Card Check: Binding Arbitration Worse than Wage and Price Controls

By March 12, 2009Economy, Labor Unions

From the D.C. Examiner, “Card Check could also mean wage and price control.”

The editorial is about the binding arbitration provisions in the Employee Free Choice Act, the “card check” legislation introduced Tuesday. Section 3 of the bill (H.R. 1409, S. 560) requires a government board to come in and set wages and benefits and what normally would be contract terms if an employer and newly recognized union do not reach a first contract within 120 days. Those terms apply for two years.

As the editorial notes, binding arbitration gives unions little incentive to bargain in good faith. If you’re a union representative, just set your demands high and hope the arbitrator splits the difference. What’s to lose?

Which brings us to the matter of terminology. Here in NAM-HQ a few of us were kicking around wording yesterday: Is the best way to describe the effect of binding arbitration, “government wage and price controls?” After all, government IS controlling wages and the “price” of labor. Pretty ominous.

But we say no, better apply a term like “government-mandated pay” or a phrase, “the government will set everyone’s salary.” You can then argue, “We don’t want a government official deciding that John should get $20 an hour and Mary just $18.”

The trouble with “wage and price controls” is that the term has a history and generally understood meaning. Wage and price controls is what the Nixon Administration did in response to inflation in the 1970s, freezing or capping employee wages and the prices of goods (following the example of government controls in WWII and the Korean War).

Wage and price controls are traditionally supposed to keep prices DOWN, but binding arbitration under the Employee Free Choice Act will introduce government mandated wages that go UP.

So let’s find another way to talk about the effects of binding arbitration.

Besides, we’ll need to use the term “wage and price controls” in the usual sense soon enough, as part of the public debate over the Great Inflation of 2014.

UPDATE (9:45 a.m.): The Examiner’s editorial concludes:

Wage and benefit packages with no relation to market realities have brought Chrysler and General Motors to the brink of bankruptcy. Card Check would force a similarly ludicrous system on many more still-healthy American businesses. If President Barack Obama – who vigorously supports Card Check – and Congress truly want to get America’s economy moving again, defeating Card Check and its compulsory arbitration provision is a must.

Leave a Reply