An Empirical Assessment of the Employee Free Choice Act: The Economic Implications

Abstract

The Employee Free Choice Act (EFCA), which is pending before the US Congress, would provide for union representation when an employee majority has signed union authorization cards and would create a system of mandatory arbitration if a collective bargaining agreement is not reached approximately 130 days after a union is newly certified. I critically assess the arguments presented for passing EFCA and consider the likely unintended consequences it will generate, should it be passed. I find that while card checks could be expected to increase union membership as hoped by EFCA proponents, EFCA is unlikely to achieve its main goal of improving social welfare, which should take into account possible consequences not only for union members but for all individuals. In particular, my quantitative analysis indicates that passing EFCA would likely increase the US unemployment rate and decrease US job creation substantially. The precise effect on unemployment will depend on the degree to which EFCA increases union density, but for every 3 percentage points gained in union membership through card checks and mandatory arbitration, the following year's unemployment rate is predicted to increase by 1 percentage point and job creation is predicted to fall by around 1.5 million jobs. Thus, if EFCA passed today and resulted in an increase in unionization from the current rate of about 12% to 15%, then unionized workers would increase from 15.5 to 19.6 million while unemployment a year from now would rise by 1.5 million, to 10.4 million. If EFCA were to increase the percentage of private sector union membership by between 5 and 10 percentage points, as some have suggested, my analysis indicates that unemployment would increase by 2.3 to 5.4 million in the following year and the unemployment rate would increase by 1.5 to 3.5 percentage points in the following year.