Why I Don't Cross Private Sector Union Picket Lines
A behavioral economics/neo-institutional economics explanation
In the preceding post, I set out the case against public sector unions. In the course of doing so, I observed:
To be clear, I am only talking about public unions here. I actually support private sector unions, albeit for reasons I’ll leave for a future post.
This is that post.
First, I come from a long line of union members. Second, Catholic Social Teaching emphasizes that workers have a natural right both to form unions and to strike. As I read the relevant encyclicals and pastoral letters, this teaching is not a matter of prudential judgment, but rather an authoritative teaching to which faithful Catholics must give religious assent. Finally, and most important for present purposes, unions potentially are an important way of minimizing transaction costs.
Labor contracts are subject to moral hazard problems on both sides. Workers shirk (by which I mean providing less effort than that to which they have agreed, whether intentionally or not). Owners behave opportunistically; i.e., providing fewer rewards than promised.
Preventing such opportunistic behavior on both sides is one of the principal functions, in economic terms, of any labor relations system. Hence, at least among lawyer-economists in the transaction costs branch of law and economics, the once widely-held view that unions exist to capture monopoly rents for workers in the form of higher wages and superior benefits has given way to an understanding that unions play an important role in reducing transactions costs by constraining strategic behavior by management.
Because workers value job security, firms can obtain lower labor costs if they can credibly promise to refrain from opportunistic conduct. One way of bonding that promise is to sign a collective bargaining agreement with a union. Collective bargaining transforms the decision-making process from unconstrained management prerogative to limited managerial discretion bounded by claims of right sounding under the agreement. The seniority system, with its ports of entry, internal promotion ladders, and protection from lay-offs, offers job security. Union monitoring helps ensure compliance by the firm with its contractual obligations. Grievance procedures allow for dispute resolution.
Collective bargaining thus becomes a burden on the enterprise, in that it raises the transaction costs associated with decision-making processes and limits management discretion. Yet, because that burden serves to make the firm’s promises to its employees more credible, it is one rational managers would accept. (Putting the theory into practice, of course, has been a problem. Unions have been plagued by internal agency costs and been a source of social costs.)
A long time ago, I explained all this to a colleague in the context of explaining why I have a general rule against crossing picket lines (by private sector unionized workers but not public sector unionized workers for the reasons discussed in the preceding post). He objected (despite being a good LBJ-style Democrat) that, whatever merit my arguments might have, I had not made a case for refusing to cross all picket lines.
He had a point. Neither efficiency nor morality compels the conclusion that every strike is worth respecting.
My rule of thumb against crossing picket lines, however, is economically justified as a transaction cost minimizing decision-making heuristic. Bounded rationality is a neo-institutional economics concept capturing the idea that we all have inherently limited memories, computational skills, and other mental tools. These limitations become a significant constraint on decision making under conditions of complexity and uncertainty. Under those conditions, we can reduce decision-making costs by adopting a heuristic—i.e., a rule of thumb—for making judgments. Yes, any rule of the thumb inevitably produces errors, but the benefit in time and effort saved may outweigh error costs. In this case, a rule of thumb of not crossing any picket line saves me the time and effort necessary to figure out whether a given strike is morally and economically justified.