The Cases Against Sectoral Bargaining: The Economic Case

The Cases Against Sectoral Bargaining (full series)
Sectoral Bargaining | The Practical Case | The Political and Advocacy Case
The Ideological Case | The Economic Case

The Economic Case

For all the ideological and social-policy arguments inherent to labor-relations policy, labor-relations policy is fundamentally economic. Everyone who works for pay and everyone who employs workers is affected by the labor regime. It affects all economic activities. And on the question of the economic effects of European-style sectoral bargaining versus American-style enterprise bargaining, the world has been running a sort of general economic experiment since the end of social democracy’s “thirty glorious years” in the 1970s.

The results are in, and the Americans beat the French.

There is no evidence that France has had greater economic success than the United States. As of 2016, its gross domestic product at purchasing power parity (that is, adjusted for the cost of living) was lower than all U.S. states except Idaho and Mississippi. Even leftist measures that consider life expectancy, obesity rates, or wealth inequality show the United States as better off. More recent research shows the European economy falling even further behind the U.S. economy, even as Americans have complained about stagnation in their own country. The same social and economic problems—uncontrolled immigration, declines in manufacturing employment, and political instability and loss of social cohesion—have not been helped obviously by a stronger organized labor movement with more coercive power in France. The 2024 national legislative elections saw the liberal party of President Emmanuel Macron lose votes to populists of right and left, with the neo-communist Unsubmissive France (La France Insoumise) and the party of the controversial Marine Le Pen, the National Rally (Rassemblement National) surging in vote share and legislative seats. The country may be ungovernable until another legislative election is called or President Macron resigns.

Then there is the question of cost of living and consumer prices. In the U.S., higher-cost-of-living states often have strong labor union movements. Even where labor relations policies are not the cause of these higher costs, labor unions’ institutional leftism encourages regulatory and legislative environments that dissuade business formation, restrict construction, raise the price of energy with environmentalist mandates, and hike taxes.

Supporters of sectoral bargaining focus on the potential of the policy to raise nominal wages before considering inflation or changes in cost of living. In a late 2020 policy paper issued while he chaired the House Education and Labor Committee (the committee name changes from Education and Labor to Education and the Workforce whenever the House majority changes), left-wing Rep. Bobby Scott (D-VA) argued, “Centralized bargaining benefits employers and employees by removing wages from competition, enabling employers to compete over the quality of their products or services.” But this ignores price competition that helps consumers and controls the “wage-price spiral” that exacerbated the inflation of the 1970s.

In discussing the causes of Big Labor’s Long Decline, I wrote:

Big Labor had risen in an environment of privation and war, but the country now identified with—and demanded—plenty and peace. The late 1970s and early 1980s saw the American consumer flex its power, demanding that something—anything—be done to curtail rampant inflation. After the predictable failure of wage and price controls enacted by the Nixon administration and the pathetic “Whip Inflation Now!” campaign of the Gerald Ford administration, a bipartisan consensus emerged, first under Jimmy Carter, in favor of deregulating the national economy.

If the public-opinion response to the economy under the Biden administration is any indication, Americans still absolutely loathe inflation. Adjusting economic policy to raise the cost of living, a certainty under sectoral bargaining, would likely trigger the American consumer’s visceral response to higher prices.

Some, most prominently Oren Cass of American Compass, have argued that sectoral bargaining would become an alternative to government labor-standards regulation, with sectoral bargaining unions and employer associations able to come to mutual agreements to waive certain government rules.

Cass sells it as a win-win, but it runs into the problem of incentives. Unions have no reason to negotiate below the level set by a government minimum labor standard. Well, no honest reason: They have at least two dishonest reasons. One is straightforwardly corrupt labor-management collusion, like what happened in the previous regime at the United Auto Workers. Corrupt managers pay corruptible union officials to keep them “fat, dumb, and happy” and to do management favors.

The second dishonest reason is both more subtle than simple corruption and also completely legal. Currently, union-backed politicians often include waiver clauses in local wage-minimum laws that create a curious carveout: They don’t apply to a collectively bargained contract. Unions—not necessarily union members—profit from this arrangement in easier organizing and more dues collections, since they can hold the possibility of avoiding these rules as a carrot to secure a card-check union recognition.

Without details on what an American sectoral bargaining system would involve, the potential to abuse of employee autonomy using Cass-promoted waiver clauses is limitless. Unions run by corrupt officials could take kickbacks for going below national standards. Unions run by leftist activists could use their ability to collude with employer associations to enshrine left-wing social policy in workplaces nationwide. Either class could use the ability to collaboratively waive regulations to secure what is euphemistically called “union security”; that is, forced dues, unless there were a national right-to-work-style protection that Cass’s allies in Congress have not endorsed.

Conclusion

Sectoral bargaining is not the answer to conservative cultural concerns or broader economic problems. Adopting it would repudiate the practical gains of the Taft-Hartley consensus to empower a Democratic Party constituency group steeped in socialist ideology with no obvious case that it would benefit the economy.

American Compass’s Jonathan Barry proposes that “The key theme—both philosophically and politically—for conservatives to recover [vis-à-vis workers] is agency, defined as participation in the charting of one’s life course.” Agency is a noble goal, but the details of any approach to secure that agency must ensure that workers, especially conservative workers, are not forced to sacrifice their political agency for the false promises of economic agency.