The Corner

Removing Union Wage Ceilings

Few people know that union contracts do not just set minimum pay. The rates they stipulate are also maximum wages. Businesses may not pay employees more than they have negotiated with the union.

It may be surprising, but few unions allow individual raises. They prefer uniform group rates. Unions want workers to view them as the reason they are getting ahead. After all, why would a worker getting above the union rate pay dues? So unions usually (though not always) negotiate contracts that base pay on seniority and job classifications.

In fact, the National Labor Relations Board (NLRB) will strike down any higher pay that’s not in the contract. So when the Brooklyn Hospital Center rewarded its best nurses with $100 gift cards, the NLRB ordered it to cease and desist. The Register Guard Publishing Co. wanted to promote a new advertising contract. The company rewarded employees who sold ads under that contract with a commission — on top of their regular pay. The NLRB struck that down, too. Companies may not pay more than the union rate without their union’s permission.

Consequently, union members often cannot get ahead through hard work. High-performers get the same pay as slackers. This makes no sense. Even countries with strong union movements, such as Australia or the U.K., allow individual union members to earn higher wages.

Representative Todd Rokita of Indiana has introduced legislation to fix this. The Rewarding Achievement and Incentivizing Successful Employees (RAISE) Act would let employers pay productive employees more than the union rate. Unions could still set a wage floor, but they could not impose a wage ceiling. Under the RAISE Act, unionized employers could add performance-pay without the union vetoing it.

This would boost both workers and businesses. Employees usually become more productive when their employer rewards hard work. This higher productivity both increases profits and funds the pay increases. Studies show that average wages rise 6 to 10 percent when companies adopt performance pay. For the typical private-sector union member, that would mean a $2,700 to $4,600 raise.

Conservatives should like the RAISE Act’s proposed policy. The American dream involves working hard to get ahead. Outdated labor laws should not deny union members this opportunity.

James Sherk is Senior Policy Analyst in Labor Economics at The Heritage Foundation.

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