Paths to Power: Labor Law, Union Density, and the Ghent System

Advocates for the labor movement are understandably disheartened by the uncertain future of the Employee Free Choice Act. Underlying the EFCA strategy of union revitalization is a widespread belief about the efficacy of strong labor laws for supporting strong, high-density labor movements. In this paper I ask: How necessary are strong labor laws for strong labor movements? If not labor law, what sorts of policies and institutions support high union density? By comparing the National Labor Relations Act with the labor laws of Denmark and Sweden, countries where union density has ranged between 70 and 80 percent in recent years, I argue that the necessity of strong labor laws for high union density is doubtful. Rather, what does appear to be important for these high-density Nordic countries is the administration of unemployment insurance by labor unions, an arrangement known as the Ghent system. The Ghent system helps unions overcome three separate problems that labor law in the US attempts to resolve, in evidently ineffective ways. I call these three problems the free-rider problem, the recognition problem, and the adversarial problem. Further, in helping to resolve the adversarial problem, I provide an economic analysis arguing that collectively-bargained unemployment insurance is efficient and establishes a positive-sum tradeoff between a form of labor-market security for workers and a flexible workplace for employers. The paper concludes by considering whether a version of the Ghent system could be adopted in the US as a strategy of union revitalization. One argument in support of this possibility is the broad deference states enjoy under the federal Social Security Act to design the administration of their unemployment-insurance systems, which makes possible the adoption of state-level Ghent systems and hence a “progressive-federalist” strategy of union revitalization.