July 27, 2012 | Commentary on Labor Regulation
“I want every man to have the chance . . . in which he can better his condition; when he may look forward and hope to be a hired laborer this year and the next, work for himself afterwards, and finally to hire men to work for him. That is the true system.”
— Abraham Lincoln
How better to encourage Lincoln’s “true system” of upward mobility than by allowing hard-working employees to receive pay raises and spot bonuses when they deserve them? That, in a nutshell, is the philosophy behind the RAISE (Rewarding Achievement and Incentivizing Successful Employees) Act. It would lift the restrictions that bar employers subject to collective-bargaining agreements from rewarding their best workers with pay increases or bonuses based solely on merit.
That’s right. Federal labor law — specifically, the National Labor Relations Act — actually prohibits employers from rewarding employees in this manner without permission from union officials. The Heritage Foundation’s labor expert James Sherk explains:
Most Americans know that unions set a floor for workers’ wages: An employer may not pay individual union members less than the amount bargained for by the union. Few Americans know that unions also set a ceiling for workers’ wages: Businesses may also not pay individual workers more than the amount for which their union bargained.
Unions are exclusive bargaining representatives. They represent all employees in a bargaining unit as a group, and they negotiate a collective contract that applies to all workers. Employers may not pay individuals more than the contract allows without first negotiating such an increase with the union.
This statutory cap on ambition went largely unnoticed on Capitol Hill until Senator Marco Rubio (R., Fla.) and 19 of his colleagues introduced the RAISE Act and forced the full Senate to consider it last week as an amendment to the farm bill. It garnered 45 votes: Every Republican — save Mark Kirk (Ill.), who is recuperating from a stroke and missed the vote, and Lisa Murkowski (Alaska), who flat-out opposed it — voted for the measure. Zero Democrats did so. Representative Todd Rokita (R., Ind.) has introduced an identical version of the RAISE Act in the House, where it has 68 cosponsors.
The existing law has produced numerous examples of a perverse antipathy to excellence. My personal favorite involves the Brooklyn Hospital Center in New York. As part of an initiative to improve its services, the hospital identified the top-performing 10 percent of its nurses. The nurses were then invited to an awards breakfast, where each received a $100 gift card. Enter the National Labor Relations Board (NLRB), which noted that the hospital had committed an unpardonable error by failing to secure prior union approval of the bonuses. The NLRB ordered the nurses to return their hard-earned cards.
Anecdotes like this one point to a larger problem. Only about 20 percent of union employees currently work in jobs where merit-based pay is available. Compare that to non-union workplaces, where half of all employees can earn more according to their merit. Sherk calculates that more than 7.6 million union workers would immediately qualify for such raises if today’s legal barriers were removed.
But union leaders don’t seem interested in making sure that their members are rewarded for hard work. They blanketed the Senate with letters of opposition to the RAISE Act, revealing their utter disdain for our free-enterprise system — as well as their total ignorance of how it functions.
Consider the missive sent to all senators by James P. Hoffa, general president of the International Brotherhood of Teamsters. For starters, Hoffa describes unions as “the workers’ duly selected representative.” This is misleading because, as Sherk points out, only 7 percent of private-sector union members actually voted to certify the union to which they pay dues. While unions don’t quite live forever once certified, they can be decertified only after a time-consuming and overly legalistic procedural process that deters even the most frustrated employees from challenging the union status quo.
The RAISE Act would harm workers, Hoffa continues, because it would preclude unions from negotiating uniform wage increases and standards for all employees. Instead, it would foster a merit-based model for employee pay known in labor-law circles as “direct dealing.” Merit pay, he warns, would inevitably lead to “favoritism” and “arbitrary action” by companies. The RAISE Act is nothing more than a “ploy to divide workers,” which “opens the door to discrimination and nepotism.”
How does it do that? Apparently, Hoffa thinks that if left to their own devices, employers would have “unfettered discretion” to behave like, well, union bosses, by ignoring merit, hard work, and worker productivity when deciding on employee remuneration. In this view, market forces don’t matter, and there is no such thing as a fiduciary responsibility to shareholders. Hoffa seems to believe that, faced with the choice of maximizing profits, productivity, and the value of the enterprise, on the one hand, or frittering away company profits and assets on unwarranted wage increases for “friends, family members, or other favored employees,” corporate executives will choose patronage and corruption every time.
Though union leaders may disagree, workers deserve better than federal labor laws that stifle the very virtues that lead to prosperity and the realization of Lincoln’s “true system” of upward economic mobility for all.
— Michael G. Franc is vice president of government studies at the Heritage Foundation.
First appeared in National Review Online