February continued the miserable string of poor employment
reports by the Bureau of Labor Statistics. The most jarring number
is the unemployment rate, which increased by a half a percentage
point to 8.1 percent. The payroll survey reported that non-farm
employment fell by 651,000 jobs, roughly in line with
Job losses were deep and widespread in February, with almost
every sector shedding jobs. The unemployment rate climbed to 8.1
percent, the highest level since 1983. The current economic
downturn is very severe, and its magnitude is similar to the
1981-82 recession. If these similarities hold true, unemployment
may continue to climb and even peak after the recession has ended,
as it did in the early 1980s when the unemployment rate reached its
high of 10.8 percent after the recession was officially over.
The large increase in the unemployment rate is the result of
several factors. First, the labor force grew rapidly by almost
500,000 workers, offsetting January's decrease in workers; much of
this is likely due to statistical variation and weather patterns
(very few of these entrants to the labor market found work, and
this increased the unemployment rate by 0.2 percentage points).
Second, there was a large spike in the number of workers who
reported unemployment. The household survey, which provides data
for the unemployment rate, reported a whopping increase in
unemployment of 851,000. This increase in Americans reporting job
losses accounted for 0.5 percentage point increase in the
The unemployment rate climbed for all workers regardless of sex,
race, or education. Male workers over 20 have an unemployment rate
of 8.1 percent, compared to 6.7 percent for women over 20.
Teenagers have an unemployment rate of 21.6 percent.
Job losses in the service industry (-375,000) constituted over
half the total amount of job losses. Construction (-104,000) and
manufacturing (-168,000) continued to reduce employment. Only
government (9,000) and health care (30,400) added jobs while
professional business services (-180,000) had its sharpest
contraction yet. Job losses in high-skill areas such as
architecture and law accelerated.
Another indicator of the labor market's bleak condition is that
the percent of workers unemployed longer than 15 weeks hit an
all-time high. Long-term unemployed workers now account for 41.7
percent of all unemployed workers--up from 32.1 percent in 2008.
The median duration of unemployment has steadily increased over the
past year, from 8.4 weeks in February of 2008 to 11 weeks in
February of 2009.
Card-Check on the Agenda
In this weak economy Congress should remember to "first, do no
harm." Union leaders boast that the misnamed Employee Free Choice
Act (EFCA) will help the labor markets. But this legislation would
replace secret ballot organizing elections with publicly signed
union cards, allowing union organizers to deceive, harass, and
threaten workers into signing these cards.
Workers would not even have to know about the organizing drive.
Once organizers had collected cards from a majority of employees
the employer would have to recognize the union as representing all
workers, even if the rest of their employees knew nothing about the
organizing drive. They would show up to work and discover they had
union representation whether they wanted it or not.
EFCA is designed to force workers into unions. The AFL-CIO
estimates that passing EFCA would increase union membership rates
by at least 5.0 percentage points. Under EFCA at least 7.1
million Americans would be pressured into unions. This would do
wonders for union finances, but it would also further devastate
Unions Are Cartels
Such labor market devastation does not occur simply because
unions bankrupt businesses--such as General Motors or the airlines.
Unions are monopoly cartels. They intend to restrict the number of
jobs in the economy to get higher wages for their members. In this
they operate like any other cartel--the Organization of Petroleum
Exporting Countries (OPEC) is one such cartel. OPEC nations, such
as Saudi Arabia and Venezuela, cut oil production in order to
decrease the supply and raise the price of oil. When they succeed,
Americans pay higher prices at the pump but OPEC cartel members
reap a financial windfall. The economy overall weakens, but OPEC
Unions work in the same way. Consider the United Auto Workers
(UAW), which represents the workers at Ford, Chrysler, and General
Motors. They demanded exorbitant compensation for their members.
Until recently the average UAW worker at the Big Three earned
triple the compensation of the average private sector worker--over
$70 an hour in wages and benefits. The Detroit automakers raised
prices and passed those costs onto consumers. GM's gold-plated
health benefits alone added $1,200 to the cost of each vehicle
produced in 2007. Because these cars cost more, consumers
bought fewer Detroit-manufactured cars. Fewer cars produced results
in fewer jobs in the auto industry. Unions are monopolies: They win
benefits for their members by raising prices and removing job
opportunities for everyone else.
Union Cartels Kill Jobs
Most economists agree that unions harm the economy. In the words
of one leading labor economist, "the large majority of economists
remain convinced that economic theory points to a net negative
impact of unions on resource allocation and economic efficiency." Study
after study consistently shows that greater unionization leads to
fewer jobs. One study of American manufacturing
companies found that unionized employers cut jobs by 11 percent two
years after a union organized their workplace. Job losses were
largest at the smaller businesses particularly vulnerable to EFCA
organizing. Studies also show annual job growth in
unionized companies of between 3 and 4 percent less a year than
A conservative estimate is that if Congress passed card-check,
the expanded unionization would reduce employment opportunities by
765,000 potential jobs in the economy within two years. Other
studies estimate even greater effects.
This is the wrong way to stimulate the economy. Economists now
estimate that the rapid expansion of union cartels in the 1930s
contributed significantly to the severity of the Great
Depression. Congress should not pass laws that will
remove even more jobs from the economy.
Strengthen the Labor Market
As the economic downturn continues, the labor market continues
to deteriorate. Unemployment will continue to rise even as the
overall economy improves. Congress and the President should take
action to strengthen the labor market instead of weakening it.
Unfortunately new proposals such as EFCA and the President's
proposed tax increases on capital will only further weaken the job
market and delay recovery. Instead, Congress and the President
should look toward easing regulations and tax burdens for
businesses that hire workers and avoid imposing legislation that
would undermine democracy in the workplace and reduce
Hederman, Jr., is a senior policy analyst and the assistant
director at The Heritage Foundation's Center for Data Analysis. James Sherk
is the Bradley Fellow in Labor Policy at The Heritage