Labor & Workplace
The Issue
The economy, labor market, and labor–management relations have changed dramatically since the 1930s. Federal labor laws have not. The government needs to bring labor policy into the 21st century to address the challenges today’s workers face.
American labor law was written for an industrial economy in which employees’ unique skills and abilities mattered little on the assembly line. The law assumed that workers’ individual needs could be met entirely through collective representation. It also assumed that workers had little need for flexible schedules.
In today’s knowledge economy, these assumptions no longer hold. Laws that prohibit flexible schedules feel less like workplace protections than shackles. Today’s workers expect to be rewarded for their individual contributions. While workers want a voice on the job, one-size-fits-all union contracts have lost much of their appeal. Only in government does union membership remains widespread.
The union movement has responded by attempting to make it more difficult for workers to decline their services. Workers increasingly need protection from union overreach. The recent union complaint against Boeing for creating non-union jobs in South Carolina is just one recent example of union aggressiveness. Taxpayers need protection from government unions that put their interests ahead of the common good. The unemployed need to have laws restricting job creation taken off the books.
Recommendations
- Modernize the Fair Labor Standards Act. The Fair Labor Standards Act (FLSA) was written to deal with challenges facing the manufacturing economy of the 1930s. The economy has changed dramatically since then, with more than four in five workers employed in the service sector. Technology has changed where and how employees do work.The FLSA requires employers to pay time and a half overtime for work beyond a 40-hour workweek, with exemptions for salaried professional employees. Criteria for determining whether an employee classifies as exempt are confusing and out of date. Figuring out when the workday begins can also be challenging. Are convenience store managers exempt employees? Does checking e-mail and voicemail before leaving for work start the clock? Courts in different states have come to different conclusions about these issues.Workers also want—and need—flexible schedules to help balance their work and family lives. They want to be able to take time off to be with their family as needed and make up those hours later. The FLSA prohibits this. Workers covered by the overtime law must receive cash pay if they work more than 40 hours a week. They may not choose to earn compensatory time instead—even if they value that flexibility.To modernize the FLSA, Congress should:
- Permit employees and employers to elect to institute compensatory time programs voluntarily;
- Clarify that checking e-mail or voicemail or similar activities before driving into work do not start the workday and do not require employers to pay workers while they commute to work; and
- Modernize the exemption standards for computer employees and salesmen to reflect today’s work practices.
- Reform the National Labor Relations Act. The National Labor Relations Act (NLRA) was also written for the industrial economy of the 1930s. Congress has not seriously amended the Act since 1947. However, many provisions of the Act hurt modern workers.Many employees (and employers) want employee involvement (EI) programs and work groups in which workers and supervisors can meet to discuss workplace issues. These would include self-directed work teams, safety committees, and production committees. Surveys show that 60 percent of workers prefer such programs to more government regulations or labor unions. But Section 8(a)(2) of the NLRA prohibits employer-dominated “labor organizations.” Employees have an all-or-nothing choice: They can have union representation at work or no representation at work. The law forbids anything in between. Congress should permit employee involvement programs.Today’s workers also expect to be rewarded for their individual contributions. However, the NLRA prevents unionized companies from paying union members more than their contract calls for without negotiating with the union. Under the law, union contracts are not just a wage floor but also a wage ceiling. Without this restriction, many unionized businesses would offer performance pay. Basing pay partly on individual performance raises workers’ earnings and corporate profits because it makes employees more productive. Congress should allow unionized companies to pay workers more than their union rate.
- Protect employee rights. Unions have their own agenda. They collect 1 percent–2 percent of union members’ paychecks as dues. Unions want to collect dues from as many workers as they can and spend that money how they like. This is not always in workers’ best interest.Businesses can legally recognize a union on the basis of publicly signed union cards without a secret-ballot election. This is known as “card-check” recognition. Card-check tells union organizers which workers support them and which do not. They return again and again to the homes of workers who have not signed and press them to change their minds. Card-check makes organizing new members much easier for unions—but only by making it harder for workers to say “no.” The government should require a secret-ballot vote before a company begins bargaining with a union.Unions also spend heavily on political activism with little regard for their members’ views. Several states have passed “paycheck protection” laws requiring unions to get their members’ permission before spending their dues on political activism. Union political spending subsequently dropped dramatically. Given the choice, most union members did not want their dues spent on politics. Congress should pass a national paycheck protection law requiring unions to get their members’ permission to use their dues for political purposes.
- Reform federal pay. The government should aim for pay parity between the private sector and the federal government. Federal pay varies wildly from market rates in both directions. Some high-performing federal workers earn less, while many other federal workers get more than they would make in the private sector. This averages out to a 22 percent cash wage premium for federal workers. Federal employees also receive much more generous pension, health care, and paid leave benefits than private-sector workers. Adding these benefits raises the average federal compensation premium to 30 percent. Federal employees also enjoy job security guarantees unheard of in the private sector.Congress should bring federal compensation in line with the private sector. The General Schedule should be scrapped and replaced with a performance pay system tied to market rates of pay. Congress should bring benefits in line with private-sector standards. In addition, federal employees who want tenure benefits should be required to contribute a portion of their salary toward it.
- Restrict government unions. The founders of the labor movement saw unions as a vehicle to protect workers from being exploited and to get workers a share of the profits they created. Consequently, they never proposed unionizing the government. The government earns no profits. Government unions organize against voters and taxpayers. They pressure the government to put their interests ahead of public service. Not until the late 1950s did the union movement begin to argue that collective bargaining belonged in government.In most agencies, collective bargaining means less efficiency and higher costs. In national security agencies, it can cost lives. That is why Congress prohibits collective bargaining in the FBI, CIA, and Secret Service. However, the Obama Administration recently decided to begin collective bargaining at the Transportation Security Administration. Canada has a similar policy. In 2006, union protests in Toronto lead to 250,000 passengers boarding their flights without being screened. National security must come first. Congress should end collective bargaining at all agencies in the Department of Homeland Security.
- End union favoritism on federal projects. The collapse of the housing bubble badly hurt construction employment. Two provisions of federal law needlessly reduce the availability of construction jobs and should be rescinded.The Davis–Bacon Act requires federal construction contractors to pay “prevailing wage” rates that average 22 percent above market rates, essentially forcing the government to hire four construction workers for the price of five. An executive order from President Obama strongly encourages federal agencies to use project labor agreements (PLAs) on federal construction projects. A PLA requires contractors to sign a collective bargaining agreement with construction unions before beginning work. These bargaining agreements require contractors to hire all workers through union hiring halls. Preventing competition from non-union construction workers raises construction costs between 12 percent and 18 percent. This also reduces the number of construction jobs in the economy.Federal policy should not artificially inflate some workers’ wages while leaving others unemployed. Congress should repeal the Davis–Bacon Act and prohibit PLA requirements for all federally funded construction projects.
Facts & Figures
- In 2000, plaintiffs filed 1,854 Fair Labor Standards Act suits in federal court. By 2010, that number rose to 6,081 suits. Modernizing the FLSA would prevent unnecessary litigation.
- Webcor Packaging, Inc., a manufacturing company in Flint, Michigan, formed a plant council consisting of five elected employees and three appointed managers to examine ways to improve work rules, wages, and benefits. The National Labor Relations Board forced Webcor to disband the council. Under the NLRA, employees must choose between union representation or no representation at work.
- Suspending the Davis–Bacon Act or using accurate prevailing wage calculations would have created 155,000 additional construction jobs in 2010.
- The federal government spends an average of $32,115 a year per employee on non-cash benefits, more than triple the average non-cash compensation of the average private-sector worker ($9,882 a year).
- Federal employees receive both a defined-benefit and a defined-contribution pension plan. Employees with enough tenure may retire with full pension benefits at 56.
- A federal employee with three years of experience receives four weeks of paid vacation, 10 federal holidays, and 13 days of paid sick leave. A comparable private-sector worker earns an average of 10 fewer days of paid leave.
- Sixty percent of union members object to unions spending their dues on politics. Two-thirds of union members say unions should have to get permission before spending dues on politics.
- A majority (52 percent) of union members now work in government. More than twice as many union members work in the Post Office (465,000) as in the entire domestic auto industry (192,000).
- Government unions accounted for three of the top five outside political spenders in the last election.
- In 1959, the AFL–CIO Executive Council declared, “In terms of accepted collective bargaining procedures, government workers have no right beyond the authority to petition Congress—a right available to every citizen.”
Selected Additional Resources
Andrew Biggs and Jason Richwine, “Public-Sector Compensation: Correcting the Economic Policy Institute, Again,” Heritage Foundation Backgrounder No. 2539, March 31, 2011.
James Sherk, “Proposed Union Rules Harm Workers and Job Creation,” Heritage Foundation Backgrounder No. 2584, July 20, 2011.
James Sherk, “Opportunity, Parity, Choice: A Labor Agenda for the 112th Congress,” Heritage Foundation Special Report No. 96, July 14, 2011.
James Sherk, “Examining the Department of Labor’s Implementation of the Davis–Bacon Act,” Heritage Foundation Testimony, April 14, 2011.
James Sherk, “Time to Restore Voter Control: End the Government-Union Monopoly,” Heritage Foundation Backgrounder No. 2522, February 25, 2011.
James Sherk, “Inflated Federal Pay: How Americans Are Overtaxed to Overpay the Civil Service,” Heritage Foundation Center for Data Analysis Report No. CDA10-05, July 7, 2010.
James Sherk and Ryan O’Donnell, “RAISE Act Lifts Pay Cap on 8 Million American Workers,” Heritage Foundation Backgrounder No. 2270, June 4, 2009.
