MCGOVERN GETS ARBITRATION WRONG

http://www.prospect.org/csnc/blogs/tapped_archive?month=05&year=2009&base_name=mcgovern_gets_arbitration_wron

George McGovern, former Democratic presidential candidate, has an op-ed in the Wall Street Journal today about why the first-contract arbitration provision in the Employee Free Choice Act is bad news. The fact that it's being printed now suggests that conservatives are interested in forestalling potential compromise on the pro-Labor legislation, but McGovern's argument -- based on a long-standing grudge against labor -- loses steam with his repeated insistence that current labor law somehow represents a fair balance of interests between the various parties involved. For instance:

When it comes to labor disputes, both parties should be guaranteed a real chance for compromise under the joint economic threat of contract breakdowns.

But the "joint economic threat" is completely asymmetrical. If the union gets their contract, the business may need to pay their workers more than previously, perhaps by cutting into investor profits, although some studies suggest that productivity increases that come with a strong relationship between management and workers may make those losses neglible. On the other hand, if management succeeds in blocking the union contract, as they do nearly half the time, the union is generally finished and workers often lose their jobs; firms are free to hire other workers. The difference between cutting investor profits and losing the main source of your livelihood reveals that the incentives here are quite unbalanced, which is why management often uses first-contract negotiations as a second bite at the union-busting apple.

Incidentally, McGovern's assumption that arbitrators couldn't understand delicate business conditions reveals his ignorance that massively complex legal and contractual issues are regularly settled by multinational companies through independent arbitration. Nor, incidentally, is federal arbitration any guarantee that the union will get their desired terms. But they feel it's more important to reach any fair agreement and get the first contract passed rather than choose between an unfair agreement and none at all.

-- Tim Fernholz

Posted by Tim Fernholz on May 7, 2009 1:20 PM | Permalink