The Free-Rider Problem

Even though collective agreements generally cover all the workers in a particular category (directly or indirectly), membership is seldom 100%. As a result workers who are not union members often get a ‘free ride’. They benefit from the union’s bargaining power without actually paying for it. Conor Cradden[1] takes a look at the problem, and some of the solutions which have been tried.

Anyone who has studied economics will know about the “free rider” problem. Free riders are people who avoid paying for things because these things are ‘non-excludable’ — they are available to everyone, whether or not they have paid. So why join?   For unions the problem is a crucial one.

Logically, there are two ways in which unions can respond. They can seek a regulatory solution, making it compulsory for everyone who benefits from union services to contribute to the cost of providing them, or they can adopt a market solution: seeking to convince workers that they offer goods and services which are not available otherwise, and which are worth paying for. What it comes down to is that unions can either try to make non-members join, or they can try to persuade them to join.

Regulatory solutions to free riding are known as union security practices (see Box 1). These are arrangements arising from collective agreements or labour legislation whereby an employer cooperates with a recognised union to ensure that the union's membership and/or fee income is as high as possible. These are most commonly found in collective agreements, and very occasionally in labour legislation. They usually commit employers to insisting that workers be union members, or offer union members some kind of preferential treatment. In some cases they insist that non-union workers pay dues to the union in some other form.

Union security practices may seem to be an obvious answer, and it was once common to find such clauses in collective agreements, particularly in the English-speaking world and in Scandinavia. But over the last twenty years they have been increasingly challenged (see Box 2). Only in South Africa, where COSATU successfully argued for the protection of union security practices in the post-apartheid constitution, and in New Zealand, where a new “agency shop” model (see Box 1) has just been legalized, does the pendulum seem to be swinging the other way.

Are these practices legally justifiable? This may depend on your interpretation of the principle of freedom of association (Articles 20 and 23 of the Universal Declaration of Human Rights, and ILO Convention No. 87). There can be no doubt that this is the legal bedrock of the right to organize, but does it also protect the right to refuse to join a union? Article 20 of the UDHR takes what appears to be a clear stand: “No one may be compelled to belong to an association.” What counts as compulsion is unclear; nor is it clear whether this article applies to unions. The ILO position on the question is more neutral. They hold that: “…systems which prohibit union security practices in order to guarantee the right not to join an organization, as well as systems which authorize such practices” are compatible with Convention No. 87.[2]

Despite the ILO’s studied neutrality, arguments based on the freedom of association have increasingly been used to justify banning closed and union shops. This argument has been less successful with respect to the agency shop. Of the six main types of union security practice (see Box 1), the agency shop model is unique in that it does not seem to represent a violation of the negative right to freedom of association. A 2003 decision by one of the EU’s law-making bodies seems to confirm this view,[3] and both the Australian and New Zealand Councils of Trade Unions have recently argued in favour of bargaining fees on the same grounds (unsuccessfully in Australia; successfully in New Zealand).

It could be argued that since the right to refuse union membership has not been clearly established in international law, appealing to freedom of association in order to outlaw union security practices is simply a cover-up for policies which are aimed at making union organisation as difficult as possible.

The ambiguity could also be a reflection of the wide variation in national legal systems (see Box 2). The extent to which the presence of free riders is actually experienced as a problem by union members and activists, and therefore the importance which union security practices have in each country, depends on the history and traditions of trade unionism in each country. We should not assume that union security practices are seen as desirable by unions in countries where they are unlawful.

In Italy, for example, the basic attitude of the labour movement is that trade unions should represent the interests of all workers, not merely those who are members. The tolerant attitude to non-members — who are not really thought of in the pejorative sense as free riders — arises from the perceived need to “guarantee a maximum of pluralism and spontaneity within the labour movement, and to avoid union bureaucratisation.”[4] Perhaps even more importantly, there is a point at which the goal of promoting union organization and collective bargaining must give way to the basic workers’ right to self-determination. For this reason, the protection of workers from pressure to leave one union in order to join or form another, and the parallel guarantee that they should be allowed to do so if they wish, are highly valued within the Italian labour movement.

In most European countries outside Scandinavia, union security practices (USPs) are either extremely rare (for example in Belgium and Holland) or have historically been prohibited altogether, as in France, Italy, Portugal, Spain, Germany, the Czech Republic and Greece. The situation in European Union law, as it applies to those member states where USPs have traditionally been used, notably Norway, Denmark and Sweden, is not clear. The Norwegian Supreme Court, for example, ruled the closed shop illegal in 2001, subsequent to the inclusion of the European Convention for the Protection of Human Rights in Norwegian law. While the Council of Europe’s Committee of Ministers has argued that the closed and union shops (but not the agency shop) are contrary to the Convention, the European Court of Human Rights has yet to rule on the issue.

Finally, a note of caution about the apparently attractive strategy of the agency shop. This presupposes that union activity can be split into its political and non-political components, with non-union members paying only for the latter. But it is very difficult to define which union goals and policies count as ‘political’, and it may be possible for anti-union employers and governments to define the ‘legitimate’ (and hence legally-protected) activities of trade unions very narrowly. Since April of this year, for example, US Federal Government contractors have been obliged to inform employees who are union members of their ‘Beck rights’ - their right to demand that their union refund the (unspecified) proportion of their membership dues which are used for political contributions or other activities not related to the collective bargaining agreement. This move, based on a 1988 Supreme Court judgement, was arguably only possible because the agency shop is permitted under Federal law.

Regardless of all the arguments for and against compulsory unionism, the open shop is a reality for most trade unions. Unions have had to ask whether the free rider problem is not in fact more usefully viewed as a recruitment and organizing problem. Indeed, in the English-speaking world, interest in new organizing strategies such as those promoted by the AFL-CIO in the USA, the TUC in the UK, and the ACTU in Australia seems to have come about as a direct result of the increasing difficulty of implementing union security practices, and the increasing influence of the so-called ‘right-to-work’ movement (see Box 2).

From the organizing perspective, free riders are less a problem than an opportunity for unions to increase membership. Where the workplaces in question are already unionized, recruitment can be conducted in “a relatively benign environment that... does not necessarily require an intense union-building effort.”[5] Unions can concentrate on developing and communicating arguments in favour of membership.

Research into what arguments are the most persuasive has shown that there is no magic solution. In the end, and regardless of the national context, it comes down to persuading people that the union is an effective force for change and that membership carries significant benefits. Perhaps most importantly, recruitment depends on convincing non-members that in campaigning for more equitable employment relationships, for fair trade and for sustainable economic development, the unions have right on their side.

Conclusion

The free rider problem is a largely a question of perspective. In Oceania, for example, it seems to loom large in union thinking. In Italy, on the other hand, it hardly rates as a problem at all. What does not change within the national context is the need to make the case for trade unionism. The regulatory solution is not an alternative, but a complement to the market solution. In fact it is perhaps even more important in those countries where regulatory solutions are established to ensure that workers understand why union membership is so important. Union security practices are a means to an end: more stable and effective worker organization. It is crucial not to lose sight of the fact that the real point is to pursue the social and economic goals of the labour movement.