aren’t in the union (“scabs”). Incidentally, historically the people not in the unions were disproportionately minorities and women.
Let’s suppose you think these labor monopolies are okay. Does it make any sense to take the opposite view in health care? The health care sector employs about 16 million people, or about one of every 10 workers in the economy. Only 780,000 of them are practicing doctors. The rest are nurses, paramedics, clerical workers, etc.
One of the arguments for single payer national health insurance is that if government is the only payer, it can use its bargain power to suppress heath care wages. Just as a monopolist can charge above-market prices, a monopsonist (single buyer) can pay below-market prices (or in this case, wages.) Paul Krugman, for example, thinks this is what Medicaid does and he is just fine with it. He would prefer to see the government suppress provider fees on behalf of all patients. Yet he also supports unions in every other sector of the economy. What does he have against nurses?
The New York Times editorial page is also fine with the idea that ObamaCare cuts to Medicare are going to come at the expense of health care workers. Yet the very same editorial page is incensed that Michigan passed a right to work law on the grounds that it might lower the wages of auto workers. Tell us, please, why auto workers are so much more deserving than paramedics?
The Affordable Care Act will reduce Medicare spending by $716 billion over the next 10 years. As Barack Obama and the congressional Democrats have said over and over again, this will not harm seniors. I don’t agree. Neither does the Medicare Chief Actuary. But let’s suppose for moment that the Democrats are correct. What would that mean? It would mean that the government would be using its monopsonistic buying power to suppress provider incomes.
Now for regular readers of The New York Times, you know that the paper thinks the ObamaCare suppression of provider fees is just hunky dory. So does Paul Krugman. So do almost all the commentators on the Left.
Can a union shop and right to work survive in different states in a largely free market economy? Matt Yglesias points out that the movement of labor and capital will tend to undermine union-based production, and adds:
Matthew Kahn and Erin Mansur, for example, have pretty compelling research showing that when you look at the boundary between two states with different rules in this regard that firms tend to cluster jobs on the union-hostile side of the border.
What is the right public policy toward unions? JD Tuccille argues that right to work laws interfere with the free market. I believe that Milton Friedman once made a similar argument. Tuccille quotes Gary Chartier, writing in the Freeman:
When a legislature interferes with voluntary employment contracts, it infringes people’s freedom to bargain with their own labor and possessions. Treating this kind of interference as acceptable means licensing arbitrary interventions into the market by politicians, who are ill-equipped to second-guess the decisions made by the real people making work agreements with one another.
But this ignores the fact that unions derive all their power from the ability to coerce. Without labor monopolies, right to work would be an irrelevant issue.
Postscript: See David Hendersonon the economics of right to work laws and the comments.