Labor Issues

ECO 435

Labor Issues: Right-to-Work and Licensing

This assignment focuses on the heart of “political” economy — the rights of labor versus unionized labor versus the rights of corporations.In a sense it is part of the ancient struggle between capitalists and workers that was the heart of the writings and theories of both Adam Smith and Karl Marx.It involves the legal concept of the right to “free association” ( and — go to section called “conflict between organization and members” halfway down the page) that comes from both natural law and the U.S. Constitution; in economics it is related to the freedom of economic choice that is the basis of “perfect” competition and consumer sovereignty.The opposite condition would be the existence of monopolies, and both unions and licensing are basically forms of monopoly.

Since 1947 states have been allowed to vote to classify themselves as right-to-work (RTW) or non-RTW.The Taft-Hartley Act was a revision of the earlier Wagner Act (1935) that made provisions for companies to engage in pro- or anti-unionization practices.This was originally viewed as simply a move towards greater worker rights, but it eventually developed into a contentious political issue as well.One of the foundations of capitalism is a belief in individual rights, which requires a certain degree of freedom.Restrictive labor laws were (and are) often considered to impinge on the rights of both individuals and corporations.

A more recent variation on the issue of worker rights involves licensing requirements.A student was arrested recently for providing free haircuts to homeless persons.The charge?He was not licensed to provide cosmetology services in the state of Arizona.There are various other occupations that have similar laws.

There are not necessarily any right or wrong answers here, yet Adam Smith’s capitalism would probably be likely to oppose very much licensing, and would also tend to be anti-union.Yet Smith was originally more interested in ethics and morality and there are elements of both in these issues.

PART I – Unions, union rules, and the right to work

We often think of unions as existing simply to increase member wages under the threat of strikes and work stoppages.In reality, management (who are likely to be non-unionized) are more wary of various work rules that serve to increase costs and decrease efficiency and profits.

The following websites will start you out in understanding the various aspects of the labor questions involved.There are many more that could help as well, but these may be a good place to start.You are asked to simply write brief “informative” summaries that show you have at least an introductory understanding of the following concepts:…

a)What the “right-to-work” law is?How many states currently have a RTW law?

b)What does not having a RTW law force employees to do (if the workplace is unionized)?

c)Why is it perceived as being anti-union and pro-business?

d)What is “featherbedding?”

e)What are some examples of rather absurd or archaic work rules promoted by unions?

f)How have union rules caused a substantial increase in cost of construction for projects involving New York City’s MTA (Metropolitan Transit Authority)?

g)In states that have a general RTW law, have states ever made exceptions in certain activities (occupations) that would then favor unions?

PART II – Licensing

Those that have so-called “professional” occupations have often established procedures for someone to obtain their license to practice a given skill.For example, in New York licensing of CPA’s was recently changed so that there is now a requirement for 150 credit hours of college education, rather than the former requirement of only 120.Many other occupations have done similar things.Yet the question is whether it serves public welfare, or just the welfare of those within those occupations?Usually such laws are instituted at the state level.There are many websites you can find that provide examples, but what we are interested in is whether there is excessive licensing, and whether it serves the public interest.Many of you may be more familiar with the controversy over city taxi licensing versus allowing of such “free-market” non-licensed services such as that of Uber.

The best introduction is the following, but you can easily find more by searching something like “absurd state occupational licensing.”

PDF file of above report:

Possible reforms:…

a)Why do occupations engage in occupational licensing?

b)What are the best examples you can find of non-sensical or absurd licensing requirements?

c)What criteria do you think should be established for licensing, and how should that decision be made?

d)What possible benefit or benefits does the public derive from licensing in those cases where you think it is warranted?

e)What would be the economic and legal basis (under U.S. laws) for eliminating or opposing licensing restrictions?

f)(optional) Do you have any personal examples where you were helped or harmed by licensing?

PART III – Make connections

Think about the similarities and differences between these two labor issues.Labor is one of the largest areas we study in economics and both topics are currently in the news.

a)How are they similar?

b)How are they different?

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