It’s time to unleash the power of the U.S. economy and the American worker, not double down on broken labor laws.
by Eli Lehrer, President, R Street Institute (April 30, 2021)
For the past few years, organized labor has sought to overhaul America’s labor relations laws through the PRO Act, which followed in the footsteps of the narrower—but still harmful—state predecessor in California, AB5. Labor unions viewed that state law, which largely forbade companies from using contractors as their workforce, as a model for the nation.
Were it to become law, the PRO Act will likely be the most consequential labor relations-related piece of legislation in years.
The R Street Institute is not opposed to organized labor. In fact, we have partnered with some of the most successful labor organizers around. We believe society would benefit from more employee-representation at work. We were the first group on the political right to propose and support a specific plan to provide a benefits system and enhanced workplace protections for gig workers, which bears strong similarity to one that a very large “gig” work provider proposed a few years later.
But as an organization that is also grounded in research supporting free markets and limited government, we think that the PRO Act is not good policy. It would damage our economy, restrict worker choice and nationalize the unintended consequences of California’s misguided attacks on innovative working arrangements. The timing couldn’t be worse, either, as Americans need more opportunities and flexibility to recover from the pandemic, not new burdens for workers and entrepreneurs alike.
There are three major problems with the PRO Act our research focuses on:
- The PRO Act would limit business opportunities and worker flexibility, dampen innovation and damage the American economy: The PRO Act will force employee status on workers who don’t want it and firms that do not want to provide it. Contrary to memes popular on both ends of the political spectrum, gig work is not becoming more common and full-time jobs are not going away. In fact, full-time jobs with large companies are becoming more common, while part-time work, gigs and employment by very small firms is shrinking. This lack of gig jobs has contributed to declining male workforce participation, which is a major problem. But the overwhelming majority of gig workers want more options than what full-time employee status provides. The PRO Act would erase much flexibility, and many individuals who rely on “gig” jobs for extra income or a safety net between jobs would probably be shut out altogether.
- The PRO Act would not fix right-to-work laws: Labor unions have a point when they point to the injustice that right-to-work laws present: employees in right-to-work states can benefit from union contracts without paying anything. The problem is that essentially abolishing right-to-work laws—which is what the PRO Act aims to do—punishes some workers for a broken system. We need a new system that makes dues optional for all workers while simultaneously allowing unions to tap other sources of revenue, organize in new ways and explore innovative business models. Ideally, employees should not be forced to support an organization they do not want to and unions shouldn’t need to represent workers who don’t want their services.
- The PRO Act would double-down on an outdated and broken business model: No matter how much some politicians might try to boost union membership, private sector unionism has been on the decline for decades. While some public policies certainly have made things harder on unions, the underlying reason for unions’ decline are myriad and complex. Nearly every important aspect of unions’ ways of doing business comes from federal statutes developed at least a half century ago. What operation anywhere could succeed if it were required to follow business practices developed by politicians in the 1930s? A look at New York State shows just how much unions are struggling under existing laws: it has one of the highest existing union densities in America, unified Democratic control of state government, some of the country’s few remaining pro-union Republicans, and, under the Obama administration, enjoyed a federal Department of Labor solicitous to unions’ desired policies. And even there, unionization declined almost 10 percent between 2010 and 2020. For America to remain competitive on a global scale, we need to experiment with our labor law, not continue to support an outdated system.
- The PRO Act also uses the same disastrous “ABC test” as California’s Assembly Bill 5 (AB5), although the federal bill uses the test for collective-bargaining rather than worker-classification purposes. In California, this test inhibited the ability of people to work as contractors; ultimately 100 professions had to be exempted because of the harm the law caused. Further, voters overwhelmingly approved a proposition to exempt ride-sharing drivers, among others. But the exemptions don’t always work as planned, and some professions were left in the lurch. For example, there’s a Facebook group full of stories of vulnerable people losing their livelihoods. With sufficient protections, something resembling the ABC test could have value in defining groups of people eligible to form recognized worker organizations. But for this to happen in a way that works for everyone, the law would also have to include numerous worker protections for those who didn’t want to join such organizations, change some existing laws, and define a “third status” of worker. As it stands, we fear that the inclusion of the “ABC test” in federal law for the first time means that courts and Congress eventually will expand its application—and that the PRO Act is a slippery slope moving toward destructively limiting worker choice.
New models for labor organizations make sense, but the PRO Act is the lawmaking equivalent of rearranging deck chairs on the Titanic. As such, any good proposals within the package are overwhelmed by the bad ideas bundled with it. Organized labor needs a new beginning, but the PRO Act would be a step backward.