A Lesson in the UPS Layoffs

The episode points toward the need to modernize the National Labor Relations Act

Letter to The WSJ. 

"Your May 1 editorial “Sean O’Brien and the UPS Layoffs” rightly notes that rich labor contracts can boomerang on the workers they’re supposed to help. My new research with Revana Sharfuddin shows the problem isn’t unique to United Parcel Service—it’s systemic.

Three decades of U.S. and European experience and 147 empirical studies demonstrate that when a union wields monopoly power to extract large, across-the-board wage hikes, employment growth slows, capital and R&D spending fall and the odds of future layoffs increase. Such dynamics account for more than half of the Rust Belt’s manufacturing job losses between 1950 and 2000.

The wage premium that once justified such risks has also withered. The private-sector union “bump” usually disappears in five to 10 years, leaving displaced workers chasing other, lower-paid jobs. In short, headline-grabbing union deals are delivering short-run sugar highs and long-run hangovers.

Modernizing the National Labor Relations Act so that employees are allowed to bargain for themselves would expand worker choice and force unions to compete for loyalty through the right mix of pay and benefits—all while ending the free-rider complaint that unions have with right-to-work laws.

Liya Palagashvili

Mercatus Center"