Sunday, June 10, 2012

Is There a Future for Labor Unions?

There is an excellent article by Bruce Western and Jake Rosenfeld in Foreign Affairs: The Decline of Labor and the Future of the Middle Class. It provides a concise history of the labor movement in the US from the postwar years to the present. They suggest that there is still a vital role that it might play in society and in the economy. Given the concerns about growing income inequality, it should have the opportunity to find a new constituency among those who see themselves losing ground in an economy that appears rigged against them. However, the labor movement cannot recreate the past; it will have to define a role for itself that offers something attractive to management as well. The UAW and its recent efforts will be used as illustration of an approach that might prove valuable to both workers and management.

The authors provide some necessary background.

"By 1954, more than 17 million American workers, around 35 percent of all wage and salary earners, were union members. In Indiana, Michigan, Pennsylvania, Washington, and West Virginia, unionization was 40 percent or higher. Even in the South, where the labor movement met the greatest resistance, union membership got as high as 20 percent of workers in Alabama, Kentucky, Louisiana, and Tennessee. U.S. union members were disproportionately male blue-collar breadwinners working lifelong jobs in large firms. As organized labor helped secure the economic well-being of this group, the American middle class prospered and the country entered a golden age of income equality."

The authors point out that the legislation that solidified the labor movement’s rights, also provided the mechanism for its ultimate decline.

"Although the National Labor Relations Act was initially a boon for unions, it also sowed the seeds of the labor movement's decline. The act enshrined the right to unionize, but the system of workplace elections it created meant that unions had to organize each new factory or firm individually rather than organize by industry. In many European countries, collective-bargaining agreements extended automatically to other firms in the same industry, but in the United States, they usually reached no further than a plant's gates."

Initially, in the postwar years, the rate of union membership declined because the mechanics of organizing and certifying a union could not keep up with the rapid job growth.

"Between 1950 and 1979, the labor force nearly doubled, adding around 45 million new wage and salary earners. Union membership increased by only half in the same period, however, from 14 million to 21 million workers, shrinking the percentage of union members in the labor force from 30 to 20 percent. By the 1970s, new organizing could annually capture only about one-third of one percent of the nonunion labor force, which itself was growing at three percent a year."

The 1970s and 1980s brought fundamental changes in the economy and in the political environment. Management viewed unions as costly and troublesome entities that it would rather do without. It became popular for economists to conclude that the higher wages and the work rules desired by unions were a drag on the economy. The antiunion sentiment was supported by business-friendly political leaders who allowed companies to bend the rules in fighting union certifications.

The authors believe that the "burden" of unionization was exceeded by the benefits it provided.

"In fact, unionization imposes only a modest drag on the economy. The economists Richard Freeman and James Medoff have calculated that in 1980, when a quarter of the work force was covered by collective-bargaining agreements, organized labor reduced the gross national product by just one-fifth to two-fifths of one percent."

"The social and economic benefits of unions outweigh such costs. For one, research shows that union membership in the private sector increases a worker's compensation by 10-20 percent."

A separate study indicated that the decline of the labor movement contributed about 20% to the growth of income inequality for male workers.

At its peak in influence, the labor movement was interested in more than just the wages of its union members; its efforts in improving wages and working conditions would become models to be applied to nonunion workers as well. It was an influential voice in all political discourse. The authors claim the union leaders must strive to recreate a dual political and economic role for themselves if they are to stem the decline and turn things around.

"Rebuilding the power of working people -- if it is still possible -- will need to involve reviving labor's dual economic and political role. Unions must start by speaking up on behalf of those most hurt by wage stagnation and rising inequality. Economically, unions must contribute more actively to the prosperity of firms and communities struggling with the effects of the recession and global competition."

Given the traditional rules of engagement between management and unions, the battle is over. Management has the resources and political support to negate just about any unionizing effort if it chooses to. As the authors suggest, the path forward must include a means of convincing employers that having union representation of its workers is a benefit. But how does one do that?

Perhaps the most important person in the labor movement is one whose name is not often heard in all the political chatter emanating from Washington: Bob King, President of the United Auto Workers (UAW). King made a big slash about a year ago, before even renegotiating the contracts with GM, Ford and Chrysler, when he announced that he thought it was possible to unionize the international auto assembly factories in the US. The Japanese, Germans and others have mostly located their plants in low-wage, anti-union sentiment states in the South. In fact, the low wages paid in these regions have become the standard for auto workers throughout the country. What could King possibly have to offer to these outfits that would convince them to accommodate a union?

King is a smart man. When he negotiated his contracts with the US auto manufacturers he gave management a valuable concession on wages. He agreed to terms that would allow for workers’ pay to be a combination of a base wage, and a component that was comprised of bonuses and profit sharing. This may not have been popular with some of his members, but it was necessary to move negotiations out of a mode that was continually confrontational. This move allows companies to lower labor costs when business is slow and increase worker benefits when profits are high. This degree of freedom is probably the most important one for an auto manufacturer.

If the UAW and the auto companies can once agree on an appropriate share for workers in company profits, they can focus their interactions on more mutually beneficial areas—areas in which the union can help improve productivity. There is a traditional role in establishing fair and efficient work rules, but something more is needed in order to make a significant difference.

Training is an area in which the UAW and other unions should be able to assume an important role. Recent studies have warned that the US manufacturing sector is in danger of imploding if it cannot obtain enough trained workers to meet its needs. Surveys indicate that domestic manufacturers are constantly reconsidering their options as to where to locate operations. A dominant—and often deciding—factor in keeping factories in the US is the inability to find enough trained workers. This issue is discussed in
Manufacturing, Education, and the Future of the US Economy.

The UAW, which represents workers in probably all known crafts, could begin to assume the responsibility for training workers in the areas in which it has responsibility. But the big payoff for the nation would be for unions to assume the responsibility for training industry-wide. Who better to be a trainer than a skilled union craftsperson? Who better to define the skills needed than industry itself? A three-way partnership between unions, industry and government could benefit the national economy and redefine the nature of the labor movement.

Meanwhile, King continues his Sisyphean task. A recent article from Yahoo/Reuters announces that the UAW has set its sights on a specific factory, a Nissan plant in Canton, Mississippi. The strategy is to first create a level playing field by using the labor agreements with the US auto manufacturers to convince the international outfits that a union representation is not the threat they have always assumed.

"King's organizing push is founded on the belief that if car companies refrain from actively opposing a UAW organizing push, workers will enthusiastically join the union. After given access to workers at auto parts supplier Dana Holding Corp , workers approved union membership in 2007, including a plant in Kentucky that had overwhelmingly voted the union down four years earlier."

King seems to be focusing on issues other than wages in attracting the interest of the workers. An approach that stresses worker participation in the workplace and civil rights seems to resonate with the workers.

"Analysts said the union would be smart to rally workers around issues like having a voice in the workplace because high wages and ample pension plans that were once enjoyed by UAW members have been eroded."

"’By reinventing themselves as a civil rights movement - that's the right way to go,’ said Gary Chaison, professor of industrial relations at Clark University in Massachusetts. The UAW can say, ‘We can give you something that is very important and that's a voice in the workplace. For workers who are seldom asked what they want, that means an awful lot’."

We wish King and the UAW well. The labor movement needs to redefine itself. They are at least making an effort.

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