The Yellow Dog Contract: Bring It Back!

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The Yellow Dog Contract is an honorable contract. It states that one of the conditions of employment is that the worker agrees not to join a union. It is no different, in principle, from the requirement that if you come visit someone in his house at his invitation, you must wear a funny hat, or agree not to associate with anyone he specifies, say, an enemy of his. In each case, that of the firm, and the private home, the one making this "demand" is exercising his rights of free association. He is saying, in effect, "if you want to associate with me, you must do thus and such." You are perfectly free to refuse to do so, but then, he will not associate with you. He will not allow you into his home, nor agree to employ you.

But suppose you need a job? Is it not "unfair" that the employer will not hire you unless you give up, in advance, your rights to organize with others for better wages and working conditions? No; this situation is no more illicit than if you need to go to a party, and hate to wear a funny hat but the host insists upon it. Or demands, as the price of entry, that you not consort with his enemies. After all, it is his house.

We all assert our rights of free association through implicit "threats" of this sort. The wife says to the husband, "If you gamble away our money, I’ll leave you." The husband may say to the wife, "If you run around with other men, I’ll divorce you." The customer says to the shop-keeper, "If you give me a bad product, you’ll never see me in here again." The restaurant owner says to his diners, "If you can’t behave yourself, I’ll have to ask you to leave."

Free association is a crucially important element of liberty. Without the right to associate with those we (mutually) choose, we are in effect and to that extent, slaves. The only thing wrong with slavery was that the slave could not quit. He was forced to "associate" with the slave master against his will.

But the principle is the same with the Yellow Dog Contract. When it is banned, the employer is compelled to associate with a potential union member. To force him to do so is to coerce an innocent man. It is to violate his right to freely associate with others on a voluntary basis.

The argument for doing so is that without unions, wages would plummet to whatever low levels the "generosity" of employers would yield. But nothing could be further from the truth. Wages are, rather, determined on the basis of (marginal revenue) productivity, which in turn stems from how hard and smart we work, and with the cooperation of how much and of what quality capital equipment. Wages were rising long before the advent of unions in the early part of the 20th century, in industries (computers, banking, insurance, baby sitting, lawn mowing) and countries (Hong Kong, Singapore, Taiwan) without any such labor organizations. Labor unions reached their apex decades ago, and now account for single digits in the private sector; during this sharp decrease in the proportion of workers "protected" by organized labor, wages catapulted.

No, labor organizations are instead an economic tape-worm, infesting firms and eating away their substance. It is no accident that what is now the "rust belt" in the northeastern quadrant of the country is the most heavily unionized sector of the nation, and suffered the greatest degree of plant closings when they were trying to suck the blood of entrepreneurs. Nor is it any puzzle that the south, the least unionized part of the country, became one of the fastest growing areas. Parasitical labor organizations in the coal-fields were also responsible for the economic devastation of West Virginia.

Are unions per se illegitimate? No. If all they do is threaten mass quits unless their demands are met, they should not be banned by law. But as a matter of fact, not a one of them limits itself in this manner. Instead, in addition, they threaten the person and property not only of the owner, but also of any workers (they call them "scabs") who attempt to take up the wages and working conditions spurned by the union. They also favor labor legislation that compels the owner to deal with the union, when he wishes to ignore these workers and hire the "scabs" instead.

The Yellow Dog Contract, in addition to safeguarding employer and employee rights of free association, also serves as a remedy against union inflicted economic disarray and violence against innocent people and their property. Long live the Yellow Dog Contract. Bring it back. Now.

Dr. Block [send him mail] is a professor of economics at Loyola University New Orleans. He is the author of Defending the Undefendable.

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