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An interesting argument came up among students of mine recently. They are talking among themselves about the justification for allowing a closed shop. A closed-shop is perhaps the most objectionable and coercive aspect of unionization. Sure, people ought to have the right to associate and bargain collectively for compensation with an employer, but from that it does not follow that non-supporters have to have their rights to not associated trampled upon.

In other words, a closed-shop means this – if a majority of a workforce votes to form a bargaining unit, then all workers at a closed shop are forced to be part of that unit. This means that all wages and benefits on behalf of the unit would be applicable to him, but it also means that the non-supporter is forced to pay dues to the union that he does not wish to be a part of. Of course, the non-supporter is also prohibited from negotiating with the employer on his own terms.

So what is the economic justification for this? I don’t see one. But my (extremely good) students advanced the following idea:

… voluntary unions face a collective action problem because collective bargaining would become a public good; workers who don’t pay dues will benefit from the negotiated wages.  That’s one reason that the closed shop was created.

That public goods justification seems odd. The potential for free-riding only comes about when union negotiated wages and benefits must be awarded to all people. That does not follow. All a contract requires is that parties to the contract adhere to it. In fact, the public goods problem works in the opposite direction. If the union negotiates higher compensation, why should I not be permitted to accept a lesser package? Is the argument that this is free-riding because it improves his competitive position? That would be odd – we’d end up having to argue that a non-supporter free-rides if he gets higher wages but doesn’t pay dues to support the union and that he also free rises if he is put in a superior competitive position because the union does not guarantee his higher compensation?

One Response to “Open Shops as a Public Good?”

  1. Salem says:

    The other objectionable part of the closed shop is that it prevents competition among unions for members. As long as teachers have a choice between NUT and NASUWT, it keeps both unions honest because individual members have both voice and exit. If the NUT were given a closed shop, those options would be reduced.

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