Given that mine is the dismal science, it is my role to cool the exuberance of investors at the news that the Fed will continue to print money rather than taper, with a bit of news that should worry them--the possible revival of the trade unions, long a fading force in the private sector.
Only some 11 percent of wage and salary workers are members of trade unions. The heaviest concentration is in the public sector, where about 36 percent of all workers are signed up with the unions. In the private sector fewer than 7 percent of workers hold union cards, down from an estimated 30 percent in 1958 and over 20 percent in 1980. The difference is unsurprising: Public sector unions can deliver the goods for their members. They make large contributions to the election campaigns of the politicians with whom they bargain, and the grateful politicians reciprocate by lavishing the unions with benefits that have bankrupted Detroit and loaded several states with pension obligations they cannot meet. Taxpayers foot the bill for the costs of this mutual back-scratching.
Private sector unions have no such ability to bribe their bargaining opponents into carefree generosity, at least not since the monopoly power of America’s major manufacturing industries–autos, steel and others–was broken by foreign competitors. In the good old days General Motors, Ford, and Chrysler granted the United Auto Workers almost any demands, and then passed the costs to consumers. Enter foreign competition from non-union manufacturers, and a trip to the bankruptcy courts and eventual tax-payer bailouts for GM and Chrysler followed.
The rise of foreign competition, the shift from a manufacturing to a service economy, and the relocation of many American firms to the approximately half of all states that are inhospitable to unions drove union membership down to levels so low as to make the unions virtually a non-factor in most parts of the private sector, although still a potent political force.
That may, only may, be about to change. President Obama has stacked the Department of Labor and other agencies that deal with workplace issues with the most pro-union leaders he could find. Their dedication to the unions that produce the funds and doorbell ringers for the Democratic party was demonstrated when a government agency sued Boeing for the “unfair labor practice” of opening a new plant in a state that protects workers’ rights not to join a union.
A pro-union government bureaucracy is not the only new advantage conferred on America’s unions. President Obama’s narrative goes like this. The deep recession he inherited, and the too-slow recovery, combined with the policies of successive Republican administrations and globalization, produced a long stagnation in middle-class wages. Until then, trade unions provided the muscle that enabled America’s middle class to have good-paying jobs that fuelled the purchase of homes, cars, and television sets, and financed the upward mobility of their children. The shift of bargaining power from unions to corporate moguls increased the share of national income claimed by profits and corporate executives, with the result of wealth for the 1 percent and woe for the 99 percent, or is it gold for the 10 perncet and grief for the 90 percent? No matter: Government policies that favor trade unions are necessary if rising inequality is to be stopped and reversed. So sayeth the Obama team.
Add to that the energy of Richard Trumka, elected in 2009 to head the AFL-CIO, a federation of 57 labor unions, and Bob King, president of the United Auto Workers. Trumka has decided to offset declining membership by forging alliances with political groups that are favorable to unions and to their liberal agenda. At the recent AFL-CIO annual convention he vowed “to put some movement back in the labor movement”, and invited groups such as the National Organization of Women (NOW), and United Students Against Sweatshops to become “partners” in working “not just for the 11 percent we are right now” but for the 99 percent. The theory is simple: The combined political clout of the unions and these outside groups can win legislative gains that will translate into higher wages and benefits.
One result was a wave of protests this summer by non-union workers in fast-food shops. Their demand: an increase in the minimum wage from the level prevailing in most states--$7.25 per hour–to $15. Their argument: Fast-food shops are no longer staffed by teenagers looking for pocket money with which to buy the next video game, but in half the cases by workers over the age of 23, and in one-third of the cases by workers with the responsibility of supporting at least one child. The protestors received generous support from the Service Employees International Union.
Trumka is also forging alliances with “workers centers", organizations exempt from various legal restrictions on union picketing and from financial reporting requirements by a quirky law that allows them to make non-negotiable demands on employers, but prohibits them from bargaining on behalf of their members. A representative of one such non-union center, the New York Taxi Workers Alliance, has been elected to the AFL-CIO executive council, a first.
But it is the UAW’s Bob King who might be on the verge of the biggest win for private-sector unions in decades: the first-ever organization of a foreign-owned auto plant in the South, a region largely free of unions. Most southern states have laws that allow workers to refuse to pay union dues, have prevailing wage rates of $12-$16 per hour (compared with about twice that in northern plants), and have attracted factories and tens of thousands of jobs from almost every foreign car maker.
King plans to narrow the North-South wage divide. He claims more than half of VW workers have expressed a desire to join the UAW, but public expressions to tough union organizers don’t always translate into secret pro-union ballots, so King is not pushing for a union-recognition election, at least not yet. Instead, he is counting on a combination of German law that requires big companies to have work councils, and U.S. law that requires companies with such councils to have its workers represented by a union. He hopes to persuade VW, “a great company… to sit down [with him] and talk about what’s the best path”.
Whether these developments are harbingers of a union revival is far from certain. Equally uncertain is whether the winners would be union treasuries, job-seeking workers, or both.