The Corner

Binding Arbitration

Former Massachusetts Gov. Mitt Romney (R) held a conference call this afternoon to discuss the Employee Free Choice Act — specifically the “binding arbitration” provision. Together with the “card-check” provision, which removes the guarantee of a secret ballot for workers considering unionization, binding arbitration means that a worker could end up forced into both a union and a contract without ever having a chance to vote for or against either one.

In addition to being “an unprecended attack on the rights of American workers and American citizens,” Romney said that EFCA represents “a grab of power by the federal government” because it takes the power away from management and labor to negotiate their own contract, and puts it in the government’s hands. Not only would the stakeholders — labor and management — lose their negotiating power, but government officials with no business expertise or understanding of particular industries could be granted unilateral power to dictate contracts.

“It would cause entrepreneurs to locate those businesses elsewhere, or not to create them at all,” Romney said. “They may say, ‘I just don’t want to sink my life savings into an enterprise that could become worthless because of this.’”

Marc Ambinder wonders why Romney and others continue to fight EFCA when its chances of passage seem so slim, and I believe he has the correct answer:

I think the Chamber and other business groups are afraid of a compromise that would eschew card check for some sort of binding arbitration process.

Democrats intend card-check as a subsidy for flagging unions’ fiscal health and for their ability to influence future elections. But binding arbitration is perhaps more fundamentally dangerous, as it undercuts the labor-management negotiation that is a key part of a functioning free market. It may be onerous to deal with a union, but how much more onerous to have the government force an employer to accept that union’s demands.

Seven years ago, Paul Kersey of the Mackinaw Center offered an example of what binding arbitration did to the City of Detroit in 1978. If arbitrary and excessive wage scales chosen by bureaucrats can help bring a recovering city back to its knees, just imagine what they could do to a small business with ten employees.

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