The “Free Rider” Argument
For Compulsory Unionism
I am just a working man. But, if the state
can pass a law which will protect my
“right”-to-ride the coat-tails of my labor
association without paying my share of the
association’s expenses, I think the same
law should entitle me to live in a community and enjoy all the benefits of city
facilities without paying taxes to the city.
It seems to me to be the same principle
exactly. As a matter of fact, if I can be a
free-rider of a labor union, I should be
protected by state law in my “right” to be
a free-rider of any collective enterprise, be
it city, county, state or national government, club, church or whatever it may be.
I don’t know who will get together and
provide these facilities for my free
use. . . .’
THEFREE RIDER ARGUMENT, set forth in this
letter to a union newspaper, is the most
familiar and yet the weakest argument for
compulsory unionism. Upion spokesmen
assert, correctly, that under federal law they
cannot exclude non-members in the bargaining unit from the benefits of union negotiated
terms of employment and union representation in grievance procedures. Therefore, they
claim it is fair that all employees in the
bargaining unit be compelled at least to pay
their fair share of the cost to the union of
negotiating those benefits for them.’ As
George M. Harrison, spokesman for the
Railway Labor Executive Association said,
“Activities of labor organizations resulting in
the procurement of employee benefits are
costly, and the only source of funds with
which to carry on these activities is the dues
received from members of the organization.
we believe that it is essentially unfair for
nop-members to participate in the benefits of
those activities without contributing any-
thing to the cost. This is especially true when
the collective bargaining representative is
one from whose existence and activities he
derives most important benefits and one
which is obligated by law to extend these
advantages to him.”-’ In Mr. Harrison’s
words, the purpose of the unions ‘7n seeking
and obtaining the amendment to the Railway
Labor Act in 1951 to permit the check-off for
payment of dues was to eliminate the ‘free
rider,’ the guy who drags his feet, a term
which is applied by unions to non-members
who obtain, without cost to themselves, the
benefits of collective bargaining procured
through the efforts of the dues-paying memb e r ~ . ”T~h e Supreme Court has accepted this
theory.’ As the Court said in 1954, in
upholding the agency shop, “Congress recognized the validity of unions’ concern about
‘free riders,’ i.e., employees who receive the
benefits of union representation but are
unwilling to contribute their share of financial support to such union, and gave the
unions the power to contract to meet that
problem while withholding from unions the
power to cause the discharge of employees
for any other reason.’’6
Individual Benefits
WHATW E DESCRIBE here as an individual
benefit is the sort which could be enjoyed by
employee Able without being enjoyed at the
same time by employee Baker. These benefits roughly correspond to what the economists call private goods.’ Able could have a
longer vacation, a better parking space, a
better medical plan, or even a higher wage
rate, than Baker. If the law did not require
that the certified union be the exclusive
bargaining agent for all employees in the
unit, a union could negotiate a wage rate or a
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medical plan on behalf of its member,
employee Able, without affecting non-member employee Baker. In that situation, Baker
would not be a free rider as to that benefit.
H e would be an uninvolved bystander. However, the picture changes when the union
becomes the representative for both Able and
Baker. Nonmember Baker now receives the
negotiated union wage or medical plan. If it
is in fact a net benefit gained for him by the
union, the free rider issue emerges. If he is
made to pay his “fair share,” which would
tend to approach if not equal the amount of
the dues for full-fledged union members,
fairness is achieved. Or so the argument goes.
However, there are two unproven assumptions here.
One assumption is that union negotiators
actually cause real benefits to the employees
in the bargaining unit. This assumption has
been accepted by the Supreme Court,’ and it
is generally assumed that because the conferral of a benefit on the employees follows the
union negotiations, therefore that benefit
was caused by those negotiations and would
not have occurred without them. In many
cases this is evidently true, although the
empirical basis for this claim has been seriously questioned.’ But to raise this conjecture
to the level of a universal assumption is to
accept the fallacy of post hoc ergo propter
hoc-because event B occurred after event A,
therefore event B was caused by event A.
Another difficulty in assuming that union
negotiations cause real benefits to the
employee is found in the likelihood that
collective bargaining in general, as now practiced in the United States, is a contributor to
inflation. While “the most certain impact
unions have had in our society’s distribution
of wealth has been to give to the organized
worker and to take away from the unorganized,”“ the apparent gains from union bargaining tend to be cancelled out by inflationary government policies which themselves
are the result of union insistence.
T h e “common impression” that unions
increase real wages, wrote Friedrich A. von
Hayek, winner of the 1974 Nobel Prize in
Economics,
is due partly to the fact that wage gains,
which are today mostly obtained in union
negotiations, are for that reason regarded
as obtainable only in this manner and even
more to the fact that, as we shall presently
see, union activity does in fact bring about
a continuous rise in money wages exceeding the increase in real wages. Such
increase in money wages is possible without producing general unemployment only
because it is regularly made ineffective by
inflation-indeed,
it must be if full
employment is to be maintained.. . . The
chief reason for this is that the dominant
“full-employment” doctrines explicitly relieve the unions of the responsibility for
any unemployment and place the duty of
preserving full employment on the monetary and fiscal authorities. T h e only way
in which the latter can prevent union
policy from producing unemployment is,
however, to counter through inflation
whatever excessive rises in real wage
unions tend to cause. . . .
T h e process is sometimes described as
though wage increases directly produced
inHation. This is not correct. If the supply
of money and credit were not expanded,
the wage increases would rapidly lead to
unemployment.”
T h e second assumption underlying the
free rider argument is that the “fair share”
exacted from Baker by the agency shop is
really fair compensation for what he has
received. Even if the union, acting as exclusive bargaining agent, did cause an increase
in real individual benefits to Baker, it would
not follow that the imposition of the “fair
share” payment on him would really be fair.
For it is assumed that the mandatory monetary fee is the only cost that would thus be
inflicted on Baker. This overlooks the realm
of intangible costs. For religious, social or
other reasons, Baker might find the idea of
being forbidden to bargain for himself and
being required to pay money to the union so
repugnant that the total cost to him, consisting of his “fair share” monetary payment
plus the intangible detriments, might far
outweigh in his eyes any benefits he would
receive from the higher wage scale.” Indeed,
the deprivation of his right to bargain for
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himself is in itself a substantial though intangible payment even if he does not have to pay
any money. Unless we are to regard Baker’s
personal preferences and convictions as
insignificant, which is hardly in keeping
with our general emphasis upon the First
Amendment freedom of association and the
right of privacy, Baker may be paying for the
union-obtained benefit a price far in excess
of his “fair share” monetary payment. H e
may be overpaying for it. Even the tendency
in some recent decision^'^ to recognize a right
of employees to withhold their agency shop
payment for religious reasons would not
solve the problem, especially if the employee
is required to donate an equivalent amount
to a charity, even one of his own choice. And
there are legitimate personal aversions to
forced payment of the “fair share” which
cannot properly be classified as religious.
In short, there is no way of gauging the
actual cost (fair share payment plus intangible detriments) of the agency shop to each
employee who is not a member of the union.
Moreover, the requirement to accept the
financial burden of union membership is a
strong compulsion to full union membership.
All but the hard-core recalcitrants are likely
to acquiesce in such membership if forced to
accept the financial burden regardless of
whether they become members.I4
Where the benefits obtained by the union
could be limited to union members, the union
could avoid free riders by negotiating those
benefits only for its members. If there are
free riders as to these benefits, it is entirely
because the unions insist on the privilege of
acting as exclusive bargaining representative
for all the employees in the bargaining unit.
In a real sense, the employees who are forced
to accept an unwanted union as their bargaining agent are forced riders, rather than
free riders. As Donald R. Richberg, coauthor of the Railway Labor Act, put it,
“The unions took away by law the right and
freedom of individual employees to contract
for themselves-and now the unions demand
that non-members be compelled to pay for
having their freedom of contract taken away
and exercised against their will! T h e nonmember is not a ‘free rider,’ he is a captive
pa~senger.”’~
If the unions really wanted to
avoid free riders with respect to such benefits, they would campaign for a termination
of the duty of the certified union to act as
exclusive bargaining agent for all the
employees in the bargaining unit. Instead,
the unions have consistently opposed all
efforts to relieve them of the exclusivity
burden of which they complain. Indeed, to
the extent the union takes in more in forced
payments than it returns in benefits to the
unwilling employees, the union itself is a
“free rider.”
Collective Bene&
THERE
IS a second type of employment benefit, which is necessarily enjoyed by all
employees in the unit and which could not be
restricted only to union members. This is
what the economists call a public or collective
good. “A public or collective good is usually
defined as one for which the total supply of
the good can be used by any individual
without reducing the amount available to
others.”“ T h e distinction has been described
as follows:
A theoretical analysis of the free-rider
requires an understanding of the difference between ‘public’ and ‘private’ goods.
By definition, for private goods, the individual purchasing the good receives all the
benefits from consumption; conversely,
unless a purchase is made, the individual
does not enjoy the benefits from consuming the good-under these conditions, free
riders do not exist by definition. In contrast, in consuming public goods, an individual may be able to ride free, Le., to
obtain benefits without incurring the associated costs. It is essential to emphasize,
however, that the existence of public goods
and services is only a necessary, but by no
means sufficient, condition for free riding
to occur.
Public goods, by definition, are jointly
consumed. It is, therefore, impossible to
exclude anyone from receiving the benefits
from them, whether payment is made for
their provision or not.I7
When a union acting as exclusive bargaining agent negotiates better lighting or air
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conditioning for the shop, the benefit necessarily is enjoyed by members and nonmembers alike. Even if exclusive representation were repealed and a union acting for its
own members negotiated better lighting, that
benefit would still be enjoyed by non-members who work in the same shop under the
same lights as the union members. As to
these benefits the non-paying employee may
be said to be a free rider. Indeed, in some
situations it could be immoral for an
employee to refuse to contribute his fair
share to the cost of obtaining such a benefit.
This could be the case where the benefit
gained by the union is clear, where it could
not be obtained without the union and where
the union is demonstrably in need of his
financial support in order to work for such
benefits. In another context, it could be
immoral to refuse to contribute to a church,
the Red Cross or other private agency which
is performing disaster relief services in one’s
own community and which is greatly in need
of private donations to carry on that work.
T h e issue, however, is not whether an
employee in a special situation might have a
moral duty to contribute to the union’s efforts
which benefit him in this way. T h e issue is
whether he ought to be compelled by law to
contribute. If there were no exclusive representation privilege, and competing unions
were negotiating benefits which were collective goods, benefiting all employees indiscriminately, the logic of the free rider argument is that all employees should be compelled to contribute to all the negotiating
unions. But since the unions insist on the
exclusivity privilege, their claim is that all
employees should contribute to that one
union which claims to benefit them all. I t is
difficult to distinguish this assertion from a
claim that all citizens should be compelled to
contribute to the Red Cross, the YMCA and
even a church. Interestingly, Patrick Henry
used the “free rider” argument in the debate
on the Virginia Statute of Religious Freedom
to support his contention that all citizens
should be required to contribute to a church.
One local petition he used during the debate
said: “As every M a n in the State partakes of
the Blessings of Peace and Order, which
results no less from religion than the opera-
tion of the laws, so every M a n should be
obliged to contribute as well to the Support of
Religion, as that of Civil Government. Nor
has he any Reason to complain of this, as an
Encroachment upon his religious Liberty, if
he is permitted to worship God according to
the Dictates of his Conscience.””
T h e free rider argument rests on a further
assumption that negotiating benefits for all
employees in the unit rather than merely for
its own members imposes an added financial
burden on the union and its membership. As
to grievance proceedings, this is true, since
the union undergoes expense in representing
individual non-members. But this “burden”
is demanded by the unions through their
insistence on exclusive representation. As to
the general negotiations with the employer, it
is an unproven assumption that it is more
expensive for the union to negotiate benefits
(whether collective or otherwise) for all the
employees in the unit than it would be for the
union to negotiate merely for its own members.” Indeed, it may be that it is less expensive for the union to bargain as the exclusive
bargaining representative than it would be
for the union to bargain only for its members
while other unions were competitively bargaining for their own members.”
In summary, employee Baker’s ability to
act as a “free rider” is caused solely by the
unions’ insistence on the extraordinary privilege of exclusive representation, except as to
those union-secured benefits which are truly
collective or public goods, benefiting all the
employees indiscriminately. As to those collective benefits, he should no more be compelled to contribute to the union than to the
Salvation Army. T h e difficulty is created by
the fact that the Wagner Act, by imposing
exclusive representation, made all benefits
applicable to all employees and thus “converted a set of almost totally divisible, and
therefore private, services which by definition are immune to free riders into a set of
public goods which are susceptible to free
riding. Clearly, the free rider issue in the
case of labor unions is far more contrived
than real.”*’
T h e simplest way to avoid the free rider
problem would be to eliminate exclusive
representation and to allow unions to nego-
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tiate for their own members only. As to
individual goods, the benefit of which could
be restricted to union members, the free rider
problem would entirely disappear. As for
collective goods (light, air conditioning, etc.)
negotiated by the particular union, the benefit to non-members and the consequent
potential of free riders would be no more a
source of justified complaint for the union
than the lack of compulsory contributions
would be for the YMCA, the Salvation Army
or the Little League.
T h e government of the United States has
the power to compel payment of taxes by all,
thus preventing, more or less, the “free rider” on government. T h e “free rider” argument assumes that the union and the
employer, in making the collective contract,
are acting as the government of the bargaining unit with the power to tax the employees
who are its “citizens.” This governmentalization of the union and employer is a persistent theme in the arguments for compulsory
unionism.
‘United Transportation Union News, February 17,
1979, 5. ’See A. Pulsipher, “The Union Shop: A
Legitimate Form of Coercion in a Free-Market Economy,” 19 Industrial and Labor Relations Review 529-32
(July, 1966); J. Spielmans, “Bargaining Free versus
Union Shop,” 10 Industrial and Labor Relations
Review, 609-10 (July 1957). Florida, a Right-to-Work
state, enacted a law in 1977 to provide that public
employee unions “shall not be required to process
grievances for employees who are not members of the
organization. Act of June 24, 1977, ch. 77-343, sec. 14,
1977 Fla. Laws 1476; Fla. Stat. sec. 447.401 (1977).
’Hearings on H.R. 7789, House Committee on Interstate and Foreign Commerce, 81st Cong. 2d Sess., p. 10,
quoted in International Assn. of Machinists v. Street,
367 U.S. 740, 762 (1961). ‘Transcript of Proceedings,
Presidential Emergency Board No. 98, appointed pursuant to Exec. Order No. 10306, Nov. 15, 1951, p. 150;
quoted in International Assn. of Machinists v . Street,
356 U.S. 740, 763, fn. 1 4 (1961). ’In Railway
Employees’ Dept. u. Hanson, the 1956 case which
sustained the Railway Labor Act’s authorization of the
union shop, the Court said: “We only hold that the
requirement for financial support of the collectivebargaining agency by all who receive the benefits of its
work is within the power of Congress under the Commerce Clause and does not violate either the First or the
Fifth Amendments.” 315 U S . 255, 238 (1956). 6Radio
Oflcers’ Union u. N L R B , 347 U S . 17, 41 (1954), see
also International Assn. o/ Machintsts v. Street, 367 US.
740, 759-764 (1961). ’Bennett and Johnson, “Free
Riders in U.S. Labour Unions: Artifice or Affliction?”
British journal ojhdustrial Relations, July 1979, 158.
*See Radio Oflcers’ Union u. N L R B , 347 U S . 17, 41
(1954); Railway Employees’ Dept. u. Hanson, 351 US.
225,238 (1956). ‘See Bennett and Johnson, above, note
7, at 162-67. “Schatzki at 932; see also Cartter &
Marshall, Labor Economics: Wages, Employment &
Trade Unionism (1967), 361-81. “Hayek, The Constitution ojliberty (1961), 271-72, 280-281. “See Berkowitz, “The Economics of Trade Union Organization
and Administration,” Industrial and Labor Relations
Review 575, 580 (July, 1954). ”See Grand Haven
School District u. Grand Haven Assn. of Education
Secretaries and Jantz (Circuit Ct., Ottawa County,
Mich., M a y 7, 1979). “Hanslowe, Dunn and Erstling,
Union Security in Public Employment: OfFree Riding
and Free Association (Institute of Public Employment,
Cornell University, Jan. 1978), 40; see New jersey
Turnpike Employee Union, Local 194 u. New Jersey
Turnpike Authority, 117 N.J. Super. 349, 284 A 2d
566, 568 (1971), affd., 64 N.J. 579, 310 A 2d 224
(1973). ”Richberg, Labor Union Monopoly (1957),
120-121. “Reynolds, “The Free Rider Argument for
Compulsory Union Dues” (Paper presented at the
Conference on Economic Aspects of Union Membership: Free Riders or Paying Customers, Washington,
D.C., September 15, 1978), 12. ”Bennett and Johnson,
above, note 7, at 158. “Stokes, Church and State in the
United States (1950), Vol. I, 389. I9See Reynolds, 9.
”See Reynolds, 9-10. ”Schatzki, “Majority Rule,
Exclusive Representation, and the Interests of Individual Workers: Should Exclusivity be Abolished?,” 123
University o/ Pennsylvania Law Review 897, 932, see
also Burton, “Are Trade Unions a Public Good/Bad?:
T h e Economics of the Closed Shop,” (Paper presented
at IEA Conference on Trade Unions, the Economy and
Society, London, Dec. 2, 1977; available from Kingston
Polytechnic School of Economics and Politics, Kingston
Upon Thames, England).
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