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________

IBE UNCOIN INSITIUIE


FOR AND EDUCATION
1735 DeSales Street, N.W.
W DC 20036
(202) 347-0872
BLACK AMERICA AND
ORGANIZED LABOR:
A FAIR DEAL?
by
Walter E. Williams
Loren A. Smith
Wendell W. Gunn
Preface by Senator S. I. Hayakawa
THE LINCOLN INSTITUTE FOR RESEARCH AND EDUCATION
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BLACK AMERICA AND
ORGANIZED LABOR:
A FAIR DEAL?
by
Walter E. Williams
Loren A. Smith
Wendell W. Gunn
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This Study Was Made Possible
by a Grant From The National
Right To Work Legal Defense
Foundation, Inc.
)
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Walter E. Williams
About the
Contributors
Dr. Williams is Visiting Professor of Economics at George Mason
University in Fairfax, Virginia and is the author of "Youth and
Minority Unemployment" which was commissioned by the Joint
Economic Committee of the U.S. Congress and has been published
in unexpurgated form by the Hoover Institution. He is a contributor
to Lincoln Review, the quarterly journal of The Lincoln Institute
and a member of the national advisory board of The Lincoln Institute.
Dr. Williams received his Ph.D. in Economics from U.C.L.A. in 1972
and is an adj unct scholar of the Heritage Foundation in Washington,
D.C.
Loren A. Smith
Associate Professor of Law at the Delaware Law School of Widener
University, Wilmington, Delaware. Mr. Smith was educated at North-
western University and Northwestern School of Law (B.A. and J.D.).
He has served as assistant to the Special Counsel to the President of
the U.S., Attorney in the General Counsel's Office, Federal Communi-
cations Commission in Washington, D.C., Professor of Law at the
International School of Law in Washington, D.C. and Office of the
United States Attorney for the District of Columbia.
Wen dell W. Gunn
Mr. Gunn is Assistant Treasurer of Pepsico in Purchase, New York
and a former Vice President of Chase Manhattan Bank. He has
testified before The Joint Economic Committee of the U.S. Congress
on Capital Formation and served as Assistant Professor of Finance at
Texas Southern University in Houston, Texas. Mr. Gunn graduated
from Florence State University in Florence, Alabama with a B.Sc.
degree in Chemistry and Mathematics and received his MBA from the
University of Chicago in 1971.
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Table of Contents
Page
Preface .............................. . ............. 1
Introduction ........................................ 6
Part I ............................................ 10
Part II ............................................ 33
Part III .............................. .............. 53
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111
Preface
Senator S. I. Hayakawa
T
he American labor movement presents two radically different faces
to black Americans. One is its rhetoric, which is uniformly sup-
portive of civil rights and equal job opportunities. The other is its
record, which is a long history of racial prejudice in both craft and
industrial unions. Unfortunately, even today, the rhetoric and actions
of organized labor are strikingly dissimilar.
In the early years of the American labor movement, blacks were
excluded from many job markets through charter provisions that
excluded them from unions. Just as often, they were kept out by
violence. Labor unions also sought to eliminate competition from
Orientals by vigorously fighting for exclusionary immigration laws,
such as The Chinese Exclusion Act of 1882 and the Immigration Act
of 1924, directed against Japanese.
Indeed the union label, of which trade unions are so proud, was
originated in the 1880s to indicate that the product labeled was made
by white workers, and not by Chinese.
Black leaders have been well aware of the racist role played by labor
unions. Booker T. Washington opposed unions throughout his life.
W.E.B. Du Bois called them the greatest enemy of the black working
man. Writing in The Nation in 1923, he recognized the desire of
unions to exclude blacks so that they could demand higher wages, and
the desire of many businesses to include blacks so that they could avoid
higher union wages.
Racial exclusion is not simply a part of union history but remains
a reality today. In 1967, for example, statistics on black membership
in some major craft unions were as follows: Electricians (!BEW), 1.6
percent; Ironworkers, 1.7 percent; Plumbers, 0.2 percent; and Sheet-
metal Workers, 0.2 percent. In 1979, 58 percent of the local unions
reporting to the Equal Employment Opportunity Commission had no
black members at all.
In the construction industry, for example, employment cannot be
discussed without reference to the involvement of craft unions. The
first step in gaining entrance to a craft union is the apprenticeship
program. Most skilled tradesmen appear to be recruited through the
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"back" rather than the "front" door, that is through job referrals,
obtained by recommendations and "word of mouth" information pro-
vided by friends and relatives. To enter the formal apprenticeship
program, individual applicants must be approved by all-white review-
ing boards. Then a written examination is given. Still, the union's
apprenticeship committee makes the determination on any basis it sees
fit. There is often pressure from existing union members to admit
few blacks-or none-into the apprenticeship program, since they will
compete for already scarce jobs in the industry.
Craft unions have traditionally rationalized nepotism as being the
trade union equivalent of a son's inheriting a father's property. In the
case of United States v. Local 638, Pipefitters, Judge Murray Gurfein
declared: "Nepotism tends to freeze out blacks because blacks do not
have white relatives in the union."
Similarly, the reliance of Apprenticeship Committees upon subjec-
tive criteria and interviews has led to an exclusionary racial policy. In
the case of Rowe v. General Motors Corp., the Fifth Circuit Court held
that," ... promotion/transfer procedures which depend almost entirely
upon the subjective evaluation and the favorable recommendation of
the immediate foreman are a ready mechanism for discrimination
against blacks, much of which can be covertly concealed and, for that
matter, not really known to management. We and others have ex-
pressed a skepticism that Black persons dependent directly on decisive
recommendations from Whites can expect non-discriminatory action."
The racial discrimination practiced by labor unions would not affect
black Americans and their job prospects so severely if labor unions did
not, in many of our states, have a life and death grip over employment.
In those states without Right To Work laws, labor unions are in
control of much of the employment process. The employer, in many
cases, goes to the union for his plumber, pipefitter or \bricklayer. If the
union has not permitted blacks to join, the employer will be unable to
employ blacks, regardless of his own wishes. Laws against discrimina-
tion in hiring have little effect if the labor pool, controlled by private
labor organizations, remains a segregated one.
The fact is that our civil rights legislation makes racial discrimina-
tion in labor organizations illegal. This legislation, however, has not
been enforced and unions themselves have
1
been vigorous and often
effective in fighting it. '
In an important discussion of this question: the book, Black Workers
in White Unions, ]ob Discrimination in the United States (Cornell
University Press, 1977), confronts these questions.
2
The author, Professor William B. Gould of the Stanford University
Law School, writes of organized labor's response to the civil rights
legislation of recent years:
The labor movement's response is ambivalent. While the unions
purport to adopt a moral stance which is a notch above the coun-
try's, they have struggled against adhering to the requirements of
new civil rights legislation. More than any other institutions,
trade unions are the focal point of racial discord in our society.
For the unions represent both the new immigrants and older
groups who are pulling themselves up the ladder and who perceive
their competitive status to be unstable and threatened. Paradoxi-
cally, the unions represent some of the most reactionary and
insecure elements in American society as well as the 'underclass',
which is disproportionately black as well as Chicano and Puerto
Rican ... Thus, unions often constitute roadblocks to the achieve-
ment of nondiscriminatory employment practices.
Labor leaders have been completely indifferent to the plight of black
workers. Asked about the United Steelworkers' experience under state
fair employment practices statutes, former union president David
McDonald said: "I must say that insofar as our personal experience is
concerned, since we have no discrimination I have no experiences to
report." This came after the United Steelworkers of America had been
hit with thousands of charges filed with the Equal Employment Oppor-
tunity Commission alleging racial discrimination, as well as with a
substantial number of lawsuits. Though the black membership is
approximately 30 percent, no black is in any elective policy-making
position on the national level.
Organized labor's top leaders, who are determined to impose com-
pulsory unionism upon the entire country, have never recognized their
racist past nor made any effort to redress such past grievances. Pro-
fessor Gould notes that, "The AFL-CIO has never relented in its
opposition to the reform of seniority systems that have discriminated
against blacks in the past. This attitude, coupled with a pattern of
opposition to other civil rights measures-including the Nixon Admin-
istration's Philadelphia Plan-indicates that, contrary to the general
impression, not merely the rank and file of local union leadership
perpetuates discrimination in the country."
The U.S. Civil Rights Commission in 1961 decl ared: "Within the
labor movement itself, civil rights goals are celebrated at the higher
levels, but fundamental internal barriers tend to preserve discrimina-
tion at the workingman's level." Professor Gould believes that such
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an assessment lets the union hierarchy off the hook. He argues that,
"Assertion of the leadership's innocence is simply the first in an arsenal
of arguments that the AFL-CIO and its friends put forward to justify
trade union misbehavior."
Even labor organizations with substantial minority memberships
such as the International Brotherhood of Teamsters, the International
Ladies Garment Workers Union, United Steelworkers, United Rubber-
workers and the Amalgamated Transit Union have no blacks in policy-
making positions.
Whether it is the question of hiring, which is the principal problem
'of black workers in relation to craft unions, or the problems of promo-
tion, transfer, seniority and lack of representation in leadership posi-
tions which they face in industrial unions, the difficulties are many.
Organized labor is, with regard to black workers, the problem, not a
solution.
The goal of organized labor is to protect the position of those now
employed, mainly white, at the expense of those who seek to be em-
ployed in the future, both white and non-white. In his book, Union
Power and the Public Interest, Professor Emerson P. Schmidt notes
that, "The one realistic principle of collective bargaining propounded
in union literature and union oral propaganda, and acted upon in
bargaining, striking and picketing is: take labor out of competition
and keep it out ... Under perfect competition, the individual pro-
ducer-say, a wheat farmer-or a worker acting alone, cannot raise his
price; he maximizes his income by increasing his output, becoming
more efficient. In so doing, he increases the national income to the
benefit of all. The purpose of market power or union monopoly is to-
raise the income of unionists-those who remain or become employed.
The increase comes at the expense of the buyers of the product or
service and of the excluded workers. It reduces the Gross National
. \
Product as a whole, and it reduces employment to the extent that the
excluded workers fail to find jobs. Taking labor out of competition is
the key union goal . . . "
It is the element of compulsion which our laws have given to labor
organizations whi ch make their racial prejudices all the m01;e difficult
to overcome. It is only by eliminating this element of compulsion, by
providing real freedom of choice to workers 1f ith regard to whether or
not they wish to join a labor union, that black workers will be given
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an equa opportunity to advance.
Now that black Americans may no longer be subjected to legal
discrimination either on the state, local or national levels, it is ironic
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indeed that they are still subject to the racism of labor unions-private
organizations empowered by law to have life and death power over
the access to employment.
The essays in this study review the various elements of this problem.
Fortunately, more and more black Americans are becoming aware of
the role labor unions have played both historically and at the present
time in preventing them from exercising their rights to equal employ-
ment opportunities.
In a free society, every man and every woman, regardless of race,
religion or ethnic origin, should have the opportunity to go as far as
his or her ability will permit. No law now stands in the way of such
progress. What remains as an obstacle, however, is the power of orga-
nized labor. Once this fact is properly understood, action will, I am
sure, be taken to make certain that no private group can violate rights
which have been achieved as a result of such strenuous and costly
struggle.
Authors Walter E. Williams, Loren A. Smith and Wendell W. Gunn
set forth many of the harsh experiences blacks have endured as a result
of organized labor's policies.
Dr. Williams demonstrates how labor organizations have prevented
black workers from contracting with employers for their labor. Pro-
fessor Smith shows why the legal structure of organized labor serves to
prohibit equal access to the labor market, and Mr. Gunn declares that
organized labor's legislative initiatives have not, in many cases, helped
to improve the lot of black Americans.
Labor unions, as voluntary organizations of workers who wish to
join them, can surely make a valuable contribution to our country.
As coercive and exclusionary bodies, however, they violate the public
interest and, most clearly, the interests of minorities. This state of
affairs cannot be permitted to continue.
5
Introduction
B
lack Americans and organized labor have, for many years, had an
ambivalent relationship.
At their very beginnings, the nation's labor unions did not hesitate
to proclaim themselves for "whites only." Craft unions for many years
performed the function of "protecting" such occupations as plumber,
carpenter and bricklayer from competition from black workers.
Unions have done serious harm to black workers in other, less direct,
ways as well. By supporting repeated increases in the minimum wage,
union leaders have effectively kept black workers from entering the
job market. Labor leaders who advocate such a policy are, it must be
remembered, not representatives of poor people or of minority group
members. They are representatives of existing workers and their orga-
nizations. No member of a labor union works for the minimum wage.
Labor spokesmen support an even higher minimum wage not to help
their own members but, quite to the contrary, to protect the members
of their unions from competition.
Nobel Prize winning economist Milton Friedman points out that,
"The minimum wage law requires employers to discriminate against
persons with low skills. No one describes it that way, but that is in
fact what it is. Take a poorly educated teenager with little skill whose
services are worth, say, only $2.00 an hour. He or she might be eager
to work for that wage in order to acquire greater skills that would
permit a better job. The law says that such a may be hired
only if the employer is willing to pay him or her (in 1979) $2.90 an
hour. Unless an employer is willing to add 90 cents in charity to the
$2.00 that the person's services are worth, the teenager will not be
employed. It has always been a mystery to me why a young person is
better off unemployed from a job that would pay $2.90 an hour than
employed at a job that does pay $2.00 an hour."
Dr. Friedman concludes that, "The rate on unemployment
among teenagers, and especially black yopngsters, is both a scandal
and a serious source of social unrest. ... I regard the minimum wage
rate as one of the most, if not the most, antiblack laws on the statute
books."
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If labor unions have been harmful to black workers both by directly
keeping them out of particular job markets for many years and by,
more recently, keeping them unemployed or underemployed through
a variety of indirect means, their rhetoric has been consistently in
support of civil rights.
Somehow, the leadership of the nation's labor unions have given the
appearance of supporting equality of opportunity for black Americans
by participating in civil rights marches, advocating civil rights legisla-
tion in the Congress, and doing whatever they felt symbolically neces-
sary to create such an image. In many cases, these individual labor
leaders may well have been sincere. To charge them with racial bias
as individuals would be unfair. Yet, the policies they have supported
when it came to their own particular concerns, have hardly been
helpful to black workers.
During the Nixon Administration, for example, government at-
tempted to make up for the union bias of the past in the construction
industry through what became known as "the Philadelphia Plan."
George Meany and the other leaders of the AFL-CIO vigorously op-
posed this plan. Discussing the manner in which unions in the con-
struction industry made it difficult, if not impossible, for black workers
to join their ranks, columnist Hobart Rowen, writing in The Wash-
ington Post of January 18, 1970, noted that the unions require a four
year apprenticeship for carpenters. Yet, today most carpenters only
build forms for concrete work-a job that can easily be taught in 90
days. He pointed out that the U.S. Air Force can "take a boy off the
farm and train him to be a bomber and navigator in six months," but
that the union requires five years to "train" a plumber.
Rowen suggests that, to solve the employment and housing problems,
the Federal Government may have to set up its own training programs
on a realistic basis-aimed at turning out skilled workers not bound
by the 19th century practices employed by the unions.
For black workers, who have been denied their basic right to work
in many fields by the actions of labor unions over the years, to be
forced to join unions against their will as a condition of employment
at the present time is to make a mockery of the civil rights which have,
we are repeatedly told, been achieved.
Compulsion and coercion are alien to a free society. In the early
days of the American labor movement, this notion was widely under-
stood. The first president of the AFL, for example, Samuel Gompers,
declared: "There may be here and there a worker who for certain
reasons ... does not join a union of labor. This is his right no matter
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how morally wrong he may be. It is his legal right and no one can
dare question his exertion of that legal r ight. "
In most states at the present t ime, that right has been eliminated for
many workers. In those states which continue to provide freedom of
choice for workers, organized labor is mounting vigorous campaigns
to replace free choice wi th compulsion. Only to labor bosses is it
controversial to say that a man or a woman should have the right, in
a free society, to make his or her own decision 'about whether to join
a labor union.
For black Americans, who have fought so hard to gain freedom and
equal rights under the law, it is a sad irony to be told that, in order to
work, he must give that freedom up and turn it over to labor leaders.
"It takes no genius to figure out why unions like exclusive bargaining
rights or why they prefer mandatory membership (or dues payment)
to voluntary membership," writes the distinguished black columnist,
William Raspberry. '"They are afraid that if the employees were left
to make the choice on their own, many of them wouldn't join . . . .
Quite apart from the philosophical implications of voluntary associa-
tion, requiring unions to compete for their members has the salutary
effect of forcing the unions to pay close attention to the desires and
needs of their members and potential members. Unions with com-
pulsory membership tend to develop agendas that have nothing to do
with, and often contradict, what the individual members see as their
best interest."
Mr. Raspberry concludes that, "If unionism is as good for the workers
as the uniom claim, there should be no problem attracting members.
If they want to force you to buy what they're selling, they must doubt
the intrinsic attractiveness of their product."
When the U.S. Congress was considering legislation in 1977 which
would require U.S. government employees in exclusive-recognition
union agencies either to join the union or pay dues as if they belonged,
vigorous opposition came from the predominantly black National
Alliance of Postal and Federal Employes.
The Alliance argued that the large unions often fail to pursue
complaints of racial discrimination or equal opportunity programs.
"Those who have failed to represent all pf the federal workers now
ask you to legislate a monopoly-union shop-which would enslave
all the working people. Employees who' refuse to pay dues to an
exclusive union are not freeloaders and deadbeats. Some pay dues to
the Alliance, and we are anxious to perform the service for which they
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have paid. Others are those people who choose not to join because
that is their right, (for) which they owe no one an explanation."
Alliance President Robert White based his opposition to mandatory
unionism on what he called discriminatory practices of the AFL-CIO
unions.
Writing in The Sacramento Observer, a prominent black newspaper,
Henry N. Austin, a Virginia postal worker, makes this important
point:
"The civil rights movement was founded on a principle with which
most Americans agree . .. that of increasing the opportunities available
to Blacks and other minority Americans. Many Americans, Black and
White, gave their lives to earn the right of all people to enjoy the full
benefits of American life regardless of their particular hue. Are we
to die to erase one barrier and close our eyes to the erection of
another-Compulsory Unionism? ... In those thirty states that allow
closed-shop-type arrangements, which restrict employment to union
members only, a qualified individual cannot even apply for most work
without first agreeing to join a union. This is especially unjust to sorne
minorities who are deemed to not have the necessary education or work
experience to get into a union and, thus, are effectively denied the right
to work. In other words, Blacks find themselves in a classic double
bind: they can't get a job unless they are card-carrying union members
and they can't get into some unions without meeting the union
Hierarchy's arbitrary entrance requirements."
Once, Mr. Austin writes, black Americans were forced to bow their
heads and pay tribute in order to support their families. He asks:
"Must we now as American citizens bow our heads to compulsory
unionism in order to work and feed our families?"
A recent public opinion poll indicates that the majority of black
Americans support voluntary unionism. Even black union members
expressed stronger support for voluntary unionism (49 percent) than
forced (45 percent) .
Labor unions have had a mixed record at best in their relationship
to black Americans. If they seek to change that record, black Ameri-
cans should have every right to join them and participate in them.
Under no circumstances, however, should black workers be forced to
join labor unions as a condition of employment. To do so would,
sadly, short-change those who have worked so long and sacrifi'ced so
much to be free.
Wendell W. Gunn
9
Part I
Freedom to Contract:
Blacks and Labor Organizations
by
Walter E. Williams
Visiting Professor
George Mason University
Fairfax, Virginia
B
lacks have been denied full justice throughout their history in the
United States. Decades ago the denial took the form of slavery.
When slavery was abolished, injustice took the form of legalized disen-
franchisement. Blacks were denied basic Bill of Rights guarantees that
were taken for granted by even visitors to the United States. In modern
times legalized in justice in its grossest forms has all but been abolished.
However, in justice continues. This form of in justice is subtle in its
approach and is not even directed explicitly against blacks. Despite
this, it nonetheless has the force of legalized economic injustice.
The economic injustice referred to is the numerous laws at both the
state and feder al levels that give many blacks a competitive disad-
vantage in labor markets. These laws discriminate against those people
who are late-comers, relatively low-skilled and those without much
political clout. Precisely how this works will be the subject of this
essay. The point to recognize is the power that these economic laws
have in inducing various sectors in the economy to act out of self-
interest (one of the most powerful human in ways not
favorable to black economic progress.
Perhaps the most insidious effects of these economic laws which
impede black economic progress is that they are not highly visible.
That is, for well over a decade the country has committed itself through
various programs and civil rights laws fo see that blacks (and other
minorities) received fair treatment. have been numerous cases
of civil rights litigation, billions of dollars 'spent and numerous initia-
tives of one sort or another, but for a very large segment of the black
population, economic opportunity remains illusive. The nation is
confused and the black population is bitter. The solution to the
IO
problem of high unemployment and low skills remains to be found.
Until it is fully recognized that the problems blacks face today are not
ones of racism per se, but that of government-sanctioned laws which
reduce economic opportunities for them, our country will continue
to generate a class who are permanently dependent.
This essay will focus mainly on one form of economic m1ustice
encountered by a large segment of the black labor force; namely, laws
governing labor transactions which effectively prohibit voluntary ex-
change among individuals and thus deny large segments of the black
community economic opportunity. Before I focus on some of these
laws, I will briefly discuss the nature of competition and how it applies
to the labor market because there is considerable confusion about this
basic element of economic life.
The Basic Theory of Competition
One of the most difficult problems involved in formulating policy
initiatives that hold effective promise to ameliorate relatively weak
economic opportunities for blacks, particularly those who are most
disadvantaged in terms of marketable skills, is a misunderstanding
about the nature of competition and a widespread mythology con-
cerning competition. This . section of the essay will attempt to redress
this problem.
Competition of some form or another is the inescapable result of
scarcity. Scarcity in turn is the natural result of the fact that we live
in a world of finite resources. Economists define scarcity as the set of
circumstances whereby human wants are unlimited and the means to
satisfy those wants are limited. In other words, it is rare that we find
people who will say that all their wants have been satisfied. People
always want more of something, be it more cars, clothes, a larger house,
more vacation time, more love, more peace, ad infinitum. On the other
hand, there are finite world resources capable of satisfying those human
wants. Therefore, given the nature of man and given the fact of
scarcity, the big question for mankind to decide, whether he lives in
a communistic, socialistic, or capitalistic society, is who gets the right
to use the scarce resources of the society.
The issue of who gets what raises conflict and this is where competi-
tion comes into play. There are several methods that a society can use
to decide, for example, who gets what house or what job. One way is
through government fiat where a central authority arbitrarily deter-
mines the entitlement. Another way is through some form of violence
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or threat of violence where physical strength produces the final out-
come. Yet another way is through the market mechanism where price
and income perform the function of deciding who gets what. The
basic point here is that all societies contain onmipresent conflict over
how the society's scarce resources will be used and who will use them.
And all societies must find ways to resolve this conflict.
Since this essay has as its purpose the analysis of the labor market,
I confine most of my attention to competition for jobs. Despite many
myths to the contrary, competition in the labor market is principally
the same as competition in other markets.
1
That is, competition always
takes place among sellers or among buyers-not between buyer and
seller. For example, General Motors competes against Chrysler (another
seller) not against buyers of automobiles, i.e. the consumer. Because
of this, if automobile companies wanted to increase their wealth
through restricting competition, one strategy would be to eliminate
their competitors (rival sellers) which include foreign producers of
automobiles. Clearly, there are numerous ways, not at issue here, by
which a particular automobile producer can reduce competition.
What is at issue is that competition takes place among sellers: the
ability to raise prices artificially requires collusive action against rivals
or with rivals.
The identical competitive principle applies in the market for labor.
Laborers compete with other laborers, i.e. with other sellers of labor.
Just as in the case of buying/selling automobiles, for a particular
group of laborers to artificially increase its wealth, requires that they
eliminate competing labor-rival sellers of labor. Despite the myth
created by labor organizations, their primary struggle is not against
employers but against other workers.
The fact that their primary struggle is against other workers is
readily seen when we consider union strategy to s ~ e k higher wages or
more favorable working conditions for its m e m e r s ~ The strike is the
labor union's ultimate strategic weapon. For the strike, as a tool of
negotiation, to. be effective, labor unions must be able to deny to the
employer the alternative of hiring persons to replace the striking
workers. In other words, they must be able to exclude other workers
from the job market. History is replete with examples of how persons
willing to take the places of striking worke'l;rs were denied this oppor-
tunity by unions through acts of intimidatJon, violence, and outright
1 No doubt the Clayton Act assertion, "that the labor of a human being is not a
commodity or article of commerce," is, in part, responsible for labor market myths.
12
murder.
2
Where labor disputes involved violence, that violence was
most of ten directed at workers and the victims of the violence were
not employers but other workers.
3
A considerable part of the activities of the labor movement in the
U.S. has been that of attempting to thwart competition among workers.
One of the ways that this has been done is through the use of union
political powers to lobby for laws that confer monopoly power on
labor unions. This observation has nothing to do with any kind of
social justification for the monopoly powers that have been conferred
on labor unions: whatever the social justification for various labor
laws can be separated from the effects of labor laws. Nor will the
discussion center around the intentions or justification of our labor
laws: we will mostly discuss the efjects of labor law which are inde-
pendent of the intentions.
With this in mind, we now turn our attention to one historical
example of labor unions' attempt to thwart the rise of the Negro
above the deprecations of a history of slavery. The point of this brief
case study is to show an example of the crude forms of union behavior
towards Negroes.
Negroes and the Railroad Indust ry
Employment in the railroad industry has historically been the site
of the most virulent forms of a union's racially discriminatory policy.
There are several factors which made this possible. First, union orga-
nization in the railroad industry has traditionally been along craft
lines. Second, unions in t:he railroad industry, having launched collec-
tive bargaining as early as the 1880's, are among the oldest and the
strongest of American unions. Third, the railroad unions were signifi-
cantly strengthened by government protection during World War I
and later by the Railway Labor Act, as amended in 1934, which out-
lawed "yellow dog" contracts and the formation of company-dominated
or company-financed unions.
4
The effects of these factors are of such
importance that some detail will be useful on how union racial dis-
crimination and government support combined to reduce jobs for
Negroes in the railroad industry.
The National Mediation Board (N MB) , created by the 1934 amend-
ments to the Railway Act of 1926, was to mediate labor disputes
2 The Wagner Act legally established labor monopoly through its requirement
that the firms negotiate solely with the union in settling work disputes.
3 "Scab" is the term used to describe a worker who sees that his interests are not
those of the union.
4 A "yellow dog" contract is one in which the employee agrees not to join a union.
13
arising on railroads. One of the practices of the Mediation Board was
that of defining the bargaining unit that was to represent railroad
employees. The Mediation Board nearly always defined the unit to
suit the jurisdictional claims of the standard railway union.
5
Negroes who were not accepted for membership in most locals or
were relegated to a low status in the standard unions during this time
naturally attempted to form their own unions. These attempts were
nullified by the action of the Natjonal Mediation Board which simply
ruled that these alternative unions created by discriminated Negroes
could not represent black employees who were unfairly being repre-
sented by the bargaining unit given exclusive rights by the Board. In
effect the Board bestowed monopoly representation powers to white
labor unions which discriminated in refusing to extend equal member-
ship rights to Negroes.
The adverse effects of this policy stand out in stark relief in the case
of Brotherhood of Railway and Steamship Clerks vs. United Transport
Service Employees of America (UTSEA) .
6
This case asked the court
to adjudicate the conflicting claims of two unions competing for the
rights to represent forty-five Negro porters at a train station in St. Paul,
Minnesota. The porters were ineligible for membership in the Clerks
union because they were Negro; they had unanimously voted for
UTSEA as their bargaining agent. The Mediation Board dismissed
the application of UTSEA on the grounds that the porters were not
a separate class of employees and that there was no dispute over
representation.
The federal district court, upon appeal, declared the dismissal order
void. The Court of Appeals pointed out that the dismissal forced the
Negro employees to accept representation by an organization in which
it had no right to membership or right to speak or be heard in its own
behalf. The Negro workers' victory was not to be had. The United
States Supreme Court reversed the decision by the 'Appeals Court on
the grounds that the Mediation Board's certifications are not subject
to judicial review.
During this era and later there were numerous certification proceed-
ings that granted discriminatory labor unions exclusive bargaining
representation. 1
5 Herbert R. Northrup, "The Appropriate Bargaining Unit Question Under the
Railway Labor Act," Quarterly Journal of Economics, Joi. 60 (February, 1946) , p. 254.
6137 F2d 817 (D.C. Cir. 1943), rev., 320 U.S. 715 (19{3).
7 For additional problems and examples see, Howard W. Risher, Jr., The Negro in
the Railroad Industry (Philadelphia, Pa.: University of Pennsylvania Press, 1971) ,
especially chapters 4, 5, 6, 7.
14
The racially discriminatory practices of railway labor unions, rein-
forced by national labor laws, gave rise to several important court
cases. Chief among these cases was Steele vs. Louisville & Nashville
Railroad.
8
This case involved a Negro fireman, B. W. Steele, who had
been laid off as a result of the Southeastern Carrier's Agreement, an
agreement between several railroad companies and railway labor
organizations. Steele had been working as a fireman along with three
other Negro firemen in the high-paying passenger division of the
Louisville & Nashville line. The jobs of the four Negroes were de-
clared vacant and were filled by white firemen having less seniority.
When Steele first started working in 19 l 0, 98 percent of the firemen
in his Louisville and Nash ville district were Negro. By 1943 the pro-
portion of Negroes had dropped to 20 percent hired as firemen. The
case was originally held before the Alabama Supreme Court. The
Court found that, as a certified representative of the firemen, the
Brotherhood had the right to destroy or create rights of members of
the bargaining unit. However, when the United States Supreme
Court heard the case it reversed the decision of the State Court and
found that the union had violated the Railway Labor Act. In reach-
ing its decision, the Court recognized that the Railway Labor Act
would be on weak Constitutional grounds if it denied individuals
(1) the right to bargain for themselves and (2) the right to be fairly
represented by the exclusive bargaining unit. The U.S. Supreme
Court ruled, "the Railway Labor Act imposes on the bargaining repre-
sentative of a craft or class of employees the duty to exercise fairly the
power conferred upon it in behalf of all those for whom it acts,
without hostile discrimination against them. " 9 Despite the Supreme
Court ruling, effective discrimination against Negro railroad workers
did not encl: the mechanism for the maintenance of effective discrimi-
nation had not been reduced-namely, the monopoly powers con-
ferred upon unions by the federal government. The Brotherhood of
Locomotive Firemen ignored the court decision and maintained the
illegal Southeastern Carrier's Agreement. It was not until the 1950's,
following separate law suits awarding damages, that the effect of the
Steele decision was even modestly felt.lo
In the late l 940's unions began to employ subtler techniques which
had the effect of reducing or eliminating Negro firemen. For example,
the Brotherhood of Locomotive Firemen in 194 7 began a campaign
B 323 U.S. 192, 202-203 (1944) .
9 Steele vs. Louisville & Nashville R.R., 323 U.S. 192, 202-203 (1944) _
10 Risher, op. cit.
15
wh'.ch, at least, appeared to be aimed at rejecting its
raoally d1scnmmatory practices of the past by negotiation of an
agreement which struck out the anti-Negro quota clause. However,
nothing but a strategy to win gains that had been lost through
ht1gat10n throughout the Forties. The new contract contained a clause
stipulating that only those firemen who were "promotable" were to
be employed on freight and passenger train runs. All others could
only be employed in yards.
In January, 1948, the Brotherhood of Locomotive Firemen proposed
to the members of the Southeastern Carrier's Conference a test to
determine whether a fireman was promotable. Failing the test after
three tries would mean that the man was unpromotable and would be
dismissed from the service. Obviously, the test was directed at eliminat-
ing Negro firemen. Most Negro firemen had been hired many years
ago and there had been no education requirements. The test based
on hiring requirement for engineers would have caused the Negroes
to be dismissed. Fortunately for the Negro firemen around the country,
the courts held that the test was illegal.
One of most stories to be told about the early history
of Negroes m the railroad industry is their success in some sectors of
the industry despite the hostility they faced. As such this story demon-
strated contrary to some of the opinion today, that racial discrimination
in and of itself cannot generally explain Negro unemployment, but
may explain lower wages.
The turn of the century in the United States saw considerable hos-
tility against Negroes, particularly in the railroad industry. Trainmen
and firemen, while able effectively to bar Negroes from union member-
ship, could not bar them from their craft. In the South, where hostility
towards Negro workmen was the greatest, some railroad companies
had firemen crews which consisted of 85 to 90 percent Negroes. For
Southern states as a whole, Negroes constituted 27' percent of the
firemen, 27 percent of the brakemen, and 12 percent of switchmen.
These statistics dramatically in later years. By 1940, 18 per-
cent of fir:men m. the South were Negroes, falling to 7 percent by
1960.11 .This cha.ngmg employment picture in the railroad industry is
of considerable mterest and supportive of t-he general hypothesis sug-
gested in this essay.
The high rate of employment for Negroes the railroad industry
was not at all a result of benevolence on belt'alf of white owners and
11
U.S. Census of Population 1940: Vol. Ill, The Labor Force, Part I, Table 62.
16
managers of railroads. It was due to the fact that Negroes would work
for wages that were often just two-thirds of the wage rate paid to, say,
white firemen for doing the same job. The wage differential had the
clear effect of reducing the power of white firemen to demand higher
wages. As one white firemen put it, "Everytime the firemen ask for an
increase in wages or for overtime due them, they are told by the
superintendent, 'Why I can get a Negro in your place for one dollar,
while I am paying you $1.50 per day.'" 12
Railroad companies were very interested in keeping the Negro in
their employ because hiring Negroes meant a lower cost of operation.
White firemen naturally protested, using allegations of Negro incom-
petency, large-scale crippling strikes, intimidation, and murder.
In 1900 a bitter strike action was taken against the Georgia Railroad.
The Brotherhood of Locomotive Firemen demanded that Negroes be
completely eliminated from the road. Instead of recommending the
elimination of Negroes as was demanded by the union, the arbitration
board decided that Negro firemen, hostlers, and hostlers' helpers be
paid wages that were equal to the wages of white men doing the same
job.
13
The Brotherhood of Locomotive Firemen expressed delight with
this decision. They said, "If this course is followed by the company
and the incentive for employing Negroes thus removed, the strike will
not have been in vain." 14
Why would the Brotherhood of Locomotive Firemen be happy with
the decision for equal-pay-for-equal-work? The reason is that, if rail-
roads were required to pay blacks the same as they paid whites, the
cost to the railroad of discriminating against blacks in employment
would be effectively zero. The work pay rule would effectively prevent
blacks from competing with whites: the white firemen knew this and
knew it well. They knew that they could trust economic incentives to
further their racist objectives better than custom, gentlemen's agree-
ments or feelings of white brotherhood.
The understanding of the power of economic inducement to further
the cause of racial discrimination in employment is further seen in an
agreement between the Brotherhood of Railway Trainmen and the
Southern Railroad Association signed in Washington, D.C., in January
1910:
12 Locomotive Fi remen's Magazine (August, 1899) , p. 203.
13 Despite a general consensus among today's public that people should be paid
identically if they do identical work, making this Jaw is the first step towards
handicapping the most disadvantaged group of workers.
14 Sterling D. Spero and Abram L. Harris, The Black Worker (New York:
Kennikat Press, 1931) , p . 291.
17
No larger percentage of Negro firemen or yardmen will be em-
ployed on any division or in any yard than was employed on
January 1, 1910. If on any roads this percentage is now larger
than ?n January 1, 1910, this agreement does not contemplate
the of any Negroes to be replaced by whites; but as
are filled or new men employed, whites are to be taken
until the percentage of January first is again reached.
Negroes are to be employed as baggagemen, flagmen or yard
foremen, but 111_ any case in which they are so now employed, they
are to be discharged to make places for whites, but when the
pos1t1?ns they occupy become vacant, whites shall be employed
111 their places.
no difference in the rates of pay between white and colored
exists, the restrictions as to percentage of Negroes to be employed
does not apply.15
This fam?us Washington Agreement shows the understanding of and
confidence 111 the power of economic inducement for racial discrimina-
tion. It is seen by the above citation that, while the white firemen
on hard and fast quotas for the hiring of Negroes, they recog-
mzed that these discriminatory measures were not necessary where the
:-vages the races were equal. In fact, they perhaps realized that
rf they. 111s1sted on racial quotas where wages were equal, that might
result 111 reduced employment opportunities for white firemen.
these kinds of agreements, stronger unionization occurring
_VYorld War I, and an increasingly monopolistic national labor
law, lt rs not very difficult to see and understand the rapid decline in
Negro employment in the railroad industry that was so much talked
during the 1940's. Charles H. Hou'.lton writing in Crisis maga-
z111e reported the Norfolk & Western, as a result .o/ an agreement
between the railroad and the Brotherhood of Locomotive Firemen
and the Brotherhood of Railroad Trainmen in 1909, hired not a single
Negro fireman or brakeman. Of considerable significance to our later
discussion, Houston pointed out that the railroad unions helped write
1934 Railway Act and that each brotherhood had its representative
srtt111g on the First Division of the Natiofial Railway Adjustment
Boa.rd has jurisdiction over all affecting train and
eng111e service employment.16 1
)
15 Jbid., p. 293.
16
Charles H. Houston, "Foul Employment Practice on the Rails" Crisis (October,
1949), pp. 269-84.
18
National Labor Relations Act
Today, in sharp contrast to the past, there a:e subtler .methods that
labor unions employ to restrict entry. This task is accomplished throug.h
monopoly powers conferred on labor unions by The b.as1c
statute which governs private sector labor transactions m the U?1ted
States is the National Labor Relations Act (NLRA) . The Nat10nal
Labor Relations Act of 1935, popularly called the Wagner Act, has
several minor amendments: (I) the Labor-Management Relat10ns
(Taft-Hartley) Act of 1947; and (2) the Labor-Management Reporting
and Disclosure (Landrum-Griffin) Act of 1959.
The ways of market control granted unions by the National Labor
Relations Act are similar to those used by a group of firms that seek to
monopolize a market, i.e., price fixing. The only
between the monopoly behavior of unions and firms is that pnce-fixmg,
collusion, and restriction of competition are illegal when clone by firms
and are legal when done by unions.17
A significant part of the power of a labor organization comes through
its agreement to be the exclusive bargaining agent for all employees of
a firm if a majority of voting employees so choose. Thereafter, labor
unions became vested by government with the power to coerce em-
ployers and employees alike to deal with unions.
Trade unions seek to advance the economic interest of members by
negotiating agreements setting the terms and conditions o.f work.
Their primary aim is to obtain higher wages and working
ditions for their members . . To the extent the urnon is successful m
negotiating wages that are higher than those which employees
obtain in the absence of monopoly power, unions must also devise
means of entry restriction. The reason is simple: the higher wages will
attract entry by workers from other sectors of the economy. If others
were permitted freely to enter the unionized labor markets, the
increased supply of labor would mean less employment and downward
pressures on wages.
Since union membership is not bought or sold on the market (the
initiation and clues fee does not represent the economic value of union
J 7 The Congress an<l the Courts have u?im1s do things which wo_uld
result in arrest and imprisonment if the ordinary cwzen d1<l them-such as dest1 uc-
tion of property, assault an<l battery, and impeding the flow of commerce. For
exa mple, in Af1ex Hosiery v L eader 310 U.S. 469 (1940) the Sup1:eme Court
that a striking union could seize a company's p lant an<l stop hosiery ship-
ments without violating the law. The court said that the ?Y the
union was only incidental to the legitimate purpose of advancing the umon s own
interest.
19
membership), the decision to reject or admit a prospective union
member will not be based upon economic criteria. Of necessity, this
means that the criteria for union membership (and, with membership,
chances for a job, particularly in craft employment) will be based
upon non-economic criteria-chiefly, personal characteristics. Such
criteria include, but are not restricted to: ( 1) age and citizenship
requirements, (2) nepotic rules whereby preference is given to relatives
of union members, (3) member sponsorship, (4) worker competency
tests, and (5) racial and sex discrimination.
Another way that unions can control entry is through worker train-
ing. Since training is necessary for some skilled jobs, unions can
regulate access to some training programs that they manage. In most
cases, however, unions cannot fully control the number of persons
who learn a particular skill: they can, however, control the number
of workers who are admitted to the union. Such a restriction is very
effective if the union has an agreement, which most craft unions do,
with employers to hire only workers referred or otherwise acceptable
to the union.
Whatever the stated purpose for granting unions the sort of monop-
oly power they now possess, the result is weak minority participation,
particularly in the craft unions.
Some portion of the poor representation of minorities in the crafts
may not be the result of racial discrimination by either unions or
contractors. It may be the result of poor schooling and low skills held
by many minority people. But union activity through collective bar-
gaining which mandates that a contractor pay, for example, each
plumber hired a minimum wage of $9. 00 per hour forces the contractor
to discriminate against hiring a lower-skilled plumber who would be
happy to work for, and the contractor happy to hire for, $5.00 an hour.
To hire such a plumber would violate the union and the
contractor would not want to hire that low-skilled plumber. The pric-
ing activity of the union not only thus denies the low-skilled plumber
a job, but it denies him also a chance to upgrade his skills through
on-the-job training.
Labor Unions and the Minimum Wage Law
Many government policies serve as reinforcement to the monopoly
powers of labor unions. One such policy is 5he minimum wage as
legislated by the Fair Labor Standards Act of 1938 and its subsequent
amendments. Superficially, at least, the minimum wage law wears the
disguise of a policy aimed at the best interests of the most unfortunate
20
members of the labor force-the low-skilled, disproportionately Negro
segment of the labor force. However, closer scrutiny of the economic
effects of the minimum wage. law reveals an outcome other than the
stated purpose for union support for the legislation.
To understand the economic effects of the minimum wage law, it is
necessary to recognize a basic behaviorial characteristic of all people,
not just that of employers. People always prefer lower prices to higher
prices for a given good or service. An economist expresses this behavior
as utility maximization. That is, for a given budget or resource con-
straint, people try to seek the highest level of satisfaction that is
consistent with that constraint.
The wage that any person gets in open markets reflect the contribu-
tion of his productivity when combined with other economic resources.
For the most part, highly productive people can command higher
wages relative to their less productive counterparts. Thus, the posses-
sion of low skills simply implies low wages relative to those with high
skills. The minimum wage law is an act of governmental intervention
into the market whereby employers must pay a specified legal minimum
wage to whomever they hire. Such a law produces gains for one class
of workers and produces losses for another. Those people who are
m d ~ worse off as a result of the minimum wage law are those who
have the lowest skills or those who are perceived as being most costly
to hire in the eyes of the employer.
Why thi s happens is clearly seen if we ask a question from the point
of view of the employer. If a minimum of $3.10 an hour must be paid
no matter who is hired, what kind of workers does it pay to hire?
Actually the mini1num compensation that must be paid by the employer
is more than the legislated minimum because there are mandatory
fringe benefits which must he paid e.g., Social Security, accident insur-
ance, and perhaps sick or vacation benefits: some estimates are that
these fringe benefits add approximately $1 .00 more to the "minimum
wage." Therefore, we should think in terms of about $4. 00 being the
"minimum wage." Clearly then, if an employer has to pay a minimum
hourly wage of .$4.00, he has very little incentive to hire a person
whose hourly output has a value of only $2.00. Even if an employer
were willing to train such a worker, the fact that the worker must be
paid a wage higher than the market value of his output, plus the
training costs, makes on-the-job-training an unattractive economic
proposition.
To the extent the minimum wage law raises the pay level to that
which may exceed the productivity of some workers, employers will
21
predictably make adjustments in their use of labor. The adjustments
will consist of measures to economize on the usage of labor that is
low-skilled. We have all seen these adjustments which tend to sub-
stitute capital for labor, i.e. automation. Other adjustments are self-
service establishments, longer waiting lines for customers, and doing
away with the service altogether.
The businessman in the literal sense of the word is really an
employee. Customers, acting collectively, are employers. The fact that
customers exhibit preferences for lower prices to. higher prices forces
the businessman to make adjustments which lower production costs in
light of the increase in the legal minimum wage. If he does not make
adjustments he will lose his customers (and investors) to those firms
which do make the corresponding adjustments. These adjustments
would be unnecessary if his customers were indifferent to product or
service prices. Therefore, the minimum wage has the full effect of a
law that says that if one cannot produce at least $3. l 0 worth of goods
and services, he should be denied a job.
The minimum wage law does not simply reduce job opportunities,
it reduces them in a way that strikes hardest at the most disadvantaged
segments of the labor force. Workers who bear the heaviest unemploy-
ment burden of the minimum wage law are those who are most
unskilled. In the American labor force, there are two well-identified
segments of the population that tend to be disproportionately low-
skilled: youths in general, who are low-skilled because of immaturity
and lack of work experience; and those racial minorities who, as a
result of poor education, racial discrimination, and other socioeconomic
factors, are disproportionate! y represented among the low-skilled.
It is no accident that it is precisely these labor groups who are most
disproportionately represented among the unemployment statistics.
Youth unemployment, even during relatively prosperous times, ranges
from two to three times that of the general adult . b o r force. Black
youth unemployment is even worse-nearly eight times that of the adult
labor force. This high rate of unemployment is largely the result of
being priced out of the market by the minimum wage law. That this
is so is a general consensus among academic economists who have
studied the problem. While there is debate among economists over the
magnitude of the effects, there is virtual consensus on the direction of
the effects of the minimum wage law-that1 of reducing employment
opportunities for the most low-skilled work}r.
1
8
18 Several important studies are cited in the bibliography.
22
One of the most ignored aspects of the high rate of youth unemploy-
ment among blacks is the fact that this is a new phenomena. In 1948,
black youth unemployment was roughly the same as white youth
unemployment. In fact, for that year, blacks in the age range 16-17
had an unemployment rate which was less than that of comparable
white youths-9.4 percent unemployed compared to I0.2 percent,
respectively. From then until the mid-fifties, black youths generally
were either just as or more active in the labor market than were white
youths. Now the labor force participation rate is just one-half that of
white youths.
1
9
Despite the rhetoric of today, racial discrimination cannot explain
this reversal unless one is able to prove that today's business world is
more racially discriminatory than that of the past. The reason for this
dramatic reversal of market opportunity for black youths lies elsewhere
as has already been suggested-it is one of the effects of the minimum
wage law. The reason why the minimum wage law has a greater
unemployment effect on black youths than it does on white youths lies
in the adjustments that are made by firms: one type of adjustment to a
higher minimum wage is not only to hire fewer youths, but to seek
among those hired the most highly qualified youths. As it turns out
for a host of socioeconomic reasons, some of which have already been
mentioned, white youths more often than black youths have better
educational backgrounds. Therefore, as confirmed in unemployment
statistics, the legislation of higher minimum wages can be expected
to impose a greater burden on black youths than on white youths.
Given the minimum wage law effects demonstrated here and else-
where, one immediate question that might be asked is, why does such
a law have the political support it has traditionally enjoyed? Surely,
one part of the answer is that decent people entertain a strong desire
for less fortunate people to be better off. However, another part of the
answer is that the minimum wage law serves the economic interests of
strong political coalitions formed by labor groups.
Economists recognize that, for many productive activities, low-skilled
labor is a substitute for high-skilled workers. In other words, often an
employer has the choice of using a certain number of low-skilled
workers to perform a certain task versus using a smaller number of
high-skilled workers and a piece of machinery. The particular produc-
tive technique that he employs will largely depend on the comparative
19 The facts and figures are further elaborated in my "Government Sanctioned
Restraints That Reduce Economic Opportunities for Minorities, " Policy Review,
(July 1978), Revised Preprint.
23
costs involved. High-skilled workers can increase the demand for their
services, hence also command higher wages, if they can somehow
eliminate the competition they face from low-skilled workers. The
following example will make this concept more concrete.
Suppose a fence can be built using either one high-skilled worker or
three low-skilled workers. If the wage of high-skilled workers is $38.00
per day and that of an individual low-skilled worker is $13.00 per day,
the firm will employ the high-skilled worker because the production
costs would be lower ($38.00 instead of $39.00, the latter being the
cost of using three low-skilled workers) . But if the high-skilled worker
were to demand a wage of anything over $39.00 per day, he would find
himself unemployed. The high-skilled worker would soon recognize
that one of the ways he could increase his income is to advocate a
minimum wage of, say, $20.00 per day in the fencing industry. The
arguments that the high-skilled worker would use to gain political
support would be very much like those we hear today. His union
leader would profess a concern for the living standards of the low-
skilled, he would want to prevent worker exploitation and promote
worker equality. If he is successful and persuades the legislature to
enact a minimum wage of $20.00 in the fencing industry, the high
skilled worker can now demand a wage up to $60.00 per day and have a
higher probability of keeping his job.
2
0 The reason that he could do
this is because the minimum wage legislation would make his sub-
stitutes (the low-skilled worker) economically unattractive. Therefore,
at least one effect of the minimum wage law is to price high-skilled
workers' competition out of the market. Whether the example accu-
rately describes the motives of labor unions is not necessarily at issue.
Whatever their motive in support for the minimum wage, the effect is
the same and the fact that the effect also happens to coincide with a
number of very important special economic interests may be entirely
coincidental.
In South Africa, where the racial climate is perhaps the most hostile
in the world, white racist labor unions are also major supporters of
minimum wage laws and equal-pay-for-equal-work laws for blacks. The
New York Times reports:
Right wing white unions in the building trades have complained
to the South African Government that laws reserving skilled jobs
for whites have broken down and should IJ/e abandoned in favor
20 The effectiveness of the wage demand also depends upon the elasticity of
substitution of capital for labor.
24
equal-pay-for-equal-work laws .... The conservative building trades
made it clear they were not motivated by concern for black workers
but had come to feel that legal job reservation had been so eroded
by Government exemption that it no longer protected the white
worker.
21
These job reservations laws were being eroded because blacks were
working at wages which were a fraction of those paid white workers,
thereby creating an incentive for contractors to hire blacks and there-
fore threatening the jobs of white workers. The minimum wage and
its parallel equal-pay-for-equal work idea were expected to serve as a
more reliable racial discriminator. In other words, if the racist con-
tractor had to pay blacks and whites the same wage, the cost of indulg-
ing his preference for white workers would be effectively zero. With a
wage differential, the cost of racial discrimination is positive-meaning
more employment for South African blacks at wages which are admit-
tedly lower but which are nevertheless higher than the unemployed's
wage of zero and which permit the acquisition of valuable job training
experiences.
The minimum wage law and other labor market restrictions do
reduce employment opportunities and therefore the income of those
forced out of the labor market. This fact suggests that, as a part of
such union restrictive strategies, there must be a political strategy
calling for various kinds of maintenance programs to provide income
for those who are unemployed as a result of market closures: if the
alternative to not working were starvation, it would present a socially
volatile climate. Thus it is very probable that labor unions will lead
the support for income subsidy programs (e.g., food stamps, welfare,
Job Corps, Public Service Employment projects, and various kinds of
make-work programs) which represent a redistribution of income from
society at large to those who have restricted the labor market in the
first place. They disguise the true effects of market entry restrictions
caused by unions and other economic agents by casting a few crumbs
to those denied jobs in order to keep them quiet, thereby creating a
permanent welfare class.
Union support for these programs may explain why minorities and
their political leaders give unions strong and obedient support. Minori-
ties are major recipients of income subsidy programs and union support
21 The New York Times, November 28, 1972. In the U.S., "liberals" are virtually
unanimous in their condemnation of South African policies. Yet they and black
political leaders support essentially the same labor policies that are supported by
racist unions in South Africa to suppress black economic progress. Interestingly
enough, U.S. "conservatives" reject those policies.
25
for these programs gives the impression that unions are pro-minority.
Thus, in an important sense, minorities and their political representa-
tives are captured union constituents. If they do not politically support
union policy, unions will not support the government handouts that
minorities receive as a result of being out of work. Even sadder is the
fact that minority political leadership is obliged by labor unions to
vote in Congress for union-backed legislation that causes even more
unemployment among minorities. This is readily seen by anyone wish-
ing to check the voting records of black Congressional Members.22
Labor union support for minimum wages and equal-pay-for-equal-
work today has its earlier counterpart in discrimination by the railroad
unions. There we saw that labor unions sought to protect the wages
of their white members by making the Negro less competitive through
institutionally attempting to drive up the wages that railroad com-
panies had to pay Negro firemen. While it may be said that unions
today have other motives, they still seek to drive up wages of those
that compete with them. The minimum wage law is a good example
but there are others, one of which is the Davis-Bacon Act.
Unions and the Davis-Bacon Act
The Davis-Bacon Act was enacted on March 31, 1931, for the stated
purpose of protecting local wages on federal construction from com-
petition with lower wage non-local labor. The Act required that, on
all federally-funded and federally-assisted construction projects, the
wages and (as the Act was later amended) fringe benefits had to be
those determined to be locally prevailing. The Secretary of Labor, in
violation of the spirit of the law, usually interprets the "prevailing
wage" requirement of the Act as the union wage or higher.
The proponents of the Davis-Bacon Act were concerned about the
tendency for non-union and non-local contractors to underbid con-
tractors in high-wage and highly unionized areas. The proponents
argued that successful low bidders often imported labor from the South
and other low-wage areas, thereby producing unemployment and lower
wages in otherwise high-wage areas.23
One effect of the Davis-Bacon Act that interests us here is that it
discourages non-union contractors from bidding on government con-
struction jobs, mainly because to do so would disrupt a company's
22 It is very interesting how black political leadership sees labor unions as their
friends particularly in light of labor's resistance to p r o ~ r m s mandating increased
minority participation in union work such as the various quota plans in the
construction ind us try. )
23 "The Legislative History of the Davis-Bacon Act,'' (Washington, D.C.: U.S.
Government Printing Office, 1962) , p . 1.
26
work force through problems that would arise from some of its workers
receiving higher wages than those on private construction j.obs and
morale problems caused when worker wages decreased following com-
pletion of the government construction job.
24

To the extent that non-union contractors are discouraged from compe-
tition on a substantial part of the construction industry, it has economic
consequences for minorities because minority workers are more likely
to work in the non-unionized sector of the construction industry.
25
The Equal Employment Opportunity Commission reports that about
one of every five locals in the building trades union had no Negro mem-
bers. In those that did, the Negroes were most often laborers. The 1967
Survey of Economic Opportunity reported that only 27 percent of
non-white craftsmen and 35 percent of non-white laborers in the con-
struction industry were union members. The high apprenticeship
rates required by the Davis-Bacon Act discourages the .use ?f
tices on federally-funded or federally-assisted construct10n ]Obs. This
requirement works at cross purposes with federal job programs seeking
to train minority young people. Aside from the reduced employment
opportunities resulting from the Davis-Bacon Act, it also hampers
government efforts to stimulate the production of low moderate
income housing. In other words the interest rate subs1d1es to con-
tractors to build moderate income housing provided by this program
is often entirely offset by the higher wages mandated by another federal
program (Davis-Bacon) .
The racial employment effects of the Davis-Bacon Act were antici-
pated by its designers. Allusions to racial bigotry were made in many
speeches during the House debate in 1931. Congressmen Allgood was
quite specific:
"That contractor has cheap colored labor that he transports,_
he puts them in cabins, and it is labor of that sort that 1s m
competition with white labor throughout the country."
26
At least one intent of the Davis-Bacon Act was therefore to prevent
black construction workers from competing with white workers on
remunerative federal construction projects. Unions today are just as
adamant in their backing of the Davis-Bacon Act as they were in years
24 General Accounting Office report to Congress, "The Need for More Realistic
Minimum Rate Determinations for Certain Federally Financed Housing in Wash
ington Metropolitan Area" (Washington, D.C., U.S. Office, 1.968); see also
Richard L. Rowan and Lester Rubi!' , Opening the Skilled Construction Trndes to
Blacks (Philadelphia: University of Pennsylvania Press, 1973). P 93.
25 This is no doubt partly explained by union discrimination.
26 U.S. Congress, House, Congressional Record, 7lst Congress, 3rd Session, 1931,
p . 6513.
27
past. For the most part the only thing that has changed in the rhetoric
being used is that the unions make no explicit racial statement in their
support.
27
However, for us, we have to keep in mind that, regardless
of the intentions involved, the analysis of any policy must always look
to e/Jects of various laws.
Occupational Licensure
Entry to certain occupations is regulated by law. Licensing laws and
certification requirements, though having some social merit, limit entry
into certain trades and hence reduce employment opportunities. Licens-
ing laws have another important effect: to the extent they limit entry,
licensing makes incumbent practitioner incomes higher than they
would otherwise be. This helps us to understand why unions and
trade associations are nearly always the major supporters both of licens-
ing laws and of any tightening in the licensing standards.
Licensing laws are another form of market entry restriction that
works to the disadvantage of minorities. In fact, licensure laws have
traditionally been looked at as a way of eliminating or reducing com-
petition resulting from minority participation in a particular trade or
craft. For example, C. H. Perry, Secretary of Plumber Local Union 110,
in Norfolk, Virginia, wrote in 1905, " ... as the Negro is a factor in
this sector, and I believe the enclosed Virginia state plumbing law will
entirely eliminate him and the impostor from following our craft and
I would suggest to the different locals that if they would devote a little
time and money they would be able to secure just as good if not better
law in their own state."
2
8 The law requires, in the name of protecting
the public health, that all plumbers be examined and licensed. A maga-
zine in Danville, Virginia, offered the following:
"There are about ten Negro state plumbers working around here
(Danville, Virginia), doing quite a lot of jobbing and repairing,
but owing to the fact of not having an examining board it is
impossible to stop them, hence the anxiety of the, men here to
organize."
29
And from Georgia:
"The justice which has been denied the white firemen of the
Georgia Railroad may be secured, not only for them, but for every
21 The most recent analysis of the many adverse effects of the Davis-Bacon Act
can be found in, U.S. General Accounting Office, The Da,visBacon Act Should be
Repealed (Washington, D.C.: U.S. Printing Office, April 21, 1979).
28 Spero and Harris, op. cit., p. 478.
/
29 Ibid., p. 481.
28
white fireman in the South, through legislation such as that now
pending in the lawmaking body of the State of Georgia.
"The proposed bill fixes generally the limitations and powers of
the Board of Examiners, who shall themselves have been firemen of
not less than three years experience, and shall be five in number.
"If the act is passed and becomes law it is expected to have the
effect of reducing to a minimum the number of Negro firemen
eligible to fill that position on locomotives in the State of
Georgia." 30
Numerous other examples of'pleas by trade associations and unions
for licensing can be given. Those same pleas exist today. The only
real difference between the pleas then and the pleas now is that the
stated reason now never makes explicit the desire to rid the profession
or trade of minorities. Very interestingly, during the l 930's, a U.S.
citizenship requirement was added to virtually all licensing laws. This
happened to coincide with the large migration of Jews to the United
States as a result of the hostilities in Europe. Many of.these immigrants
were skilled artisans but, not surprisingly, they invariably lacked this
new criterion.
Evidence shows that licensing requirements are manipulated to meet
the economic pressure of the moment. One study demonstrated that,
when unemployment among journeymen and master electricians and
plumbers is high, licensing examination standards are raised. The
obvious intent is that of restricting entry in order to protect the jobs of
incumbent electricians and plumbers-thus driving up the price they
can charge the public for their labor. The pressure for higher stan-
dards is couched in terms of protecting the consuming public yet it is
obvious that a principal result is to protect the incomes of electricians
and plumbers.31
Raising licensing requirements, and other forms of "credentialism"
is bound to have the most adverse effects on those who are disad-
vantaged already in terms of formal education skills. Often these
requirements deny people who can otherwise do a job the chance to
earn income at that job. For example, one study shows that in Missouri
barbers are required to pass a two-part test, one practical and the other
written, in order to get a barber's license.
32
Black candidates fail the
test at a rate that is 40 percent higher than whites. However, on the
30 Ibid. , 482.
31 See, Elton Rayack, An Economic Analysis of Occupational Licensure, a report
prepared for the U.S. Department of Labor, September 1975.
32 Professor Stuart Dorsey, "Characteristics of the Occupational Licensing Queue,"
Unpublished Paper, Western Illinois University, 1978.
29
practical part of the test, where examiners test the applicant on his
ability actually to cut hair, shave, etc., there is no statistically significant
difference in the failure rate between blacks and whites. This same
result is probably true of other trades and occupations that are licensed.
That is, blacks can do the job, but they are penalized because of the
grossly inferior education they have received in the public school
systems around the country.
The same outcomes discussed above can be found in the area of
business licensing and regulation which also wins the support of unions.
For example, the taxicab industry is an area that would be a readily
accessible opportunity for business ownership by many low-income and
low-skilled blacks were it not for the restrictive entry provisions in most
cities. Both capital and the education requirements are low. However,
entry is restricted through prohibitively high entry requirements set by
law. For example, in New York and Boston, a license or medallion
sells for $60,000 and $45,000 respectively. Such a license must be
purchased for each vehicle that is operated as a taxicab. In Washington,
D.C., the story is different. Fee requirements are quite nominal-
$200.00. As a consequence, black taxicab ownership is high relative to
the black population.
Another area of potential business ownership for minont1es is the
trucking industry. Here, too, there are significant entry restrictions.
To own and operate a truck for the interstate transportation of goods
requires a certificate from the Interstate Commerce Commission (ICC).
A certificate will be granted if the entrant can prove he will provide a
service that no other trucker is currently providing. If the entrant only
offers to provide a better service at a cheaper price, he will be denied
a certificate. Behind the support for this restrictive ICC policy are
trucking companies and the Teamsters Union. Teamster Union mem
hers benefit from this restrictive policy in the form of higher wages
and more work. 33
Summary
The adverse impact of market entry restrictions and the role of labor
unions in that restrictions, while not seen by today's black leadership,
was clearly recognized by black leaders of the past. W.E.B. DuBois
frequently commented on union behavior:
33 See, Thomas Gale Moore, "The Beneficiaries of Regulation, " The
Journal of Law and Economics (Fall, 1978) . Professor Moo; e estimates that the
benefit from the restricted entry for Teamster union members add up to $1.0 to
$1.3 billion dollars annually in the form of higher wages.
30
The white employers, North and South, literally gave the Negroes
work when white men refused to work with him; when he 'scabbed'
for bread and butter the employers defended him against mob
violence of white laborers; they gave him educational institutions
when white labor would have left him in ignorance; and even
when the full-fledged socialist movement came, the socialists were
afraid to make a direct appeal to the Negro vote because such an
appeal would have militated against their chances of attracting
white labor, North and South.
However, instead of taking the part of the Negro and helping
him toward physical and economic freedom, the American labor
movement from the beginning has tried to achieve freedom at the
expense of the Negro.34
DuBois was not the only black leader who condemned labor unions;
virtually every Negro leader of the period, including Booker T. Wash-
ington, felt the same way.35
The white employers that DuBois spoke of were not necessarily all
humanitarians. That is, you do not need to appeal to humanitarian
motives to account for the willingness of businesses to hire Negroes.
The fact of business is that Negroes would work for lower wages in
order to offset any lack of skills or non-pecuniary disadvantage they
had. From the employer's point of view, his money interests lay in the
direction of increasing job availability for Negroes: the union's money
interests lay in decreasing job availability for Negroes.
While labor union policies of restricting entry may not be aimed
specifically at restricting the entry of Negroes as such, they nonetheless
are restrictive in practice. As it turns out, disadvantaged Negroes bear
the brunt of labor union restrictions. So far as policy to advance the
economic progress of Negroes, entry is what is needed rather than
restriction. It is ironic, if not tragic, that for the most part today's
black leadership has formed a political coalition with the very people
in whose interest it is to restrict employment opportunities. Among
many of these black political leaders is an anti-business attitude and
rhetoric. They fail to realize that blacks as a group pose no competi-
tive threat to the Chryslers, U.S. Steels, and other industrial giants of
America. Blacks do pose a competitive threat to plumbers, electricians,
and carpenters as well as to their unions. Unfortunately, for blacks,
34 W.E.B. DuBois, "The Denial of Economic Justice to Negroes," The New Leader,
(February 9, 1929), pp. 43-46.
35 Booker T . Washington, "The Negro and the Labor Unions," Atlantic Monthly,
(Juty 1913), pp. 756-767.
31
particularly those most disadvantaged, black leadership today has
formed an association with, and does the bidding of, the very people
who are most responsible for narrowing the job opportunities of those
whom this black leadership claims to represent.
Bibliography
Yale Brozen, "The Effect of Statutory Minimum Wages on Teenage
Unemployment," Journal of Law and Economics (April, 1969), pp.
109-122.
David E. Kaun, "Minimum Wages, Factor Substitution, and the
Marginal Producer," Quarterly Journal of Economics (August, 1965),
pp. 4 78-486.
Marvin Kosters and Finis Welch, "The Effects of Minimum Wages on
the Distribution of Changes in Aggregate Employment," American
Economic Review (June, 1972).
Jacob Mincer, "Unemployment Effects of Minimum Wages," Journal
of Political Economy (August, 1976), pp. 87-105.
Thomas Gale Moore, "The Effects of Minimum Wages on Teenage
Unemployment Rates," Journal of Political Economy (July/ August,
1971), pp. 897-902.
Walter E. Williams, "Government Sanctioned Restraints That Reduce
Economic Opportunity for Minorities," Policy Review (Fall, 1977),
pp. 1-24.
' \
)
32
Part II
Obstacle to Equal Employment:
The Legal Structure of Organized Labor
The Problem
by
Loren A. Smith, Associate Professor of Law
Delaware Law School of Widener University
Wilmington, Delaware
After a quarter century of legal recognition that racial discrimina-
tion is contrary to the 14th Amendment's equal protection clause, and
after more than a decade of Title VII of the Civil Rights Act of 1964,
the United States Commission on Civil Rights issued a report noting:
"We have found that referral unions still maintain discriminatory
practices that have an adverse effect on the employment oppor-
tunities of minorities and women. We have found further that
Federal programs to provide equal employment opportunity in
the affected industries largely have been ineffective."
This statement was part of the letter of transmittal of a May, 1976
report by the Commission entitled Equal Opportunity in Referral
Unions.
In 1977, a black labor lawyer, sympathetic to but recognizing some
problems with the ultimate theory of compulsory unionism, noted:
The principal issues involved in disputes between blacks and the
unions are: (I) restrictions on admission to apprenticeship pro-
grams jointly administered with employers by both industrial and
craft unions; (2) the denial of journeyman cards to qualified
black nonunionists; (3) refusal of admission to membership-
even though no union today refers to a formal color bar in its
constitutional rules; (4) the establishment of segregated or aux-
iliary locals for blacks; (5) the maintenance of separate lines of
progression and seniority districts which prohibit or discourage
transfers by blacks into relatively better paying and more desirable
jobs held by whites; and (6) the absence of blacks and other
minorities from policy-making elective and appointed positions
inside the unions.
33
These factors were present at the time of President Kennedy's
speech in 1963. They are present today-more than a decade after
Title VII of the Civil Rights Act of 1964, the federal fair-
employment practices statute, was enacted into law. The limited
arsenal provided to minority-group plaintiffs by the 1964 statute
and the hostility of the unions have made the problems seem more
intractable today than they once appeared to be. Furthermore,
governmental agencies charged with enforcing the act, hampered
by both lack of appropriations from Congress and the absence of
political will and competence, have failed to crack down effec-
tively on offenders.1
The author of the previous statement later goes on to note about
his work: "The entire book demonstrates that the opportunity for
employment is the key to the improvement of race relations in the
United States."2 If racial discrimination in employment is a key or
the key national problem in the area of race relations, which we may
take as a starting point, and if, in spite of labor laws and anti-
discrimination laws (or because of them), labor unions play an
important role in employment discrimination, then it is certainly at
least worth looking into whether our entire system of labor relations
is the source of the problem.
Based on the fact of existing employment discrimination today,
despite extensive anti-discriminatory legislation on the federal and
many state statute books (many such laws being of long standing),
this paper will look at the question of whether it is this nation's sys-
tem of exclusive bargaining and compulsory membership which is in
need of basic revision. It is not the purpose of this paper to provide
a comprehensive analysis of union discrimination against black Ameri-
cans; that has been done in various places and in more detail than
we could hope to duplicate.
3
Nor is this paper designed to be a
comprehensive history or critique of the effect of national labor rela-
tions legislation on racial discrimination in employment, Rather it
is designed to suggest some of the central and perhaps critical incon-
sistencies between the ultimate goal of true equal opportunity employ-
1 Gould, Black Workers in White Unions, 1977, 16.
2 Id. at 22.
3 Id. generally. See also as a representative sample: Hill , Black Labor and the
American Legal System, 1977; Demsetz, " Minorities in the .Market Place," 43 North
Carolina L. Rev. 271 (1965), Rowan & Rubin, Opening t re Skilled Construction
Trades to Blacks (1972); Rosen, "The Law and Racial Discrimination in Employ-
ment, " 53 Calif. L. Rev. 729 (1965); Kahn, "Racial Discrim)nation on the Jobsite,"
12 UCLA L. Rev. ll86 (1965); Herring, "The ' Fair Representation' Doctrine," 24
Maryland L. Rev. ll3 (1964).
34
ment and the ultimate goal and effect of our scheme of national labor
law.
The hardest thing we must face in dealing with racial discrimination
in the United States is to separate the moral issues from the practical
problem. This is not meant to suggest that the moral issue has no
place in the consideration of the problem of racial discrimination. In
has a preeminent place, for it defines the problem: racial preju-
dice is morally wrong and inconsistent with both American political
values and our Judea-Christian religious heritage. However, once the
problem has been defined, once the moral sensibility has recog-
nized the wrong, it is largely up to the practical arts and sciences of
pol!tics economics to find solutions. In this life, purely moral
ms1ght identifies problems, it does not solve them. Once identified,
be tackled with all the great human tools of orga-
analysis and effort. . If a particular solution is not working,
It may not be that the solution is immoral, but it surely is immoral
to pursue such an ineffective solution. For then one is really saying
that the moral problem should not be solved.
we look at the instant problem of eliminating racial dis-
from the realm of employment in this country, the starting
pomt is .the that such discrimination is wrong. Being
faced with an mfimte range of possible solutions, it is desirable as a
moral matter to pick the solution that is most effective.
Otherwise, in the name of solving the problem, and curing the evil,
the reverse is actually being clone. If we are trying to put out a fire,
the (possibly) with the best of motives, suggests pouring
?asolme on It .rather than water is spreading pernicious concepts. He
is not necessarily a bad person, nor should he be silenced, but his ideas
should be examined and rejected. It is the thesis of this paper that
the legal structure
4
our nation has erected over the last fifty years to
4
We are primarily talking about the National Labor Relations Act (Wagner Act)
of 1935 as amended by the Labor-Management Relations Act (Taft-Hartl ey Act) of
1947 and the Labor Reporting and Disclosure Act (Landrum-Griffin
Act) of 1959 (and the ClVll Rights Act of 1964-Titl e VII, along with the E 1
Employment Opportunity of 1972) . Two other significant laws make up
federal legal structure governmg labor relations They are the Ra' ! L b A
f
1
1 way a or ct
o 1926 and the Norns-L.aGuard1a Act of 1932. It is interesting that the Railwa
Act, a statute, was the product of compromise between
railroads and the un10ns With Congress enacting the final comprom' L b . L
c B k & G
97
. . . . . 1se. a 01 aw,
ox'. o orman, I 7, p . 7;>. . This ongm 1s significant because it reAects the
pattern of American labor law reAecting only the interests of
labor umons and corporat ions, and ignoring the interest of the
d1ssentmg md1v1dual.
35
govern employer-employee relations represents the pouring of gasoline
on the fires of racial discrimination, and not the quenching of those
fires. The moral motivations for this dumping of gasoline have been
mixed. Social idealism, crass economic greed, institutional inertia,
political demagoguery and false ideology have all played a part in
making American labor relations particularly subject to the passions
of prejudice. There are, in fact, many attitudes at work in our culture
promoting the current system of labor relations. The desires of ideal-
ists to create a better livelihood for the workingman; the desires of
union leaders for the power and prestige of $100,000 plus jobs (paid
by the cumpulsory dues of millions of workers) ; the fact of judicial
decisions, political thought and regulatory experience based upon
expectations of compulsory unionism; and the strong interest that
politicians and employers have in dealing with a few union officials
rather than with millions of diverse working people-these have all
played a part in creating our current system. This, however, is less
important for the purposes of this study than the question or topic of
what is the practical nature of the problem created by our system and
what are relevant potential solutions to the problem.
The specific practical problem that confronts the elimination of
racial discrimination in employment is what procedure will most ensure
that hiring decisions produce the least racially biased and most rational,
fair result. The procedural question is really the critical question in
terms of what the government can do to solve or alleviate the problem,
for government only acts by changing or reinforcing existing proce-
dures. In the case of labor relations in this country, at least since 1935,
the procedures have been established and controlled by government.
Through the National Labor Relations Act
5
and the administrative
agency, the National Labor Relations Board, established by it, the
federal government has established a controlled monopoly system of
labor relations for most industrial organizations. Using the power
vested in the federal government under the Commerce Clause of the
Constitution,6 and in response to a serious economic crisis,
7
the Con-
5 29 U.S.C. Sec. 151 et seq.
6 U.S. Const., Art. I, Sec. 8, Para. 3.
7 This, of course, refers to the Great Depression, though as noted in Note I, the
impetus for labor law change goes back into the 1920s and history can be traced
directly to the populist movement ?f 1890s an? that. crit.ici.ue of
capitalist values. It is not merely comc1dental that , m to bemg cnt1cal
corporate power and market forces, w.as host1l5 . to (though 1t
would be a simplification to identify all populist ideology with racism) . E. Foner,
Free Soil, Free Labor, Free Men, 73-102 (1973) . Indeed in the 1890s when "Jim Crow"
36
gress launched labor policy on the course of government monopoly.
NLRB v. Jones & Laughlin Steel Corp. 301 US l (1937), confirmed
the constitutionality of the course in a break with previous decisions
which had severely limited federal economic interventionism. By as
early as 1941, in U.S. v. Darby (312 U.S. 100), the 1937 constitutional
shift had become the dogma of the federal judiciary. With World
War II there came strong pressures for national economic unity,
militarily-oriented industrial cooperation and regimentation: as a
result, the New Deal policy of government-sanctioned union power
passed from the arena of political debate into "received wisdom."
Following World War II, the institution of organized labor, backed
by the governmental power of mandatory collective bargaining and
exclusive representation, had developed to such an extent that the
same government which had created it over a decade before became
responsive to the abuses that always flow from the private exercise of
powers properly unique to government. The Labor Management
Relations Act of 1947 (Taft-Hartley Act) sought to regulate some of
the abuses. Leaving the basic labor relations structure intact, however,
it maintained private unions in possession of certain governmental
monopoly powers. Due notice should be taken of the fact that the
unions, in possession of these powers, were largely all white. They had
risen to power on the basis of an emotional appeal to solidarity that
was often antithetical to any concern for the rights oCminorities or the
individual aspirations of anyone who did not share the union "cause."
The 1940s witnessed many changes in American life. One of the
most significant (legally) was the judicial abandonment of any con-
cern with the protection of individual economic rights against the
legislative branch of government: parallel with this abandonment was
a new emphasis on the role of the judiciary as a check upon legislative
interference with those individual rights having no direct economic
relationship. These trends are still in full swing today and have
produced many of the century's greatest landmark decisions. However,
judicial focus upon the protection of noneconomically-oriented per-
sonal rights since the late 1930s has left a large gap in the constitutional
protection of individuals. This is so because political and economic
laws were com.ing int? v?gue, the same r ~ u p s that were attacking blacks' rights
were also leveling their sights on corporate interests and their rights. It should be
remembered that in Plessy v. Ferguson the railroad was supportive of the challenge
to the law. Woodward, "The Case of the Louisiana Traveler, in Quarrels That Have
Shaped the Constitution 145 (J. Garraty ed. 1964) . See R. Hofstadter, The Age of
R eform, 70-93 (1955). See generally C. Woodward, Tom Watson: Agrarian Rebel
(1963) .
37
freedoms are indivisible, and personal rights which have their source
in the individual's economic interests often are critical to those things
that make life worthwhile. Thus, as the American legal system enters
the 1980s, some new directions may be appropriate to realize more
fully the goals of our Constitution.
When black Americans were denied such basic noneconomic rights
as voting, equal treatment by government, fair judicial procedures and
the basic rights of the First Amendment, it was quite arguable that
the judicial lack of attention to the defense of economic personal rights
had little effect on fighting racial discrimination. This, however, is no
longer the critical problem. While de jure segregation has passed from
the American scene, economic and employment discrimination still
exists. And while it is no small gain that equal protection is legally
established in governmental programs, the very denial to most Ameri-
cans of the right to work irrespective of union membership severely
limits the possibility of truly meaningful equal employment oppor-
tunity. An industrial relations system which fails to protect the indi-
vidual's right to pursue employment based solely upon such salient
qualifications as experience and ability, which instead demands the
use of wholly extraneous pseudo-qualifications (e.g., union member-
ship or race), is not likely to be found sensitive to equality of oppor-
tunity. In every society, economic and political structures are comple-
mentary: for freedom to exist in one, it must also be found in the other.
It might be noted here that when the present legal structure of
American organized labor was created, black Americans had no illu-
sions about the problem of discrimination by government-sanctioned
compulsory agents. Herbert Hill has noted:
When the NRA was struck clown by the Supreme Court in 1935,
there was cause for celebration in the Negro community. The
legislation intended to be the keystone of President Roosevelt's
program to protect and uplift the working class had already be-
come a millstone around the black worker's neck._ The Wagner
Act, which repl aced Section 7a of the NRA, gave org anized labor
legitimacy within the legal structure and increased its power
enormously. It was intended to fill the gaps left by the demise
of the NRA but was also viewed by blacks with considerable hos-
tility. Now discriminatory labor agreements negotiated under the
National Labor Relations Act were san(: tioned by government
agencies.
8
As demonstrated in this instance, legal ini titutions as they de-
velop may also legitimize injustice. The Natfonal Labor Relations
8 Hill , sup ra at 100. From Hill 's footnot e.
38
Act not only imposed limits on conflict in industrial relations and
provided a mechanism for resolving labor-management disputes,
it also had the effect of legitimizing racial discrimination. After
passage of the Act, informal discriminatory practices became struc-
tured and legally sanctioned by government action. Max Weber
writes of 'domination by virtue of "legality," by virtue of the belief
in the validity of legal statute and functional "competence" based
on rationally created rules ... This is domination as exercised
by the modern "servant of the state" and by all those bearers of
power who in this respect resemble him.'-Max Weber: Essays in
Sociology, trans. and eds. H. H. Gerth and C. Wright Mills (New
York: Oxford University Press, 1946), p. 79.
And Hill further noted:
A significant aspect of the public controversy surrounding the
passage of the National Labor Relations Act was the intense
opposition of the NAACP, the National Urban League, and other
Negro interest groups. The most important feature of the Act
was taken from Section 7a of the National Industrial Recovery
Act (which became Section 9 of the NLRA). This section estab-
lished labor unions as exclusive collective bargaining agents
through a process of governmental certification by the National
Labor Relations Board. Because most of the unions affiliated with
the American Federation of Labor either excluded Negro workers
from membership (the United Mine Workers of America was the
major exception), thus preventing their employment in union-
controlled jobs, or engaged in other discriminatory practices,
spokesmen for the black community vigorously opposed Section
7a. W. E. B. Du Bois wrote in Crisis:
'The American Federation of Labor is not a labor movement.
It is a monopoly of skilled laborers, who joined the capitalists
in exploiting the masses of labor, whenever and wherever they
can ... The AF of L has from the beginning of its organiza-
tion stood up and lied brazenly about its attitude toward
Negro labor ... They have affirmed and still affirm that they
wish to organize Negro labor when this is a flat and proven
falsehood.'
9
And a final quotation from Hill .stresses the problem we are concerned
with:
The southern field secretary of the National Urban League,
Jesse 0 . Thomas, observed in a report that "while Section 7a has
O Id. at 101-2, quoting Du Bois (footnote omitted) .
39
greatly increased the security of labor in general, insofar as the
different labor organizations thus benefitted deny and exclude
Negroes from their membership by constitutions or rituals, the
position of Negro labor has been made less favorable.'' Thomas
added that as a result of the "anti-social attitude of the majority
of the membership and heads of the many unions and crafts, the
position of Negroes has been made even more disadvantageous.IO
To the extent American labor relations represent government con-
trol and monopoly power, equal opportunity employment as well as
true political freedom is an unrealizable goal. This is necessarily the
case. When private individuals are given unique powers of compulsion
and a momopoly position, it is an axiom of human nature that this
power will be used for private benefit. Since the individuals who have
held virtually all of this power since the 1930s have neither been black
nor represented any numerically significant black population, it is not
surprising that blacks have been excluded from any meaningful bene-
fit: indeed, they have been among the principal victims of this power,
both directly by having employment denied for racial reasons, and
indirectly by having union-sponsored legislative programs destroy the
housing, ruin the schools, bulldoze the neighborhoods, stifle the
incipient businesses and inflate away the savings through which their
poverty and depression could have been overcome.
11
The problem thus reduces to the fact that there is in America a
system of labor relations, founded upon federal legal power, that gives
monopoly power to various private groups of union officials who are
essentially self-perpetuating entities responsible primarily to them-
selves. In most unions which have any degree of democratic respon-
siveness of officials to members, it is largely a responsiveness to those
individuals who have been let into the union over the last 40 years-
namely, a white majority. All of this is not to suggest that officials of
unions are inherently more biased than anyone else: it is just that the
10 Id. at 102 (footnote omitted).
. '
11 It is beyond the scope of this paper to analyze the degree to which uni on-supported
legislative proposals have been consciously anti-black. Many unions have supported
many of the landmark civil rights acts that were unrelated to union discrimination.
However, a case can be made that behind much paternalistic legislation, supported
by unions, is an implicit belief that blacks must be taken care of by the government
because they cannot take care of themselves. Of the New Deal approach to the
economic problems of the Depression, Herbert Hill notes:
"The practices of the many New Deal agencies in relation to varied, but
in no case was there equality of treatment. The seek111g to establish
economic stabilization and security either excluded Negroes from their benefits
or accepted (and thereby gave federal sanctions to) inferior standards for them."
Hill supra at 97.
40
legal structure and monopoly power of unions give their personal and
organizational prejudices a great effect upon other humans. Parallel
to the fact that virtually every congressional district in America with
a white majority has a white Congressman is the similar fact that union
leaders with governmentally-granted monopoly powers and predomi-
nantly white constituencies will at best not be sensitive to the concerns
of minority members of the union. Apart from a lack of sensitivity, it
is far more likely that most minority workers will be (as they indeed
are) either flatly excluded from access to the union or shunted aside
into some segregated corner of the union organization.
This "lack of sensitivity" or overt discrimination is highlighted by
the following information from the United States Civil Rights Com-
mission:
"Female and minority trade unionists who believe that their
interests are not receiving sufficient attention argue that
this is partly because of their underrepresentation within the
leadership. ranks of national and local unions. At the leadership
level deos10ns are made and priorities are established and unless
i:iinorities and women are represented there, adequate presenta-
t10n of their special interests is not assured.12
Many national unions have large numbers of minority group and
female yet w!th few exceptions there are no minority or
m the councils of these unions. Many other
nat10nal umons-part1cularly the more powerful referral unions-
have very few minority or female members. With such a small
of minorities and women, there is virtually no possi-
b1hty ?f electing or women to high leadership positions.
Yet without representat10n of women or minorities in the leader-
ship, there is l!ttle poss!bility of changing those union policies that
have resulted m exclus10n of women and minorities from member-
ship and from union-controlled training programs.
Of 177 national unions, only five have minority males as presidents
and onl y two have women as presidents. The governing body of
the AFL-CIO, its executive council, currently has 35 members.
None of the 35 are women and only two are minority males; both
are black.
Mii:iorities and women are also poorly represented in the ranks of
nat10nal officers other than president and on the executive boards
of national unions. A recent study showed that only 6 women
were among 187 national officers and appointed officials reported
by the 24 unions with at least 50,000 women members. Only 18
12
Un ited States Commission on Civil Rights, Equal Opportuni ty in Referral
Unions, 1976, p. 31.
41
women were among the 556 members of executive boards in these
same 24 unions.
The representation of minorities and women in the leadership of
national unions and of the AFL-CIO is slight in view of the fact
that more than 9 percent of union members are minority men
and 21 percent are women."
Given this problem, a problem of human nature and human preju-
dice, how de we insure minorities a fair shake in the job market? There
are two possible approaches to the question just posed. We can operate
through the present employer-employee relations system as established
by law, using the law to force companies and unions not to discrimi-
nate. This has been the approach of the 16 years since 1964 and its
epochal Civil Rights Act.
13
It is an approach we shall explore presently.
In the alternative, we can change the present labor relations system
from its present monopoly model to a more pluralist form. The com-
petition stemming from such a pluralistic model would be the primary
force in creating equal employment opportunity. In the next section
we will explore some of the difficulties already encountered in the first
approach, after which it will be appropriate to investigate some aspects
of the alternative approach.
The Monopoly Model
In the 1944 Supreme Court decision of ]. I . Case v. NLRB, 321
U.S. 332, the fundamental premise of American labor relations was
enunciated. The Court noted:
The workman is free, if he values his own bargaining position
more than that of the group, to vote against representation; but
the majority rules, and if it collectivizes the employment bargain,
individual advantages or: favors will generally in practice go in as
a contribution to the collective result . .. 14
Just prior to this statement, the Court had also noted:
The practice and philosophy of collective bargaining looks with
suspicion on such individual advantages. Of where there
is great variation in circumstances of employment or capacity of
employees, it is possible for the collective bargain to prescribe only
minimum rates or maximum hours or expres.sly to leave certain
areas open to individual bargaining. But except as so provided,
advantages to individuals may prove as disruptive of industrial
peace as disadvantage. "15
13 42 use sec. 2000e et seq .
14 321 US at 339.
15 Id. at 338.
)
42
In NLRB v. Jones & Laughlin Steel Corp. 301 US I (1937) the
Court had already begun to establish this rationale in constitutional
bedrock when it noted:
"Experience has abundantly demonstrated that the recognition
of the right of employees to self-organization and to have repre-
sentatives of their own choosing for the purpose of collective
bargaining is often an essential condition of industrial peace . .. " rn
(Emphasis added.)
Reduced to its essential concept, the Supreme Court found in these
cases that the "greater" interests of the Nat ion as a whole justified a
restriction on the rights of some (perhaps many) individuals.
Whether those individuals were racial or economic minorities matters
less than the basic concept enunciated, namely that in labor relations
the rights of the individual matter less than the rights of the national
collectivity.
This is, of course, the essential premise upon which all racial dis-
crimination has been historically founded. The constitutional corner-
stone of 20th century de jure racial discrimination can be found in
the United States Supreme Court's validation of the "separate but
equal" doctrine in Plessy v. Ferguson, 163 US 537 (1896). That ill-
famed case noted:
"So far, then, as a conflict with the Fourteenth Amendment is
concerned, the case reduces itself to the question whether the
statute of Louisiana is a reasonable regulation, and with respect
to this there must necessarily be a large discretion on the part of
the legislature. In determining the question of reasonableness it
is at liberty to act with reference to the established usages, customs
and traditions of the peopl e, and with a view to the promotion of
their comfort , and the preservation of the public peace and good
order. Gauged by this standard, we cannot say that a law which
authorizes or even requires the separation of the two races in
public conveyances is unreasonable, or more obnoxious to the
Fourteenth Amendment than the acts of Congress requiring
separate schools for colored children in the District of Columbia,
the constitutionality of which does not seem to have been ques-
tioned, or the corresponding acts of state legislatures" 11 (Empha-
sis added) .
Thus, the foundation of legally mandated segregation rests upon a
doctrine that sacrifices the rights of the individual or minority to the
purported "public interest" in "public peace and good order." This
doctrine is the very antithesis of the clauses of the 14th Amendment,
rn 301 US at 42.
li 163 US at 55055 1.
43
due process and equal protection, that have been the primary tools
for attacking racial discrimination in America. Thus, .the that
supports our current national labor relations polic'.', v.iz, the
good of the minority to the "larger good" of .the m the interest
of some purportedly worthwhile social goal, 1s antithetical to those great
constitutional guarantees. And those guarantees in the field. of race
relations have vindicated the individual rights of black Americans, as
well as those of other groups.
One troubling aspect of the approach our National
to labor relations, in addition to its denigration of mmonty is
the increasingly political nature of the process of collective bargammg.
When the dealings between employers and employees are
by government-mandated exclusive representatives, by .the will
of the majority of voting workers, over, and many times agamst, the
will of the minority of workers, the process is a political one. The
traditional economic rights of property and contract that have been
the most powerful tools of individual betterment. for
replaced with a collective bargaining agreement wh.1ch, like all po.ht1-
cal rights" is held by the group in common and is not truly a nght
of any In fact, under some federal case law'.
18
the individual
union member who disagrees with his union leadership on the bene.fits
granted by the contract with the employer may be sum.g
the employer on the basis of the employer's contract v1.olat10ns. It
an old maxim that the property owned by everyone m common is
actually owned by no one.
The Questions-Defect in the System
There are several specific problems that emerge from this . legal
situation created over the last five decades. These be
analyzed with respect to the effect they have upon
in employment. First, there is the problem of fau If
the union is vested with government-backed economic the
interests of all employees in any particular economic umt, i.e.'. the
power of exclusive representation, what is to keep leadership of
the union, at least in theory elected by some proport10n of the em-
ployees, from using its power to benefit the at the
of both the minority in the union and those individuals. outside the
union? until 1964 the answer was that very few res tram ts existed.
We shall explore the current status of this
18 Vaca v. Sipes 386 US 171 (1967). See also Schatzji . :Maj ority Rul e, Exclusive
Representation, and the Interests of Individual Workers, 123 Uni v. Penn. L. Rev.
897, 904-5 (1975).
44
Second, there is the problem of past discrimination by unions against
blacks. To the extent that the very structure of America's labor unions
was built upon racial discrimination and to the extent that their cur-
rent avowed institutional purpose is to stabilize the labor market and
protect the jobs of existing members, how does the law attempt to deal
with this effect? In other words how does the law barring discrimina-
tion deal with the fact that essentially every single union policy de-
signed to give union members advantages and benefits over non-
members has the effect of rewarding those who discriminated and of
contributing to the ongoing effects of past discrimination? Thus, those
in the union benefit from its monopoly position and from the fact that
they were allowed entry through discriminatory means even after the
formal discrimination may have stopped. Those excluded by dis-
crimination suffer the permanent competitive disadvantages of not
being a part of the favored monopoly, even after equal entry may have
become a formal fact.
Third, there is the problem of ongoing discriminatory practices in
employment. To what extent can current judicial or administrative
remedies reach these practices when the system that created the dis-
crimination is still largely in place and unmodified in any of its
essential characteristics? Part of this problem resolves itself into the
question of whether the fox, now said to be reformed, can be trusted
with guarding the chicken coop against his own possible misdeeds.
Fair Representation?
The first problem posed involves the issue of the duty of fair repre-
sentation. From first passage of the National Labor Relations Act in
1935, the principle was established that, once a majority of those voting
in an economic bargaining unit had chosen a union, that union would
become the exclusive representative of all employees in that bargainin()'
. b
umt. That is to say, the individual employees who had voted against
the successful union-bargaining representative (together with those who
had not voted at all) lost their right to bargain individually or to bar-
gain through representatives of their own choosing. They lost their
basic freedom to deal or negotiate with or even to protest directly to
their employer without going through the union. In the 1935 Act,
however, there was no explicit countervailing recognition of any duty
on the part of the triumphant exclusive bargaining agent union to
represent fairly all the members of the union. The situation could
thus occur, and did, whereby an explicitly all-white union
leadership had the monopoly legal power to bargain with the employer
45
in the name of black employees. This basic fact situation produced in
1944 the decision of Steele v. Louisville & Nashville R. Co., 321 U.S.
102 wherein the Supreme Court recognized an implicit duty of "fair
representation" that went along with the grant of monopoly power to
the union. That is, a union which was an exclusive bargaining repre-
sentative must fairly represent all the employees in the unit, irrespec-
tive of the employee's union membership, race, color, religion, or other
condition deemed not relevant to the employment situation.
Part of this duty was finally written into the statutory law in 1947
with the Taft-Hartley Act. Its section 8 (b) (2) makes it an unfair
labor practice (subject to National Labor Relations Board sanction)
to discriminate against non-members in derogation of the various
privileges conferred by section 7 of the Act. Some understanding of
the ineffective nature of this remedy may be achieved when it is noted
that, ten years after its passage, eminent writers were still speculating
as to what it obligated unions to do. In a 1957 article, Professor
Archibald Cox believed that the duty did not impose "the affirmative
obligation of making reasonable efforts to abolish racial discrimina-
tion." 19 In 1962, Professor Michael I . Sovern was attempting to show
why the sections in question could, contrary to some of Cox's views, be
construed to provide a remedy with the NLRB for union-caused racial
discrimination.20 It was not until five years later that the NLRB for
the first time dealt with and gave relief upon a claim based on a union's
unfair labor practice in not meeting its duty of fair representation.
The 1962 case was Miranda Fuel Co. (140 N.L.R.B. 181), and the
Board's order, however, was denied enforcement by the courts.
21
Miranda Fuel dealt only with the concept of invidious discrimination:
two years later in 1964 the Board actually dealt with a case involving
racial discrimination which was alleged to constitute an unfair labor
practice. In Metal Workers Union/Hughes Tool Co. (147 N.L.R.B.
166), the Board found racially discriminatory practices sufficient to
justify a removal of Board certification from the union.
Perhaps the lesson to be learned from this is only the usual one
becoming more and more relevant to the issue of government regula-
tion-i.e., regulators are quickly captured by the regulatees who have
the real stake and interest in regulation, while the general public's
attention is broad and quite diffuse. Thus, for example, the television
19 Sovern "The National Labor Relations Act and Racial Discrimination," 62 Col.
L. Rev. 563,' 578 (1962), (citing Cox).
20 Id. at 578-584. J
21 326 F.2d 172 (1963) (2nd Cir.); 53 Geo. L. J. 1103, 1106 (1965).
46
industry has much more interest in and input to the Federal Com-
munication Commission than does the general public of viewers, with
the that the FCC is much more responsive to the industry than
to viewers (to the extent that viewers can even be described as a
coherent group). Likewise, the NLRB was created to foster and
encourage collective bargaining and unions. It is thus vastly more
responsive to and influenced by the various unions it deals with
constantly than to the vas't mass of workers (some members of unions,
most not) whom the NLRB at best sees as a distracting abstraction.
This is especially true of the interests of those workers which are
inconsistent with the very concept of majoritarian dominance and
exlusive, possibly prejudiced representation.
The 1964 Civil Rights Act created a new weapon for assaulting racial
prejudice within the union structure. Title VII made it unlawful for a
labor union:
(_l) :xclude o.r to expel from its membership, or otherwise to
chscnmmate agamst, any individual because of his race color
religion, sex, or national origin; ' '
(2) to limit, segregate, or classify its membership or applicants for
or t? classify or fail or refuse to refer for employment
any any way which would deprive, or tend to
any md1v1dual of employment opportunities, or would
such employment opportunities or otherwise adversely affect
his status as an . or as an applicant for employment,
of such mchv1dual s race, color, religion, sex, or national
ongm; or
(3). to cau.se ?r. attempt to cause an employer to discriminate
agamst an mchv1dual in violation of this section.22 .
'!'he principal relied upon to enforce this action upon the
urnons was the pnvate litigation of individual acts of discrimination
and the government's pursuit of litigation against firms and
where a pattern or practice of discrimination is found. The law, how-
ever, left the basic structure of union compulsory powers intact. The
government still granted monopoly power to unions which negated
the common law contract rights of individual employees. This is the
key device that historically has made the prejudices of a union and its
weapons against those who did not support the
urnon. The s1grnficant amount of private litigation that has continued
22 42 USC Sec. 2000e - 2 (c) 1964.
47
down to today
2
3 is a testament of the fact of the problem, not to its
solution. Government has once again created a remedy of some
questionable effectiveness for a problem it has played a large par t in
creating.
A recent case decided by the U.S. Court of Appeals (D.C. Cir.)
gives some feel for how little real progress has been made in this area.
The NLRB had found that the firing of several black employees for
picketing their employer against his racially discriminatory policy, and
in opposition to the union's perceived lackluster aid to the employees,
did not constitute an unfair labor practice. The decision stressed the
importance of exclusivity and collective bargaining in this instance.
24
The Court of Appeals remanded for reconsideration in NLRB v.
Western Addition Community Organization, 485 F 2d 917 (D.C. Cir.
1973) . Judge Wyzanski, in a separate opinion in this case, felt the
Board should have been fully reversed. He stated the problem in no
uncertain terms.
TO LEAVE NON-WHITES AT THE MERCY OF WHITES IN
THE PRESENTATION OF NON-WHITE CLAIMS WHICH
ARE ADMITTEDLY ADVERSE TO THE WHITES WOULD
BE A MOCKERY OF DEMOCRACY. SUPPRESSION, INTEN-
TIONAL OR OTHERWISE, OF THE PRESENTATION OF
NON-WHITE CLAIMS CANNOT BE TOLERATED IN OUR
SOCIETY EVEN IF, WHICH IS PROBABLY AT LEAST THE
SHORT-TERM CONSEQUENCE, THE RESULT IS THAT
INDUSTRIAL PEACE IS TEMPORARILY ADVERSELY AF-
FECTED. IN PRESENTING NON-WHITE ISSUES, NON-
WHITES CANNOT, AGAINST THEIR WILL, BE RELE-
GATED TO WHITE SPOKESMEN, MIMICKING BLACK
MEN. THE DAY OF THE MINSTREL SHOW IS OVER.
25
The Supreme Court went on, however, to reverse the Court of Appeals'
halfway relief, and to reinstate the NLRB decision. The basic national
labor policy implicit in exclusive collective bargaini1<-g was stressed by
the Supreme Court in a decision to which only Justice Douglas dis-
sented.26
23 One need only glance at the U.S. Code Annotated to get some feel for the
volume of reported case. Increase thi s by several fold for the number filed or
settled.
24 The Emporium, 192 NLRB 173 (1971) .
25 485 F. 2d 917, 940 (D.C. Cir., 1973). Quoted in Could, Black Work ers in White
Unions, 1977, 254. I
26 Emporium Capwell v. Western Addition Com1rl'i.mity Organization, 420 US 50
(1975).
48
William B. Gold, in his book, Black Workers zn White Unions,
notes the meaning of the Supreme Court's decision:
It is quite clear that the Court was extremely concerned about the
problems whi.ch would. arise if the grievance procedure was by-
passed. In this .connect10n, the Court referred to divisions among
the workers which flow from competing claims, the inability of an
employer to take 'remedial steps satisfactory to all at once' and the
a_bility .of the grievance procedure to resolve group claims effec-
tively-in contrast to .self-h.elp-because 'one would hardly expect
an e.mployer to c?ntinue in effect an employment practice that
routinely results in adverse arbitral decision.' Justice Marshall
stated that self-help would exacerbate tensions, and that 'the like-
_of headway against discriminatory practices would
?e minima.I. stating that the Board may have a role to play
1? connect10n with some race discrimination issues and noting that
nghts created under the NLRB might be 'broadened to accommo-
date the policies of Title VII,' the Court took the view that the
of Title VII relief was an issue for Congress to take
into account and not the Court.' 21
Gould's analysis would seem to support the position that the current
of labor relations may be a large part of the problem in achiev-
ing equal employment opportunity. If Title VII, the NLRB and the
judicially-implied duty of fair representation are not effective ;emedies
it may be that the disease is systemic. It would also seem that
J Marshall gives a higher priority to the collective goals of the
umon over the individual aspirations of the employees.
Built-in Discrimination?2B
In looking at the second problem posed earlier, i.e., how the current
law deals with the effect of past discrimination or with racial discrimi-
nation that was not illegal by federal statute before the 1965 effective
date of the 1964 Civil Rights Act, the answer would seem to be "not
with total vigor." In 1977 the United States Supreme Court decided
27 Gould, Id. at 254-5.
28 I h
t is per a on our legal system's approach to the problem of
that 1t implicitly rej ects the individuals own ability and
respons1b1hty. I.t is. if .our laws and courts are saying "Blackman, you can't do
much to fight d1scnmmat10n through your own initiative so let us take care of the
problem." This .lack of faith in .the individual is unfortunately the rule in our
labor pohcy. To refute this concept we should remind ourselves again and
again it was that launched the civil rights struggle years
before the finally took cognizance of the aspirations for equal protection
and opportunity.
49
International Bro. of Teamsters v. United States.
2
0 The effect of this
case was to say that, even though the existing seniority system of the
company and union elected by the collective bargaining unit had the
effect of perpetuating past racial discrimination, it was validated by
the Civil Rights Act of 1964. Section 703 (h) of that Act was found to
have immunized from judicial remedy any bona fide seniority system:
a bona fide seniority system was one established for a purpose other
than expressly creating racial discrimination. In the case at issue, black
employees had been forced by the union-bargained seniority system into
a class of inferior jobs and the seniority gained in those inferior jobs
was not transferable to the class of better jobs. Under this scheme, an
employee in the inferior job class could only obtain a position in the
better class by losing all his previously earned seniority. He would
thus be starting at the bottom, behind those employees with less total
seniority, who were in the better job, ahead of the black employees,
solely because of pre-1965 discriminatory practices. The Court con-
strued section 703 (h) in the light of its legislative history as permitting
such an effect.
To the extent the law has given monopoly powers to unions, it is
really sanctioning any racial discrimination created by the unions.
This is so because in the absence of the union's compulsory power, the
discriminatory seniority system could be challenged in the market place.
The existence of the legal monopoly not only insulates the union
seniority system from economic attack, but the Civil Rights Act of
1964, in a concession to union power, insulates this discriminatory
effect from judicial challenge as well. A more recent decision, Johnson
v. Ryder Truck Lines, lnc.,3o found not only that such a seniority sys-
tem, perpetuating the effects of past racial discrimination, was immu-
nized from attack under the Civil Rights Act of 1964 by Section 703 (h)
but also that the same section immunized the system from judicial
remedy under the far older provisions of 42 USC 1981. This is such
an extreme position that, fortunately, another jurisdiction has offered
an opposing interpretation.
31
How these contradictory decisions will
be resolved must await further litigation at a higher level.
Real Remedies?
The analysis of the first two questions posed leads into the third
question. What is the adequacy of the remedies federal law has created
29 97 S. Ct. 1843 (1977) .
30 46 LW 2610 (5/2/ 78).
\
I
31 See Bolden v. Pa. State Police, 46 LW 2618, (4/ 17 /78).
50
to deal with the problem of racial discrimination in labor unions which
are the recipients of monopoly powers through federal laws? After five
decades of an essentially unchanged labor policy, the answer seems to
be that the remedies are not adequate. The NLRA, for example,
provides an administrative remedy and a substantive body of rules
that are founded entirely upon a system designed to deny minority
employees (whatever their race) the right to represent themselves in
labor relations. Is it any wonder, then, that the Board did not even
come to grips with the problem of discrimination against racial minori-
ties as an unfair labor practice until 1964, on the very eve of the
passage of a major new civil rights law? The system established by
the NLRA was not designed to benefit minorities of any kind: remedy-
ing discrimination against racial minorities is therefore anomalous
with its basic function. It should be remembered that the entire struc-
ture of industrial relations legislation is premised upon the existenc:e
of only two parties-the employer and the union. The individual
employee, a minority by definition, or any other minority group of
employees under the NLRA scheme enjoys no right of activity other
than to challenge the fairness of his union representative. Such chal-
lenges are rarely successful because the courts have defined very nar-
row grounds for proving that union representation is unfair.ao
The other remedy to discrimination based upon race is judicial.
In the cases dealing with the seniority system we have seen that there
are severe substantive limitations. In particular, the Civil Rights Act
of 1964 imposes limits on the courts' powers to challenge racial dis-
crimination built into the union system. Only the more immediate
overt conduct of unions explicitly denying membership or equal bene-
fits to blacks can be reached. While this is not insignificant, it will only
solve the surface problem. The basic structure of American unions will
remain racist until unions lose that monopoly power which insulates
them from the competition of the market. v\Thile business has to com-
pete for the growing black market of millions of consumers, organized
All it is required to do is keep its
raoal bias withm politically acceptable and legally sophisticated forms.
The white, racially-biased retailer has to show the black customer he
will provide good products and services. If he doesn't, he may well be
out of business for the loss of the black consumer's dollar. The white,
racially-biased union leader wants to keep blacks and others out of the
3
2 See generally Tobias, "Individual Employee Suits for Breach of the Labor
Agreement and the Union 's Duty of Fair Representation, " 5 Univ. of Toledo L.
Rev. 514 (1974).
51
union, thus restricting the market and raising wages for the privileged
members. His economic motives thus reinforce his bigotry. The non-
profit character of the union means the primary effect of judicial relief,
if it ever reaches the particular union practice question, is to deny
the union leadership or controlling bloc the benefit of a practice they
had no right to in the first place. If the only sanction to robbery were
that, once caught, the robber must return his ill-gotten gains, the
penalty would seem ludicrous indeed. That is almost the situation with
respect to union discrimination today.
Conclusion
A comprehensive review of recent case annotations under the various
civil rights and labor relations remedies makes it clear that the problem
is indeed extensive. The very volume of the litigation, with its poten-
tial for carving out relatively complex rules on a case-by-case basis,
bodes ill for the solution of the problem. Such a process is good for
lawyers, but does little for racial justice. One need only look to the
growth of our tax law by this same process and shudder: this complex
scheme allows the minimization of tax liability not by the rich or poor
so much as by the clever and the adroit in the manipulation of the tax
laws. In the field of racial discrimination in employment, the system
thus penalizes not racial discrimination itself, as it should, but inartful
forms of such discrimination. Thus, the incentive is placed on creating
more subtle and sophisticated systems of discrimination that can be
rationalized by individuals who are given an economic incentive to
discriminate in the name of keeping a tight labor market. Such policy
makes little sense.
In this analysis we have suggested some possible alternatives by
implication. If union representation were a matter of individual
choice, rather than majority choice, union leaders and union members
in general would be forced to appeal to members individually for
support. If a union were insensitive to the civil 'rights or economic
concerns of members, these members could form a competing union.
If the union's minority members felt the union was not representing
their interests adequately with the employer, a long "fair representa-
tion" legal battle (as necessitated by our present laws) might be
supplanted by self-representation. The alternative approaches just
mentioned would no doubt raise problems as well as opportunities.
However, the history of freedom has been\ a dynamic history. The
opportunities and new approaches of this generation are vastly beyond
the solutions to the most feared problems of the last generation.
52
Part III
Public Service Employment and the
Minimum Wage Law: Bad Remedy
by
Wendell Wilkie Gunn
Assistant Treasurer
Pepsico, Inc.
Purchase, New York
I
n October 1978, after nearly three years of debate, compromise, delay
and revision, "The Full Employment and Balanced Growth Act of
1978," commonly known as the Humphrey-Hawkins Bill, was quietly
signed into law. The bill, the subject of a long, intense lobbying effort
by several labor, civil rights and religious organizations, seeks to estab-
lish in law "the right of all Americans who are able, willing, and seek-
ing to work to full opportunity for useful paid employment at fair
rates of compensation."
The late Senator Hubert Humphrey, co-author of the original bill,
noting in 1976 the devastating effect of recession on black Americans,
declared that "the civil rights movement has shifted from the political
arena to the economic arena." He further stated that every American
has the "right" to a decent job at decent wages and that if the private
economy cannot supply these jobs, then the federal government should
do so, i. e. the government should be the employer of last resort. The
stated objective of Humphrey-Hawkins is to reduce unemployment clue
to recessions and structural causes.
The original (and stronger) version of the bill would have made
any adult unemployment rate greater than three percent "illegal" and
would have required the President to use federal programs of public
works and public service jobs to achieve the three-percent objective
within specified time limits. In the final version, however, the time
table was lengthened and a new overall unemployment target (includ-
ing persons aged sixteen and over) was added. Secondly, the final
version permits the President, with the approval of Congress, to modify
the goals and/or timetables. Third, the President is given more latitude
in choosing the means to achieve the goals of the bill, in lieu of the
controversial mandatory public works provision in the original version.
In the opinion of many people, both supporters and opponents, these
53
and other changes represented a significant watering down of the
proposal which, in any case, apparently aided in its final passage.
The purpose of this paper is to examine the major provisions of the
Humphrey-Hawkins Bill and its expected effect of the economy, includ-
ing a determination as to who will benefit and who will suffer as a
result. More specifically, we shall demonstrate that this law, regardless
of the intent of its primary authors, will promote windfalls to organized
labor at the expense of non-union workers, exacerbate economic con-
traction, and effectively place the strength of the federal government
behind numerous labor policies which promote racial discrimination.
We shall further demonstrate that in spite of the so-called "watering
down" of the original version of the bill, the final version can, depend-
ing on later interpretations, have the same negative consequences.
The primary objection of opponents to the bill was that it would
inflationary, especially if the final version included the controversial
public works provision, which would have required the government to
establish reservoirs of public employment whenever the rate of unem-
ployment exceeded the stated target. H-H supporters attacked this
objection as being merely the reflection of a continued belief in the
discredited "trade-off," i.e. that the main cause of inflation is a low
rate of unemployment, or that one must be used to fight the other.
The supporters also cite empirical evidence that "trade-off" is invalid
and argue correctly that the " trade-off" would be indefensible even if
it worked. The ironic thing is that people on both sides of this issue
have claimed for years that they no longer believe in the "trade-off,"
but their debate on numerous economic issues continues to reflect
exactly the opposite. The debate on H-H, alas, was no exception.
Humphrey-Hawkins opponents, realizing that blocking the passage
of the bill in some form would be a near impossibility, sought to weaken
it by adding a specific low target level for the rate of inflation in the
hope that i.t .would frustrate the process acwa; ly the.
works prov1s10n. The supporters fought vigorously against this addi-
tion, even though they had claimed earlier, in arguing against the
"trade-off," that H-H would actually help to bring inflation down.
The opponents also fought successfully to eliminate-or at least modify
-the public works provision of the bill such that the President could,
but was no longer compelled to, use programs of public employment
as a weapon against unemployment. Still, the former battle over infla-
tion/ unemployment targets continued the "non-believers" in
the "trade-off. " A notable exception to this was a rather novel approach
taken by Congressman Jack Kemp, who sought unsuccessfully to replace
54
the public works provision with a tax-cut provision, which would have
mandated cuts in marginal income tax rates on businesses and individ-
uals whenever the unemployment rate exceeded the desired target.
This was apparently based on the attractive idea that inflation can be
fought with higher employment, provided the incremental employment
occur in the pr(vate sector as a result of increased profit incentives.
The Humphrey-Hawkins Bill is based partly on the notion that
private sector economic expansion can he stimulated through increased
government expenditures and money creation. This follows from the
belief that when the newly employed government workers receive
wages, their resulting new spending creates new private sector jobs as
the new money "ripples" through the economy. The result therefore,
in addition to jobs created directly, is a new, higher level of overall
economic activity. However, they fail' to take into account the fact that
the jobs directly created must be paid for either through new direct
taxes on existing economic activity or through the indirect tax of
money creation and the inflation which must surely result. Unfortun-
ately, this is the kind of one-dimensional analysis that dominates most
of our text books on macroeconomics, of which most of us, at one time
or another, have been victims.
I sometimes think that perhaps the study of macroeconomics, as
opposed to microeconomics, will some clay prove to be a key factor in
our nation's economic undoing. While the microeconomist studies the
behavior of profit-maximizing individuals and firms and their likely
responses to changes in the economic environment, the macroeconomist
studies the statistical relationships between the general level of eco-
nomic activity and movements in certain specific economic variables.
This latter focus is what apparently led to the establishment of the
so-called "leading indicators." While these indicators are not inher-
ently harmful, in the hands of ambitious politicians and incompetent
economic advisors, they can be-and have been-pure economic poison.
The most glaring example of this has to do with the relationship
between economic growth and the incidence of new construction.
Because previous economic growth periods were generally preceded by
increases in new housing construction, the politician "naturally" de-
cides that the way to stimulate economic activity is to have a federal
dollar injection into the housing and construction industry. As one ,
might suspect, he has little trouble in gaining support in his folly from
organized labor, especially those involved in building and
and related industries (housing and public works construction projects
are among the primary tools envisioned by H-H).
55
The problem is that the politican, overcome by the "eureka" phe-
nomenon, fails to realize that what he is manipulating is merely an
indicator and not a casual factor. Private sector anticipation of new
economic activity caused the increases in new construction and not the
other way around. Therefore, this course of action is much like stand-
ing outside on a bitter cold day, holding a lighted match under a
thermometer in an attempt to change the weather.
The fact that such policies do not accomplish the intended objective
is relatively innocuous when compared to their definite harmful effects.
First of all, it represents a transfer of real economic resources from
other sectors of the private economy to the building and construction
trades, with (or negative) benefits in return. Furthermore,
black Americans and other minorities have always had, and continue
to have, enormous difficulties gaining entry into these trades in any
meaningful way. This results primarily from the myriad of restrictive
licensing, pricing and membership policies which labor unions, usually
with government backing, have effectively used as instruments of dis-
crimination against them. Using public funds in this manner therefore
effectively forces taxpayers, including black taxpayers, to subsidize these
discriminatory practices.
But the supporters of the bill , determined to have something in it
for everybody, did not forget to throw a bone, bare though it may be,
to the poor, underprivileged, unskilled and un-unionized, in the form
of "the expansion of CET A and other existing employment and train-
ing projects and such new programs as are determined by the President
to be needed." It is further stipulated that jobs under the new pro-
grams "shall be mainly in the lower ranges of skills, so as to maximize
the number of jobs created."
No one can reasonably argue against the need for job training for the
unskilled, and I am sure that such legislation is often well intended.
Although there have been widespread reports .of impropriety and
misappropriation of funds in conection with CETA' and such
my primary objection to them is much more fundamental. Job trammg
is an economic activity much like the production of almost any other
goods or service in that it is best encouraged through sector
profit incentives. The profit incentive not only promotes but
,also causes the training to focus on those skills which are in relauvely
scarc;e supply. 1
Many private firms have had such trainTg programs for ..
absence of such incentives and the lack of any real accountab1hty m
t
. 11 es the1r failure. The result is
government programs prac 1ca y assur
56
that people are poorly trained, if at all, or they are trained in skills
which may not be in demand. The following excerpt from a conversa-
tion with a New Jersey college professor regarding a recent visit to her
home town in Alabama is illustrative.
"I was taking an early morning stroll in the park in my Alabama
home town and came upon a group of teenagers pitching pennies
under the pavillion. I thought to myself that it was a bit early in
the morning for such leisure and walked over to have a word with
them.
"After a few minutes of conversation, I learned that they were
participants in a training program under the Comprehensive
Employment and Training Act. Their daily routine was to come
to the park early in the morning to clean the pavillion and the
rest rooms, then wait for their supervisor to return and take them
to another park to perform the same task. The first task generally
took them an hour or so and they found other pursuits to fill their
time until the supervisor came for them after lunch. They soon
began to feel that I was asking too many questions and refused to
talk to me any further."
The sad thing about this case is that young people are paid to do
essentially nothing, under the guise of training while the federal
government pays their middle class supervisors to oversee their non-
training. The end result, in a few short years, will be a group of
frustrated, unskilled adults, most of whom will probably need some sort
of federal assistance to subsist for the rest of their lives because labor
unions and private employers will have "legitimate" cause for denying
them entry into any .meaningful employment. Also, while the stated
purpose of having jobs under these programs focus on the lower ranges
of skills is to maximize the number of jobs so created, such a restriction
has the effect of assuring minimum competition with members of labor
unions by program participants, both now and in the future.
In order to appreciate the full impact of such programs as CET A, it
is helpful to note that it is a continuation of an onslaught against
youngsters which begins with the minimum wage, which incidentally
was increased last year, with a provision for automatic annual increases
over the next years. When a child is born, it consumes much while
producing nothing. However, this does not trouble its parents because
they regard the current consumption as an investment in the child's
future production. As the child grows, it begins to produce, albeit
marginally, gaining experience for the future. The young teenager,
during summer vacation and after school, can work at various unskilled
57
jobs producing something worth only a small amount compared to
experienced adults, using the small wages and the new experience to
enhance his future productive capabilities.
The minimum wage law, which effectively prohibits work for hire by
anyone whose labor is worth less than the minimum wage, stops this
process in its infancy, contributing, therefore, to teenage idleness and
unemployment. When this is coupled with programs such as CET A,
we are setting the stage for a number of youths, primarily blacks and
other minorities, to eventually reach age twenty, having never worked
at all.
The most serious effect of H-H arises from the fact that it will
require the confiscatory transfer of economic resources from the private
economy at the very time that the economy is least able to bear the
burden. This obviously cannot be done without stifling some other
economic activity which might have required those resources. There-
fore, the H-H provision for countercyclical programs of public employ-
ment would actually aggravate the very contraction that it is intended
to offset, by destroying at least one job in the private sector for every
job directly "created." This occurs regardless of the source of funding,
whether through government borrowing (future taxes) , money crea-
tion (inflation tax) , or new direct taxes on existing private sector
production. Either tax simply makes all private economic transactions
less profitable and the economy contracts further in response. This
scenario is the source of my greatest fear regarding this legislation.
Economic contraction always necessarily pits groups and individuals
against each other as they compete for shares of a shrinking pool of
resources, thereby substantially eroding prior social progress. Even
racial discrimination, albeit in cleverer and more subtle forms, rears
its ugly head again. As new unemployment results, the poor and
powerless will naturally bear a disproportionate share, since they are
still the last hired and the first fired. However, when this occurs, H-H
supporters, rather than recognize the error of the'ir ways, will surely
conclude that not enough of their "stimulus" was applied. Therefore,
not only is valuable energy diverted away from productive enterprise,
but new impetus is given new and more massive schemes of income
redistribution. This sets the stage for a downward economic spiral
which we can very well do without, especially the poor, powerless and
non unionized.
For those who take comfort in the bel ief that the bill was sub-
stantially watered down before it became Jlaw, it would be wise to
assume that a President and Congress who believed that such a law
58
was necessary in the first place would very likely feel compelled by the
law to implement its provisions. The bill mandates that "the President
and the Congress shall exert every available effort, including use of
the tools provided in the bill" to accomplish the unemployment targets.
Therefore, whatever erroneous ideas the President and the Congress
might have regarding economic policy would have the full force of
law, once the unemployment targets are exceeded. Challenges to such
initiatives would ultimately have to be settled in the courts, thereby
effectively placing economic policy making in the hands of the Judi-
ciary. Since the length of this paper is intended to be finite, we shall
not attempt to discuss the problems associated with that scenario. The
problem here is that the President and the Congress are attempting
to legislate the result before establishing the proper methods of achiev-
ing that result. It is analogous to-and no more effective than-out-
lawing headaches for persons who have brain tumors.
It is interesting to note that there was very little support for this
legislation from the business community. Its passage has been called
a major victory for organized labor, and is yet another indication of
the apparent but puzzling adversary relationship between business and
labor. My high school course in elementary economics taught me that
a business enterprise consisted of a combination of capital, i.e. invest-
ment, and labor, with management added to organize the two for
production. By that definition, labor, like capital, is a subset of busi-
ness. In fact, labor and capital are partners in business with a well-
defined community of interests, i.e. to maximize the output value of
their combined input-after taxes, of course.
This adversary relationship, as it is played out, benefits no one
except, of course, the government or, more specifically, the politician.
Because the politician sets the rules of the game, capital (called busi-
ness) and labor each enlists the aid of the politician in trying to
extract its "fair share" of the fruits of production or, more specifically,
in trying to determine which side, capital or labor, should bear the
cost of government-i.e. , taxes. Meanwhile, the government o n t i n u ~
ously increases the tax bite on the enterprise year after year, by pitting
one side against the other in the creation of new and more restrictive
taxes, alternating between so-called business taxes on the one hand
and personal income taxes on the other, as well as sales taxes, excise
taxes, social security taxes, and the like. The result is that capital and
labor have less to divide between them. In fact, the amount left is
often too little to satisfy both parties simultaneously and the two sides
blame each other, strikes result, and employment opportunities decline.
59
In all of their furor, they seem to completely ignore the third party
at the negotiating table-the tax collector. This situation is best de-
scribed in a November, 1977 press release by Joseph Trerotola, presi-
dent of the Teamsters Joint Council No. 16, from which the following
excerpt is taken:
"There is no question that government taxing policy can and does
nullify private sector union power. If the government taxes the
employer, he has less to offer the worker in the form of wages.
If the government taxes the worker, then he has less in the way
of food and shelter to share with his family. Having no other
place to turn to, he increases his wage demands, knowing full well
that it will result in fewer employment opportunities. The ironic
thing is that the tax collector, who pays no union dues and walks
no picket lines, is the first beneficiary of any wage increase so
ex tract ed."
In the list of labor supporters of the H-H bill, the Teamsters were
conspicuously under-represented. I don't know whether this was an
oversight or, as the preceding passage would indicate, that the Team-
sters somehow realize who the real adversary is. In any case, it seems
clear that labor's practice of going to the politician's side door while
business goes to the other side door does not solve the problems of
either labor or capital. Rather, the salvation of labor and capital lies
in an alliance with each other.
I
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______ I .______
1HE Lll\TCOIN INSTl1UIE
FOR RESEARCH AND EDUCATION
The Linco ln Institute for Research and Educati on was founded in
L978 t o study public poli cy issues that impact on the li ves of black
middle America, and to make its findings ava il abl e t o elected
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in many cases, h ave been harmfu l to the long- range inte rest of
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