Do you know that federal law caps the wages of more than 8 million middle class workers? Union rates set both the minimum and the maximum that union members can earn. Employers may not pay individual workers more than a collective bargaining agreement calls for without negotiating with the union.
But strange as sounds, unions do not want individual workers to earn more. Unions want workers to view their union — not their own efforts — as the reason they get ahead. So they usually insist on contracts that set pay by seniority schedules where everyone gets the same raise, no matter what they contribute.
Workers do not have the freedom to negotiate for higher wages. Even if an employer wants to pay a deserving employee more, and that employee wants to accept it, the law prevents it.
This holds good workers back. No matter how productive they become, no matter how much they contribute, hard-working employees cannot earn more than their union has negotiated for them. The diligent union member putting in an honest eight hour day gets the same seniority-based raise as the slacker exerting half that effort.
Allowing unions to try to raise wages makes sense — although the bankrupt Detroit automakers show that does not always work out so well in practice — but why should the law allow unions to hold productive workers back?
Legislation introduced yesterday lifts the “seniority ceiling” that unions put on their members’ wages. Sen. David Vitter (R-LA) and Rep. Tom McClintock (R-CA) introduced the Rewarding Achievement and Incentivizing Successful Employees (RAISE) Act that amends the National Labor Relations Act (NLRA) to allow employers to pay individual workers higher wages without negotiating over it.
Under the RAISE Act unions could still negotiate for higher wages, but they could only set the minimum — not the maximum – that workers earn. Employees — through their own productivity — could always earn more than the union contract calls for. Unions would never have the option of saying “no thanks” to a raise on a workers’ behalf.
RAISE leaves intact the ban on discriminatory pay increases: employers could not hand out raises anti-union workers to undermine union support. But they could pay more to workers whose work deserved it.
This gives workers back the freedom to earn more through their efforts. Why should the law force exceptional employees to accept average pay increases?
The RAISE Act also means higher wages without hurting the economy. Economic research shows — not surprisingly — that workers respond to incentives. Employees work harder when their employers reward their efforts than when they don’t. If the RAISE Act passed, the 8.6 million union members regulated under the NLRA would become more productive and earn higher wages while their businesses would earn higher profits.
Economic research suggests the typical union members would earn between $2,600 and $4,300 more a year if the law permitted performance pay. Imagine employers and employees working together to create more wealth instead of fighting over how to redistribute it. That — not borrowing from the next generation — is real economic stimulus.
James Sherk is the Bradley Fellow in Labor Policy in the Center for Data Analysis at The Heritage Foundation.