Union Security Agreement - Rationale

Rationale

The free rider problem is often cited as the rationale for union security agreements. A classic study of the free rider problem is presented in Mancur Olson's 1965 work, The Logic of Collective Action. In labor relations, the free rider problem exists because the costs of organizing a union and negotiating a contract with the employer can be very high, while it is almost impossible to prevent non-union members from enjoying the benefits of the contract because employers will find it too costly to adopt multiple wage and benefit scales. Thus, the incentive is for each individual worker to "ride for free" by not paying the costs, which leads to the collapse of the union and no collective bargaining agreement. If the union collapses, each worker is worse off than if the union had negotiated the agreement. Union security agreements are one way of ensuring that all (or nearly all) workers incur the costs of collective bargaining (e.g., join the union and pay dues) so that everyone is better off. There are alternative solutions to the free rider problem in labor relations. One solution is for the state to provide rights (such as the right to administer welfare or pension funds, or to participate in a works council) or benefits (such as unemployment insurance) only to unions or their members. Another solution is for unions to engage in members-only collective bargaining, which restricts the benefits of the contract to union members.