Right-to-Work Laws and Free Riding

By Davis, Joe C.; Huston, John H. | Economic Inquiry, January 1993 | Go to article overview

Right-to-Work Laws and Free Riding


Davis, Joe C., Huston, John H., Economic Inquiry


I. INTRODUCTION

Section 14(b) of the Taft-Hartley Act permits state right-to-work (right-to-work) laws which prohibit compulsory payment of union dues. By allowing employees to enjoy the benefits of a union contract without the costs of union membership, right-to-work laws can reduce not only the demand for memberships but also the supply as unions lose incentives to organize and maintain bargaining units.

The significance of right-to-work laws as a deterrent to membership, however, is open to dispute. Olson |1971, 88~ reasons that right-to-work laws must be ineffective because the incentive to free ride is so great that large unions could not survive if workers were free not to join. Olson considers the continued existence of large unions in states with right-to-work laws as evidence that these laws are not being enforced. Farber's |1984~ finding that the supply of union jobs relative to demand is comparable in right-to-work and non-right-to-work states also suggests non-enforcement. Hirsh |1980~ finds that while right-to-work laws do not affect coverage, they do affect membership. He infers that free riders account for the slippage, that is, right-to-work laws do not deter unions from organizing firms but they do interfere with unions signing up individual members. Freeman and Medoff |1984, 243~, Bloom and Northrup |1981, 227~ and others point to membership figures indicating that right-to-work laws create serious free rider problems for unions. Some 15.5 percent of employees covered by collective bargaining contracts free ride in states with right-to-work laws, about 2.4 times the 6.4 percent who free ride in other states.(1)

The literature on union membership, however, makes it clear that such bivariate comparisons neglect other factors that could affect free riding. Jones' |1982~ research using the National Longitudinal Survey reveals that nonmembers covered by union contracts are more likely to be younger, to live in the South, and to work in white-collar jobs than members are. Moore, Dunlevy, and Newman |1986~ contend that the same attitudes that give rise to right-to-work laws also affect union membership. When these attitudes are properly controlled for, right-to-work laws have no significant effect on membership. Moore and Newman |1985~ provide a good review of the literature on union membership. Although these studies and others have examined the effects of right-to-work laws on union membership of all workers, the impact on only those workers covered by union contracts has not been as thoroughly explored.

Previous analysis of free riding has been extensive but largely theoretical. This study fills a gap in the literature by developing an empirical model of free riding. Having created a statistical model of free riding we can test the marginal impact of right-to-work laws. We find that, after taking into account other factors that affect the decision to free ride, right-to-work laws remain statistically significant, although of a smaller magnitude than bivariate analysis would suggest.

II. CAUSES OF FREE RIDING

The theoretical model used to explain free riding is abstracted from the standard model of the demand for and supply of union membership that Moore and Newman |1985~ describe in detail. One of the advantages of focusing on workers covered by union contracts is that we avoid the simultaneity problem inherent in modeling the supply as well as the demand for union services. We limit our analysis to the demand for membership because the union, as a rule, must supply membership to all covered workers.(2)

The key variables that influence the demand for membership by covered workers include price (dues and fees), the union wage premium, job security and pressures from peers and community. As in other studies of union membership, data limitations do not allow us to gauge the effect of dues and fees. Where membership is not compulsory, free riders do not face immediate loss of the union wage because by law the union must negotiate the same wages and benefits for nonmembers as for members.

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