THE EMPLOYEE FREE CHOICE ACT: ECONOMIC IMPLICATIONS

The Employee Free Choice Act (EFCA), which is pending before the U.S. 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.

Are there any likely unintended consequences, should the legislation be passed?

• 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, passing EFCA would likely increase the U.S. unemployment rate and decrease U.S. 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.

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