Binding Arbitration’s Early Victims

If you’re not sure about how the binding arbitration sections of the Employee Free Choice Act could affect America’s struggling economy, take a look at Michigan and Massachusetts.

That’s what Forbes columnist Shikha Dalmia did in a Wall Street Journal op-ed over the weekend, and she found that binding arbitration rules in those states devastated their economies. Here’s what she writes about Michigan:

In 1969, the Wolverine State embraced a form of compulsory arbitration nearly identical to the one proposed in EFCA to resolve disputes with its police and firefighters. Years later, Detroit mayor Coleman Young -- who had authored the original law as state senator -- rued what he had done. ‘We now know that compulsory arbitration has been a failure,’ he lamented to the National Journal in 1981. ‘Slowly, inexorably, compulsory interest arbitration has destroyed sensible fiscal management and has caused more damage to the public service than the strikes it was designed to prevent.’  …

Compulsory arbitration also nudged other Michigan cities, including the working-class towns of Hamtramck and Highland Park, into bankruptcy. In 1999 an arbitration panel awarded Hamtramck police officers $2.1 million in pay raises and back pay, pushing it into state receivership. Under receivership, which is only used in extreme situations, the state government takes over the city's finances and appoints its own manager to run the city. Hamtramck was ultimately forced to impose a combination of service cuts and tax increases, all of which accelerated the exodus of its residents. Highland Park, wishing to avoid similar arbitration, gave its public safety officers raises it couldn't really afford and was also forced into receivership.” 

Dalmia, “The ‘Free Choice’ Act and Binding Arbitration,” The Wall Street Journal, 07.11.09

Massachusetts didn’t have an easy time with binding arbitration either, Dalmia noted.

Former Massachusetts Gov. Michael Dukakis also tried to limit public-sector compulsory arbitration during his first term. In 1977, Mr. Dukakis argued that compulsory arbitration ‘has removed legitimate management prerogatives in the area of staff assignments, (and) transfers from the control of municipal officials at a time when they are under severe pressure to improve their management and make savings.’ Mr. Dukakis failed to stop compulsory arbitration, but two years later Massachusetts voters approved a ballot initiative that effectively scrapped it.” 

Dalmia, “The ‘Free Choice’ Act and Binding Arbitration,” The Wall Street Journal, 07.11.09

“Should EFCA pass,” Dalmia concluded, “the costs of compulsory arbitration in the private sector will dwarf those in the public sector. That's because businesses, unlike government, can't just bill taxpayers to pay off unions. They have to compete.”

The act, also known as card check, is currently pending in Congress. If lawmakers truly want to help America’s struggling economy recover, they should let the bill remain in legislative limbo. Michigan and Massachusetts already had a taste of what card check can bring. The rest of the states should not have to suffer as well.

Contact:Alexa Marrero| (202) 225-4527 

U.S. House Education and Labor Committee Republicans

Contact: Jason Resnick|(949) 885-2253