Janus was the ancient Roman god of endings and beginnings. And while Janus v. AFSCME Council 31 reflects the name of the plaintiff, Mark Janus, rather than the Roman deity, an ending and a beginning is a good way to look at the legal case now before the U.S. Supreme Court.
AFCME (American Federation of State, County and Municipal Employees) is a labor union representing public sector workers in collective bargaining negotiations covering wages, benefits and work rules.
The legal case is already politically charged. And the economics of unions tends to divide economists into those who think that organized labor’s restrictions on supply raises producer costs and consumer prices and those who believe that the improvements in labor quality offset the additional cost. Depending on the situation, of course, both can be right, which makes economic analysis — and sometimes legal cases — very interesting.
The outcome of the lawsuit will determine whether it is legal for a union to charge a “representation fee” — sometimes called an “agency fee” — for non-union members who are part of a collective bargaining agreement. In 1977 the court decided (Abood v. Detroit Board of Education) that states could allow public sector unions to charge these fees. The practice was last reviewed by the court in 2016 but the justices voted 4-4 and left the law unchanged.
The issue heated up again when a new case, based on constitutional questions, made its way through the legal system and the Supreme Court, now at full strength with the appointment of Justice Neil Gorsuch, agreed to review it.
If the justices decide for the union, nothing will change. If the court decides in favor of Janus, though, it will change the underlying economic structure supporting organized labor. Even though this decision would cover only public-sector workers, the funds from fees paid by these workers is substantial.
The initial economic impact will be felt by the union. According to data compiled by the Bureau of Labor Statistics, there are about 735,000 non-union workers in the public sector – federal, state and local —- who are represented by unions in collective bargaining agreements. It seems likely that if they don’t have to pay fees, most of these workers will choose not to. That would definitely put a crimp in the unions’ budget.
The legal case itself will probably focus on two questions. The first is whether a union’s political activities, such as lobbying, marketing and donating to campaigns, violate the First Amendment rights of non-union workers by using their fees to support political causes they disagree with.
The second question is whether a union’s political actions can truly be separated from its collective bargaining representation. This question, apart from its legal aspects, has some very interesting economics dimensions.
A few years ago, for example, there was a major disagreement between two labor unions representing service workers. It was not a legal case but an argument over the best use of funds. One union wanted to grow by using its financial resources to recruit new members and organize at more workplaces. The other union saw more growth potential in lobbying and other political activities to pave the way.
The dispute between unions is a classic economics problem of resource allocation, familiar to anyone who has pored over a corporate or household budget. What it revealed, though, is that representational expenses are not easily separable from political activity expenses. They are, more accurately, two sides of the same coin.
Politics tends to view things through a polarized lens. The left sees Janus v. ACFME as an anti-union measure, while the right sees it as an overdue reassertion of constitutional rights. The result, though, if the court decides in favor of Mr. Janus, may well be neither of those things.
There is no doubt that such a ruling would present a significant internal marketing challenge for the unions. Essentially, they will have to convince workers of the value of union membership beyond collective wage representation. And since unions tend to weight that representation more heavily on pensions and benefits — like healthcare plans — the case for union membership might not be weakened as much as it might first appear.
Some accommodation to change may be necessary. The players’ union within the NFL, for example, can bring multimillionaire stars and minimally paid apprentices into the same tent for a collective bargaining agreement, while a small army of bargaining agents negotiating individual employment contracts can determine wages for players.
For those watching the Supreme Court case, the wise course would be to adopt a perspective based on Janus the Roman God. The outcome is likely to mark the end of one phase of union structure and the beginning of another.
James McCusker is a Bothell economist, educator and consultant.
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