The Market for Union Representation: An Information Deficit or Rational Behavior?

The National Labor Relations Act provides the legal framework for private-sector workers to choose collective representation. The National Labor Relations Board (“NLRB”) supervises this process and relies on an election campaign model that is premised on the assumption that competition between the union and the employer will generate sufficient information to enable workers to reach a rational decision. In his recent article, Information and the Market for Union Representation, Professor Matthew Bodie asserts the NLRB’s model fails to ensure the inclusion of sufficient relevant information. Offering a “purchase of services” paradigm as an alternative way to understand the decision to choose or refrain from choosing to join a union, Bodie conceives the representation election as a collective economic decision rather than the end result of a political campaign. In order for the market for union representation to function satisfactorily, adequate knowledge is required. Bodie states that this market is afflicted by a number of difficulties, including information asymmetry, inverse employer incentives, absence of competition among unions, and the lack of public confidence in labor unions. Information deficiencies impair employees’ capacity to act rationally. Professor Bodie tenders a provisional solution—mandatory disclosure aimed at boosting public confidence in the market for union representation.

Based on insights derived from mandatory disclosure requirements within the nation’s securities market, Bodie concedes that additional disclosures may “create costs and . . . change market dynamics in inefficient ways.” Despite these welcome caveats, Bodie’s proposal suffers from a number of shortcomings. First, unions may resist disclosure initiatives unless they are paired with a card-check certification program, which defeats the goal of enabling workers to make rational decisions about union membership. Second, Bodie’s conception of capture focuses on employer capture and ignores the problem of capture by outside interest groups aligned with union hierarchs. Finally, Bodie’s mistaken conclusion that unions secure better conditions for workers leads to a faulty assessment of the problem of free riding. This response addresses each problem in turn.