The U.S. Supreme Court, in ruling in favor of Mark Janus’ free speech rights to withhold a $45 monthly payment to the union at his Illinois government workplace, struck a blow for free labor markets.
In doing so, it also advanced the cause of free riders.
“Free riders” is an economists’ term for a particular kind of market failure. In economic terms, free riders take advantage of a public good but refuse to contribute to it.
People who game the property tax system and don’t pay their fair share are free riders. So are people who picnic in a public park but don’t clean up after themselves, knowing city workers will do so. The economists have a dramatic term for such behavior: “the tragedy of the commons.”
Economists see “free rider” as a neutral description of rational, self-interested market behavior, but it’s usually taken as an insult. No one wants to be called a free rider. That’s because the rest of the people — those who contribute money, time or effort to the public good — tend to resent the ones who refuse to pitch in.
The trouble with the free rider phenomenon is that if free riding goes too far, the whole system breaks down, the public good becomes unaffordable, and everyone winds up worse off.
That’s exactly the scenario Illinois Gov. Bruce Rauner had in mind when he helped launch the Janus lawsuit in the first place. He wanted to take on the American Federation of State, County and Municipal Employees — which Janus refused to join — in his broader effort to mortally weaken the union movement.
The common outlook for the impact of Wednesday’s ruling on the labor markets is pretty dark. Non-union workers will stop contributing their “fair-share” payments in the 22 states that have required them, the pessimists say. This will starve the unions of money, which will reduce funds available for political contributions and organizing efforts, which in turn will weaken them both politically and financially.
Charles Wheelan, a public policy expert at Dartmouth University who wrote the plainspoken book “Naked Economics,” said the Supreme Court ruling could not have come at a worse time for unions, given the steep decline in membership over the years. “The unions are kind of on life support, and the plug is just barely in the socket, and someone just knocked it out of the wall,” Wheelan said.
A study published before the Janus decision, by Frank Manzo of the Illinois Economic Policy Institute and labor professor Robert Bruno of the University of Illinois, predicted that a ruling in favor of Janus could cause public service unions to lose 726,000 members, a decline of more than 8 percent.
Expect large losses in California, New York and Illinois, Manzo and Bruno say. And because African-American workers are more likely to belong to labor unions, they will feel the impact of weaker unions especially hard.
That scenario of inevitable decline is what prompted Rauner to help launch the Janus case in the first place. In need of a photo-op that would please his conservative political base during this election year, Rauner spent three days in Washington waiting for the Supreme Court to provide the widely expected ruling so he could get out on the court steps and claim credit.
But the death-knell scenario is hardly a sure thing.
Daniel Hemel, of the University of Chicago Law School, is among several law professors who have argued that states simply can change their laws. Instead of requiring workers to contribute fair-share payments, state legislatures can directly fund unions that represent the state’s workers, Hemel and others have written.
That might help the unions, but it would be questionable public policy. There seems nothing about unionism that merits direct government support, especially in a state with nearly $7 billion in unpaid bills and a soaring deficit.
A better option — both in terms of public policy and market economics — would be for unions to heal themselves. The right-to-work movement once was seen as a death knell for unions, but in some right-to-work states, unions have staved off decline with aggressive organizing efforts and more creative approaches to creating value for members.
Skills training, job-search services and even lobbying on behalf of popular issues, such as immigration reform, have helped make union membership attractive.
Wheelan says unions could still recover from the Janus blow. “There is one potential silver lining, which is that this might force the unions to be more creative,” Wheelan said. “Unions have been lazy in terms of finding other benefits of membership. This could change that.”
The unions need to stop worrying about free riders and start driving toward more creative ways to attract support from the common worker. It’s either that, or the unions could become another victim of the tragedy of the commons.
David Greising is president and chief executive officer of the Better Government Association.