by
Professor of Economics and
Director of The Smith Center California State University, Hayward.
cbaird@csuhayward.edu
I speak this morning against AB 931 and AB 921. As an economist who specializes in the law and economics of labor relations, I regard both bills as unwise attempts to favor unionized labor over union-free labor by restricting the ability of union-free labor to compete. As a result these bills will drive up labor costs, reduce jobs and harm consumers. The simple fact is that unionized labor is a declining institution,. In 1998 unionized labor made up only 9.4 percent of the U. S. private sector workforce, and that number continues to fall across the country. By the end of the year 2000 it will be close to 7 percent - about where it was in 1900. Unionized labor, in California as well as in the rest of the nation, is incapable of competing successfully with union-free labor without special privileges granted by government.
The National Labor Relations Act model of unionism is an unfortunate hangover from the 1930s. Workers and employers who are encumbered by this model have, and will continue to have, serious competitive disadvantages in the modern, rapidly changing economy. This Legislature seems determined to put off the unions' day of reckoning. It has tried to so by renewing the outmoded 8 hour per day standard for overtime pay, and it seems poised to do so again with these two bills. I think this is regressive legislation. A progressive Legislature would seek to foster competition, not restrict it. Throughout history general economic welfare has benefited from competition and the innovations that competition brings. These bills do not promote the general welfare. To the contrary, they promote the welfare of a tiny minority of workers and unionized firms at the expense of the general welfare.
AB 931 would require the state Division of Apprenticeship Standards "to establish and validate minimum standards for the competency and training of electricians through a system of testing and certification." Electricians are defined to "include all employees who engage in the connection of electrical devices for [licensed] electrical contractors." In brief, it is a bill to license electricians on union terms. AB 921 would give unions almost monopoly control over apprenticeship training.
The proponents of licensing electricians argue that tighter control over electricians is required because "improper wiring can lead to electrical fire and is a danger to consumers and workers." However, only 1 to 2 percent of fires in California are electricity-related; and, according to Ron Coleman, the former State Fire Marshall, the overwhelming majority of those fires are due to faulty equipment , not to faulty installation. Moreover, the safety records of union-free electricians are just as commendable as those of unionized electricians. When it comes to fires, AB 931 is a solution in search of a problem.
The actual problem it addresses is the unions' declining market share. The minimum standards for competency and training of electricians will be those imposed by unions in their apprenticeship programs. That is, union-free electricians will in effect be forced to be approved by the unions before they can practice their trade. The unions impose far higher standards than are required for safety reasons. Their standards are imposed in a shameless attempt to restrict the supply of electricians relative to the demand for them in order to keep wages above competitive levels. Union-free contractors can often outbid unionized contractors because they pay competitive wages rather than artificially high wages. Unions figure that if they can gain control over the supply of union-free electricians they can erase that competitive advantage.
The unions' declining market share proves that without special favors from the Legislature and a complicit governor, unions cannot compete. But the Legislature ought to be concerned with the general welfare of all Californians. It ought not to be engaged in handing out special favors to very few, but politically organized, Californians
It should be obvious to anyone that consumers will be harmed by the imposition of above-market wage rates in the construction industry. On an individual consumer basis it may increase housing costs by a few thousand dollars, to say nothing of houses that will never be constructed because of union-imposed excessive costs. But to the unions it means hundreds of thousands, even millions, of dollars added to union coffers because of their increasing monopoly power over construction workers. I can understand politicians' susceptibility to union blandishments. Unlike unions, consumers are not organized for lobbying. Public choice theory tells us that politicians, whose principal interest lies in getting and keeping political power, naturally pay more attention to the interests of those organized to contribute manpower and cash support to their electoral campaigns than to the interests of unorganized labor and consumers.
AB 921 would insure that unions have unbreakable control over the California Apprenticeship Council that sets requirements that must be met by any contractor bidding on California public works projects. Existing law stipulates that the Council be made up of representatives from employer and employee groups, not just those with joint apprenticeship programs. The bill requires that the Council be made up of representatives from employer and employee groups that have joint apprenticeship programs. Unions and unionized contractors control most joint apprenticeship programs. Moreover, the bill's requirement that the programs "ensure meaningful and trustworthy representation of the interests of employees" almost guarantees that approved programs will be limited to union programs. In the 1992 Electromation case the National Labor Relations Board (NLRB) ruled that any form of labor-management cooperation that is not union-management cooperation amounts to an illegal company union. To the NLRB, meaningful representation means union representation. Thus the guiding principal of the newly constituted Council will be to serve the interests of unions, not the interests of all labor, all contractors, and the general public.
Public choice economists call the process by which politicians are enticed into handing out favors to special interests at the expense of the general welfare in return for cash and in-kind electoral support, "politics as exchange." I prefer to call it malice in plunderland. AB 931 and 921 illustrate what Ambroce Bierce meant when he wrote that "Politics is a strife of interests masquerading as a contest of principles." It is a fun game, profitable to its players, but it is not what this Legislature, or any Legislature ought to do.
Thank you.