18. The Closed Shop

THERE ARE economists (as we have seen—pp, 15–16) who feel that there would be little harm in groups of workers agreeing among themselves about what remuneration they are willing to accept, provided only that certain admitted abuses of this process could be eliminated. They believe, that is, that the right to exert strike-threat pressures can be tolerated as long as those who organize for this purpose have no right or power, under any conditions whatsoever, to restrain the employment of others. Such economists maintain that, if the rights of nonstrikers or other strikebreakers were effectively guaranteed, the right to strike could (on wholly pragmatic grounds) be permitted. All that is required is that the “closed shop” or the “union shop” shall be forbidden and the use or threat of bodily violence stamped out. No other major limitations on union activities would be then necessary. This was, for instance, the broad view of Herbert Spencer of the last century.

Now the ability to withhold at any one moment a large volume of labor employed in any firm, or in any group of competing firms, can be seriously disruptive even if there is no restraint on the recruitment of substitutes to fill the vacated jobs. And the private coercion used in such a case, although weaker than it is when the civil rights of nonstrikers need not be respected, may still compel the acceptance of wage contracts which gravely harm minorities (those within a union and potential employees outside it). Yet it must be admitted that the path toward a socially coordinated labor market will be at least partially cleared by reforms to protect the interloper, including what have been called “right to work laws” in the United States, authorized for individual states by Section 14 (b) of the Taft-Hartley Act. The incorporation of the 14 (b) clause in Federal legislation would be a move toward what has been called “the emancipation of labor” and the democratization of the wage determination process. Such a reform would need supplementation, of course, by other reforms to remove all those immunities and privileges before the law (discussed on pages 51–52) which have virtually conferred upon the unions the right to intimidate, assault, or slander executives or nonstrikers in the course of a trade dispute or during preparations for a dispute.

What is needed (on the assumption that physical violence has been eradicated) is the explicit abolition of any right to compel any person to join a union as a condition for permission to accept or retain any employment, unless the union member is left clearly free, if he wishes, not to strike on the motion of a majority or on the command of an elected official. The present chapter is devoted to an examination of the objections which have been advanced against reforms in this direction.

In the United States a trend toward the closed shop regime was powerfully fostered by the Wagner Act of 1935. Congressional critics of this legislation feared that it would indeed lead to compulsory union membership. “Nothing could be more false,” said Senator Robert F. Wagner reassuringly. But after 38 years of lobbying expenditures and electoral pressures, the “closed shop” form of organization now dominates the American labor movement. In 1935, less than 3 percent of union membership in the United States was “involuntary.” Today, union membership is an essential condition for the individual’s employment in the overwhelming majority of unionized occupations. We are supposed to have had, as someone has put it, “a voluntary acceptance of involuntary unionism.”

The case for compulsory union membership (whether in the form of the “closed shop,” the “union shop,” or some variant thereof) is primarily based on appeal to a principle which, if applicable, appears unchallengeable to many economists. When a union, in providing valuable services for its members, necessarily provides these services also for nonmembers, the latter are getting a “free ride.” They share in benefits provided from others’ pockets, efforts, enterprise and risk—benefits which would not be provided at all, or not in the same degree, unless all prospective beneficiaries contributed to the costs. The assumption is, however, that representation by the union is synonymous with benefit from the union, or that the nonmembers really do want the union’s services but shrewdly rely upon others paying for them.

The problem raised by this possibility is an all-pervading phenomenon in economics generally—an aspect of the problem of “social cost” or “externalities.” I myself always illustrate the issue by the example (not original) of lighthouses. The providers of lighthouses do not allow any shipping lines to claim that their captains are such skilled navigators that they do not need guidance by light, and that therefore they should not be called upon to pay “light dues” (levied for this purpose on users of ports and harbors). In this case, there is no serious controversy. Not ail economists agree that compulsory charges in these circumstances are defensible; but for the purpose of the present controversy, I propose not to argue the point.

The question to be considered is then as follows: Is the “closed shop” (or the “union shop,” or some other variant of compulsory union membership) an acceptable parallel? In our kind of society, groups of people invest effort and capital in ventures that benefit not only themselves but obviously others also. In general, persons who put work or capital into a project under such conditions do so either because they think that they will benefit sufficiently (in spite of any “free riders”) or out of some sense of social duty. Their recognition that others will reap some part of the reward for the activities they have provided does not deter them. For instance, party political organizations work for certain legislation and support the candidatures of certain aspirant legislators; but if the parties have any sincerity at all they expect their activities to be for the benefit of all, including even those who work against them! The political parties cannot be charged with assuming that all the finance and effort will be not worth while unless the advantages accrue to their due-paying members only. No one thinks that the party political system will cease unless alt persons can be forced to contribute to one or other of the political parties. But one of the arguments used in defense of compulsory unionism is that all workers benefit from the legislation or administrative action of the political parties which the unions finance, even if some may not believe they benefit. But the controversy largely arises out of the conviction that minorities are compelled to finance the organization of their own detriment.

Perhaps an even better example is the Conference of American Small Business Organizations (not to be confused with the official Small Business Administration!). This body exercises a general vigilance regarding legislation which may affect its members. Presumably these members believe that they get good value for their subscriptions. But there is no doubt that the services the conference performs benefit many more small businesses than contribute to the costs. Yet the conference does not press for compulsory membership to compel all beneficiaries to pay their share. The reader will be able to think of innumerable other examples. However, the question is far too important to be summarily dismissed on grounds such as these, and I propose to examine the case for the closed or union shop from all angles.

It is obvious that not all members or potential members of a union will attach the same value to the prospective benefits which membership offers. Some may expect to get good value for their contribution; others may genuinely feel that any prospective benefits are not worth the dues; while others may feel that union pressures actually work to their disadvantage. Even those who would admit that they get some gross benefit may feel that the cost is too high.¹ Hence the possibility of a potential unionist quite genuinely judging membership to cost more than it is worth to him cannot be dogmatically dismissed.

Moreover, we must consider those who will almost certainly feel that they are more likely to be harmed than helped by union activity. They will fear that, if wage rates are pushed too high for current outputs to be absorbed, they will be the first to be displaced. Their misgivings may exist because they feel—realistically—that they are not quite so well qualified as the majority; or because of some seniority or other rule which a union has imposed concerning “lay-off; or by reason of their race, religion, sex, political opinions and so forth, they may expect to be the ones most likely to have to suffer in bad times—unless they can count on being allowed to bargain with greater freedom than a union is likely to permit.

It has been ruled in the United States, however, that a union is not “barred from making contracts which may have unfavorable effects on some members of the craft represented.” (323 U.S. 203)² Then is it really morally defensible that those who believe that they are the ones who will experience the “unfavorable effects” shall be forced to finance the operations which threaten to harm them? The fact that what may benefit a majority can well be to the disadvantage of a minority cannot be ignored.

The argument against the closed shop is in part based on concern for the rights of any such minority. Bradley has put the point in terms of the question, “Can the exploited be compelled to finance their exploiters? . . . It might be urged that Congress lacks the power arbitrarily to select unoffending citizens and to compel their own self-destruction.”³

The relevant general principle here is that there are many reasons why there should be a conflict of interest among the different groups which form a union’s membership. We find it as between the skilled and the unskilled; between those paid by time and those paid by piece; between those in expanding branches of a firm or industry and those in a contracting branch; between those employed in areas with a high cost of living and those in areas in which living costs are low; between those in developed areas and those in underdeveloped areas; between those who prefer more leisure (and would like to sacrifice pecuniary earnings in order to obtain it) and those who prefer the opposite; and between the young and aggressive members and those (often a small but older minority) who feel that the relative certainty of continuous employment is of greater value to them than a wage-rate increase (more accurately, that such an increase might prove incompatible with the survival of their present source of income). This last kind of minority tends to consist of those who, because of their special obligations, value employment security high in their “scales of preferences.”

In so far as court decisions confirming the unions’ right to compel membership have been based, not on the principle that minorities may be legitimately harmed, but on the incompatible belief that nonunion workers gain unfairly from the protections won by the unions, the effect has been either to deny the individual the right to make his own judgment on the matter or to accept as proven the thesis that nonunionists are shrewdly relying on the “free ride.” But what imaginable meaningful evidence could be brought on this last issue? In one case the court invited employees who did not believe themselves to be beneficiaries from compulsory membership to come and give evidence. But under the existing power of a union to deprive them of their livelihood, naturally few would dare to appear. In that very case the Solicitor General had argued bluntly that those who thought a union did not benefit them should give up their jobs!⁴ If the courts had been permitted to hear the evidence of unwilling union members in camera, and with effective arrangements to prevent the disclosure of their identity to the union rulers, they might well have reached different conclusions.⁵ As things are, individuals who might have the courage to fight are unlikely to possess the resources needed and it would be very difficult for them to find philanthropists prepared to take up their case on principle.

The mere fact that a union may provide unemployment compensation for members who are displaced does not imply that the recipients are net beneficiaries of the strike-threat system. This would only be so if the levies on the employed members were sufficient to provide full compensation for those who are laid off. And “full compensation” here means sufficient to bring their earnings in alternative occupations up to the net earnings (wages minus the unemployment levy) of those retaining employment. But in practice, as I pointed out in my Theory of Idle Resources, the “displaced workers get . . . a mere sop. They appear to consent because they do not understand, . . . It is nothing but their ignorance which prevents them from insisting upon an equal sharing of the spoils in return for their agreement to refrain from ‘black-legging.’”⁶

Others may feel such confidence in the free market value of their services that they judge their income prospects to be more favorable if the prosperity of the firm they are serving is assured by low labor costs. They may fear, for instance, that the firm’s growth, or even the industry’s growth, may be held back by aggressive union activity; and they may therefore view any forced membership with great distaste. Exceptionally able or skilled workers in an industry-wide union may sometimes form the minority which believes it is harmed by union policies.

Some minorities may disapprove of union policy on moral grounds, through an intuitive feeling or ethical perception that the private use of coercive power is indefensible. And in the case of certain unions, minorities may object because they believe that the union leaders are unprincipled demagogues or utter scoundrels whom they cannot, in good conscience, finance voluntarily. Ought private coercion, and on occasion the threat of bodily violence, be allowed to force such people into membership?

Again, some reluctant union members feel that the funds to which they must contribute are used for the support of political causes which they oppose. Mr. Justice Black gave one view of the present position in this respect, in a famous 1961 judgment. He found that “the union shop . . . is being used as a means to exact money from these employees to help to get votes to win elections for parties and candidates they are against. If this is constitutional, the First Amendment is not the charter of political and religious liberty its sponsors believed it to be.” Nevertheless, the Supreme Court ruled, by five to four, that such a use of funds is not unconstitutional. But what is now constitutional may yet be intolerable. It must be remembered, however, that a union shop or closed shop could be restrained by law from using its funds in this manner without the right to compulsory membership being abolished.

The union leaders and their academic and political allies sometimes deny that a minority has the right to endanger or destroy what they like to call the “freedom” of the union they serve to protect the income and conditions of work of its members. But the controversy turns largely on whether that word “freedom” is used to mean “privilege.” Support for 14 (b) is motivated by the wish to preserve the freedom of minorities who feel that union policies withhold opportunities from them, or have objectives which they (the minorities) reject. Superficially, at any rate, it would appear that the minorities who must be coerced into membership are most often the weakest members of the group—those for whose protection society ought to be most solicitous. Admittedly, this minority may possess considerable power when the individuals who make it up are free to bargain independently and seek the most remunerative employment opportunities. But their power is capable of harming others only when there exists some privilege which their competition can erode.

A possible objection is that the unions can be trusted to deal fairly with minorities, in spite of the protection of majorities by compulsory membership, and that divergencies of interest tend to be adjusted through mutual agreement. Undoubtedly internal adjustments are made from time to time in response to representations or pressures from within. But generally speaking, the less well-qualified workers whose prospects are damaged are regarded as an expendable minority. It seems to be less infrequent for a skilled minority successfully to demand autonomy within a union and to be conceded the right to negotiate separately. And sometimes local groups, perceiving the conflict of these interests with those of other groups in different areas, have revolted against the exclusion of their competition via “the rate for the job.” Such a revolt occurred some years ago in the United States meat packing industry when, under bargaining on a national scale, one local group perceived that their source of income was being shrunken or exterminated by the general forcing up of labor costs. But although a minority group within a union can in some circumstances break away and form its own organization in this manner, the possibility of doing this appears to occur but rarely. We cannot hope therefore for any weakening through spontaneous fragmentation of the arbitrary power structure which has been fashioned. The divergencies of interest which we are here considering do not seem powerful enough to be effective. In general, passive acceptance of the union’s authority is normal. Active opposition from exploited groups within is abnormal. (See pp. 201–203.)

Let us now return to the case of those who object to union membership, not on the grounds that they are directly harmed by the policies pursued, but simply on the grounds (already mentioned) that they do not think the benefits are worth the cost. An important general proposition is relevant here. When some people want a good or service very strongly (that is, when it ranks high on their “scale of preferences”), and others want it only moderately (when it stands low on their scale of preferences), while others want it so slightly that they would only make use of it if it were provided free (that is, when they will use it if they have to make no sacrifice of other things to get it), economists have recognized that there may be a case for “price discrimination” (see pages 163-167). It is recognized that those people who value the good or service highly can benefit by agreeing to pay more for it than others are called upon to pay. The principle involved, sometimes known as “charging what the traffic will bear” has, in my opinion, often been seriously abused. But the conditions under which it can be accepted are perfectly clear, namely, that the parties discriminated against obtain thereby a good, service or other objective which they would otherwise be unable to obtain at all, or else that they obtain it cheaper than they could in the absence of discrimination against them. And, in the extreme case, one class of possible beneficiary may be called upon to pay nothing at all. For instance, toll roads are not rendered unprofitable investments for the community because passengers in excess of one per car are normally allowed to use them free. Hence the mere fact that those beneficiaries of union activity who do not value the benefits sufficiently to agree to buy them voluntarily may, unless forced to contribute, succeed in getting “a free ride,” does not ipso facto justify coercion.

The unions’ answer to this objection is that the great majority of those employed obviously do believe and know that they benefit materially from union protection or aggression. That being so, all may justly be called upon to contribute. Employees in any craft, occupation or industry who refuse to do so have no integrity. They simply accept the benefits knowing that they can get them for nothing.

The unions argue further that the marginal employees who are harmed—those who would undercut if permitted to do so, or those who might disapprove—are a minority who, like all minorities, must expect to be overruled. When the unions rely on this argument, they are reasoning in the manner in which the age limit principle is usually justified. Forced retirements at a certain age in certain occupations may mean that some who are still highly efficient may have to be dismissed; yet the rule can be defended and is generally accepted as not unjust. Similarly, we are all prepared to approve a certain age limit before the right to vote in a democratic society is conferred, in spite of the fact that some young people may be better qualified than most adults to assume the responsibilities of citizenship. The same argument has been used also to justify Apartheid in South Africa. The authorities there claim that their discriminations are not really based on color or race but on grounds of civilization. Most nonwhites, they hold, are relatively uncivilized; and when asked why, then, they deny rights to highly educated Africans which are enjoyed by some virtually illiterate whites, their answer is exactly that which we have just noticed; and official policy in South Africa does, indeed, explicitly rely upon appeal to the age limit parallel.

Now this age limit principle is acceptable as a voting qualification only because age is a rough evidence of responsibility and because youth is a handicap out of which one grows rapidly. Age-retirement limits are, perhaps, justifiable on the grounds that they enable administrations to avoid invidious decisions which might entail telling one air hostess that her youthful charms have faded while another’s of the same age have survived, or telling one pilot that his judgment can no longer be trusted while another’s of the same age is believed to be unimpaired. The suspicion of favoritism or nepotism is also avoided when an inflexible rule is applied. But similar circumstances certainly cannot be used to justify the discriminations of Apartheid, or forced membership of a union for those who claim or believe that they do not benefit from membership, or that the policy is likely to harm them, or that the policy is ethically indefensible.

The unions are apt to argue that, without compulsory membership, the efforts of their staff must, to some extent at least, be diverted from more important activities to the process of selling their policies, in order to insure continued membership. But would the continuing necessity to justify the use made of funds collected voluntarily, in order to maintain membership, be such an undesirable thing? Would it not be an advantage if the administrations were called upon regularly to account for their stewardship in detail? The voluntary subscription (like any other unenforced payment) is the most democratic form of voting. Would not the voluntary principle alone tend to mitigate some of the actual or alleged abuses that I have been discussing? And could not every producer of goods and services say, with equal justification, “Give our firm a monopoly and we can eliminate all the advertising and other selling costs for the community’s advantage”? Would we contemplate such an argument for a single moment if it were used on behalf of any institution other than a labor union?

Certainly legislation has conferred on unions the privilege as well as the duty of representing both their own members and their nonunion competitors in the same undertaking. But there is no obvious reason why, because they have been given the privilege of pleading their rivals’ case, their position should be further strengthened by the right to extort financial support from their competitors—from those who will contribute under duress only.

Up to this point in the present chapter I have not again challenged the assumption that the services supplied by labor unions are really services for the benefit of “labor.” But this assumption cannot be upheld if the argument of the previous chapters can be sustained. For I have tried to show that if by “labor” we mean the whole body of artisans, laborers, clerks, shop assistants, etc., the gains secured by the unions via the strike or strike threats are for the benefit only of a section and always against the advantage of the whole.

Yet it was, ostensibly at least, acceptance (on intuitive grounds, unsupported by evidence presented or recorded) of the thesis that strike-threat pressures bring about a redistribution in favor of “the workers” that labor policy (in parliaments, administrations and in the courts) has almost everywhere been based—in the United States, especially since the ‘thirties. And the tolerance of compulsory membership has, in particular, been justified on the grounds that, because all workers share in a redistribution at the expense of “capital” brought about by union activities, all beneficiaries can be properly forced to contribute to the costs of those activities. But as we have seen, no such redistribution is actually achievable.

There may be many functions which can be usefully undertaken by an organization which negotiates a wage contract on behalf of wage earners whom it represents but does not coerce, and in so far as such an organization is concerned solely with these functions, there may be some justification for compulsory membership. But this is a possibility which does not need further discussion in the present context.

It may of course be claimed that even if strike-threat activity can benefit sections only, it is still just that all those who enjoy the unjustly-gained benefits should contribute toward the cost of their achievement (in the sense of honor among thieves). Moreover, in a society in which general union pressures are accompanied by monetary and fiscal policy to insure full employment, it is possible that any group which does not have an aggressive union to push its wage rate up ahead of the average is likely to come off worst. Thus regarded, the use of union power in each instance is defensive—defense against the aggression of all the other unions. That being so, may there not be additional grounds for insisting that all those who benefit from the defense shall be called upon to contribute? To answer this question satisfactorily we must recognize that the abolition of compulsion will weaken the power of aggression as much as it weakens the power of defense. To forbid the closed shop and the union shop will be to take one positive step in the direction of economic disarmament. There is little doubt that acquiescence in forced union membership tends to perpetuate rather than weaken the present internecine system or expose its malignance or absurdity.

An argument against compulsory membership which I have not yet mentioned is that, in a racially mixed country, it facilitates race discrimination. I have explained above why the simple enforcement of the standard rate—“the rate for the job”—constitutes everywhere by far the most important color bar in racially complex communities. But there have been union shops in the United States which (in practice although not in principle) have (until recently at least) refused Negroes membership. The result is an explicit color bar. This source of racial injustice is easily recognizable. It is, however, relatively unimportant. The really serious injustices stem from the standard rate, the force of which would be lessened under effectively enforced “right to work” laws. For under such laws, Negroes would at least be able to bid for entry into the more remunerative kinds of employment.

It is, I suggest, in the context of the above discussion that the question of compulsory union membership (as a facet of the general problem of the private use of coercive power) must be considered. Let us bear in mind that every argument used for it can be appealed to with equal validity in support of compulsory membership of cartels. But in the case of cartel type action, government policy aims most frequently not only at preventing obligatory membership of any organization to price output or limit output collusively, but even to prevent any form of purely voluntary collusion with that end in view. The purpose of antitrust is rightly to rely upon the conflict of interest among producers—their lack of solidarity—to insure that the interests of the public are paramount in the pricing process; and there is no valid reason why unions should be treated differently from cartels. Defenders of the closed shop or the union shop are claiming the paramountcy of sectional interests over the community’s interests.

During the controversies which led to an abortive House of Representatives’ resolution to repeal Section 14 (b) of the Taft Hartley Act, it was alleged that the purpose of that section was to destroy the unions. But justly stated, the object was to weaken the private use of coercive power in a manner which was denying the civil rights of minorities. And that infringement of what we have come to accept as a basic freedom of modern man has no compensatory benefits. For as we have seen, the pricing of labor and output through economic warfare has throughout tended to reduce the aggregate flow of wages and render the distribution of income less equal and less equitable. And this result would have been unchallengeably obvious had not technological progress (“economizing displacement”) and creeping, crawling, chronic inflation crudely mitigated the burdens and obscured the inegalitarian consequences.

The erosion of civil rights by way of compulsory membership of unions can well foster further erosion. It is notorious that in the United States union members have been expelled for openly supporting a “wrong” political party or “wrong” causes (such as for the retention of 14 (b)). When the president of the International Machinists’ Union of California can defend the expulsion of a member on the grounds quoted below, is it surprising that those who are vigilant in the cause of human freedom feel that they must work for the universal adoption of “right to work laws”? The union president’s ruling was: “While it is agreed that the right to express one’s views is a privilege guaranteed by the Constitution, this does not mean that a member is entitled openly to denounce the considered position of the labor movement.”⁷

But the “considered position of the labor movement” may be indefensible! Actually, it is difficult to avoid the conclusion that it is precisely because that “considered position” is felt to be vulnerable that the suppression of its critics is attempted with such determination. And does not the union president’s ruling stress one of the most disturbing phenomena of the present era, namely, the recrudescence of the idea that nonconformity may be suppressed?

In Chapter 4, I suggested that the union leaders have acquired what many regard as illegitimate power by methods which amount to a process of revealed corruption. There are at least some grounds for holding that Mr. Justice Black was justified when he held, a few years ago, that it is compulsory membership “which has enabled corrupt union officials to entrench themselves in the organized labor movement and exploit the working man for their own purposes.”⁸ And for this reason alone, I suggest, a case can be made out for the repeal of the right to compel membership where this right exists. In the United States the required repeal could be achieved simply by the incorporation of 14 (b) into Federal law.

It is no argument against Section 14 (b) that, considered in the light of the other privileges before the law which the union managements enjoy, it cannot provide any adequate defense against oppression by the union rulers. Admittedly the clause cannot eradicate all the injustices of a despotic system, but it can mitigate them. In particular, it can protect the actual or potential marginal workers in a trade, who feel they will suffer from the curtailment of employment outlets if labor costs are raised by strike-threat pressures.

The fact that most managements have acquiesced in the closed or union shop is irrelevant to the thesis advanced in this chapter. With public opinion, the consensus of current moral teaching, the majority of university economists, and virtually every teacher of “labor economics” against them, managements have (as we have seen on pages 50–51) mostly lost sight of their moral duty, namely, to fight on behalf of consumers and for a minority they could profitably put into contact with consumers if wage rates and prices were socially determined, instead of determined through economic warfare.

NOTES

¹ After all, the cost is not negligible. If the typical unionist invests throughout his life, at compound interest, a sum equal to what he pays out in union dues, he will have a substantial capital sum at retirement.

² P. D. Bradley, Labor Unions and Public Policy (Washington, D.C.: American Enterprise Association, 1958), p. 81.

³ Ibid., p. 82.

⁴ Ibid., p. 84.

⁵ Such evidence could then have been available for rebuttal in spite of the identity of witnesses not having been disclosed.

⁶ Hutt, Theory of Idle Resources (Jonathan Cape, 1939), p. 131. This example brings out one of the biggest difficulties involved. Many who are harmed by union policy believe themselves to be beneficiaries. (See ibid., pp. 128-140) But law and the courts ought to protect the ignorant, not connive to facilitate their exploitation.

⁷ Quoted from 14 (b), the Key Issue (Washington, D.C.: Free Society Association, 1966), p. 14,

⁸ Quoted from Ibid., p. 16.