With all of the talk surrounding Wisconsin and the governor's desire to end collective bargaining, the issue of unions has again come to the forefront of debate. While I don't talk about it much, I am a big fan of unions and think they are an important part of the economy. However, the primary reason why I support unions is based in law, not economic policy.
The U.S. has a long legal tradition that stretches back to England in the middle ages. We can trace our legal roots in property, trusts, wills and criminal law to this era. Just as importantly, we can also trace contract law to this time. Contracts are a remarkably powerful tool; they essentially allow two or more parties to form a relationship within the broadest of boundaries. A court will not void a contract so long as the subject matter is not for an illegal act or voided because it is against public policy. In other words, people can form their own private law to further mutually beneficial relationships and the courts will uphold these agreements so long as they don't hurt the greater part of society.
However, inherent in the establishment of this relationship is the concept of equality of bargaining power. The law recognizes that a contract, whose terms are written by one party, is inherently biased. It calls these adhesion contracts and courts will interpret the contract terms of an adhesion contract against the drafter. But these interpretive maxims can only go so far; careful and well-drafted contracts, modified over many years by numerous lawyers can help to blunt that maxim.
Therefore, in order to establish a contract that is truly private law between two parties, it is imperative for the parties participating in the negotiations to be as close to equal as possible. This is the primary reason why labor unions are a vital part of the legal and economic process -- they provide a legal counter-weight to management.
There are numerous other benefits, such as increased wages and benefits for union members (which usually spread out an benefit non-union members), better working conditions and a social network that provides financial and emotional support. However, I personally view these benefits as ancillary -- although no less vital. The real benefit from unions is to provide another strong voice at the bargaining table when contracts are formed.
Asset Allocation & Rebalancing Review | 19 June 2013
16 minutes ago