A few years ago, President Obama declared he believed “in people getting rich based on performance and what they add in terms of value and the products and services that they create.” United Food and Commercial Workers (UFCW) Local 23 never got this message. The union fought in court to rescind its members’ performance-based raises.
Giant Eagle operates a unionized grocery store in Edinboro, Pennsylvania. The store’s managers gave 25 employees raises above and beyond the prescribed rate. They believed the union contract permitted them to reward hard work.
Local 23 strongly disagreed. It filed a grievance arguing the company needed their permission to pay higher wages. The UFCW objected to industrious junior employees earning higher wages than workers with more seniority. The arbitrator ruled in the union’s favor; he ordered the company to revoke the raises. On appeal the court also sided with the union.
At first this seems a strange sight: a union suing a company because it raised pay? But it is not that strange. Most unions dislike recognizing individual performance. As the head of a Teamsters division sees it, they do not want companies rewarding the “bosses’ pet.” Consequently, unionized firms offer performance-based pay less than half as often as non-union businesses.
This hostility hurts both employers and employees. Businesses offer performance pay to encourage productivity, which raises both profits and wages. The average worker earns 6–10 percent more when companies implement performance pay, but businesses’ profits also rise. Both sides win.
Arguing that unions should set a wage floor is one thing. But why should the law let them turn down a raise on a worker’s behalf?
Senator Marco Rubio (R–FL) and Representative Todd Rokita (R–IN) have also asked this question. The duo just reintroduced the Rewarding Achievement and Incentivizing Successful Employees (RAISE) Act. This legislation amends the National Labor Relations Act to prevent unions from capping their members’ pay. If the RAISE Act becomes law, unions could prevent companies from paying less than the union rate, but they could not stop a company from paying hard workers more.
This would enable unionized firms to offer performance-based raises over union objections. The higher pay would translate into about $4,000 a year in raises and bonuses for the typical unionized employee. That is a change hard-working union members could take to the bank.