Suppose a bare majority of the eateries in your town forces all the others into a dues-imposing “restaurant association” that fixes prices, hours and terms of service for all of them.
In this example, it is illegal for customers to negotiate with a restaurant without first going through the association. Moreover, all new restaurants must join the association, pay its dues and abide by its rules.
Economists call such an arrangement a cartel. The industry is monopolized by its trade association. Some members and the organizers are better off; customers and members who do not wish to be subject to the cartel’s control are worse off.
Substitute workers for restaurants, employers for customers, and labor unions for the restaurant association and the framework outlined above describes U.S. labor policy since the Wagner Act. Despite soaring rhetoric to the contrary, industrial labor unions are simply labor cartels. (Craft unions can be somewhat different.)
Continue the narrative by allowing the restaurant association to roam from town to town, trying to set up local restaurant associations. In some places they garner the necessary 50 percent plus and in others they don’t. But now let’s add the following rule: A 50-percent majority can force the minority into the cartel, but it can’t force the minority to pay dues for representation they do not want.
This proviso is right-to-work legislation. Right-to-work does two things: It partially offsets the injustice of forced association and makes the gains to the cartel organizers less than what they would otherwise be.
If State No. 1 had no right-to-work law we expect to see a higher proportion of its labor force cartelized (unionized) than in State No. 2, where a right-to-work law was in place. However, all other things equal, we would expect to see better deals for businesses in State No. 2, which would of course attract more businesses.
So how will this all play out now that Indiana is a right-to-work state?
The scholarly literature is not definitive as to the impact of right-to-work. Contemporary anecdotal information is interesting. "Heartbeats," a newsletter of Energize ECI, indicates that “The Indiana Economic Development Corporation advises, that as of August, 74 companies had communicated that Indiana’s enactment of right-to-work will factor into their decision-making process of where to locate current projects.”
Will right-to-work help Indiana grow? I think so, but even if its effect is minor I support it. It is a simple matter of justice.
Cecil Bohanon, an adjunct scholar of the Indiana Policy Review Foundation, is a professor of economics at Ball State University. The opinion expressed in this column is the writer's and not necessarily that of The Times.