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Does Unionization Matter?

by rdf Mon Mar 6th, 2006 at 09:03:13 AM EST

I've written a new essay on the correlation of US earnings and the degree of union membership in the workforce. For various formatting reasons it doesn't lend itself to posting in a blog so I'll provide a link and a short summary below.


My premise is that various economic models have been put forward since the days of Adam Smith to "explain" the conditions of the working class. The ones I'm most concerned with currently being Marx and Henry George.

For those not familiar, Henry George wrote an extremely popular book in 1879 blaming the poor state of the working man on landlords. His solution was to replace all taxes with a tax on land. Marx, of course, blamed all the problems on capitalists. My essential point is that things got better for the working class in the industrialized countries in the 20th Century in spite of the fact that neither man's policies were adopted. My explanation is that it was due to the rise of organized labor as a counter balancing force.

The drop in labor's power over the past half century (at least in the US) has led to a stagnation or decline  in their standard of living. If you are interested in this topic, please at least glance at the essay to see the graphs I've included.

It would be most instructive to see corresponding graphs for the situation in various EU countries to see whether my hypothesis makes sense.

The essay:

Does Unionization Matter?

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I haven't read your essay yet, but I am currently reading "The Jungle" by Upton Sinclair.  Of course, I have heard of this book multiple times in history courses through the years.  I knew that its publication of the meat-packing industry's misdeeds had led to the creation of the FDA.  Yet somehow I never got around to actually reading the book.  It is a real eye-opener and provides an amazing insight into the cruel, hard life of unskilled immigrant  laborers in turn of the century Chicago.

Union membership never actually helped Jurgis, his family, or anyone else in their dire situation in Packingtown.  They religiously paid their dues, only to be turned out time after time with the rest of the workers.  I find this interesting, in that Sinclair was an ardent socialist and so, seemingly, should have painted unions in a more positive light.

I guess I'm asking, where do you think the turning point came as far as organized labor reaching critical mass to effectively represent the interests of the working man?  Have we not yet reached that point, as unions' influence continues its steep decline?  Do you see some kind of modern proletarian (i.e. anyone who is not living off income from investments) uprising as corporations continue to exploit labor?

by slaboymni on Mon Mar 6th, 2006 at 10:16:36 AM EST
Glad to see you back here. :)

Those who can make you believe absurdities can make you commit atrocities. -Voltaire
by p------- on Mon Mar 6th, 2006 at 06:38:41 PM EST
[ Parent ]
Thanks, poemless.  I never really left.  I've been lurking.  Most of the non-Russia related topics (I mean the highly-specific, internal EU laws and rules) here just don't interest me enough to post about, but for some reason I do read most of them ;-)
by slaboymni on Mon Mar 6th, 2006 at 07:18:25 PM EST
[ Parent ]
I'm glad to hear that and I second poemless!

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Mon Mar 6th, 2006 at 07:24:43 PM EST
[ Parent ]
Ask the Swedes. They have a 89% unionization rate (2000 data), while the USA's rate is less than 15%. The USA has a minimum wage that is one third of what a living wage needs to be in order to lift a family of four just over the poverty level. Sweden has one of the lowest poverty rates in Europe, and while their average income is about 25% below the USA's (whose isn't), their social democracy seems to provide advantages that the USA can only dream about.

by shergald on Mon Mar 6th, 2006 at 05:40:22 PM EST
You write:

According to my theory, the decline in unionization led to a decline in political power

I would argue that the causality runs the other way: the political power of labor began to decline c1970, leading to a decline in rates of unionization all over the world.

The question is: why did labor's political power decline?

My answer, drawing from people like Thomas Ferguson and Joel Rogers, Robert Brenner, and Richard Duncan would be that business decided to withdraw from the postwar social contract in the early 1970s, in order to restore profitability that had been eroded by global industrial overcapacity. This overcapacity, in turn, was brought about by the postwar recovery of Europe and the development of Japan and the Asian NICs who followed an export-led growth strategy, and by the collapse of the Bretton Woods system in 1971-73 that unleashed a wave of international credit creation and overinvestment relative to global demand.

These perverse effects of globalization, in my view, are at the root of business attempts to destroy unions, regulations, public ownership of enterprise, and any other barrier to corporate profitability.

by TGeraghty on Mon Mar 6th, 2006 at 06:13:43 PM EST
If you look at my charts you will see that union membership peaked in the mid 1950's so one could argue that by the 1970's the unions had already lost some of their political power.

The aging of the workforce (and leadership) in the AFL-CIO probably also led to complacency. No one was willing to have the kind of confrontational organizing and strikes that took place during the period of growth.

I've recently read an account of the Lawrence Mass strike in 1911 (the one now called bread and roses). Thousands of strikers went out for months and caused a total disruption in the local economy. Things got so bad that they had to ship some of the children to foster homes in New York and other places because of the lack of food. There is a recent book called "Bread and Roses" which does a good job of telling the story. There are currently several fairly large strikes/lockouts in the midwest. Are you aware of them? Has your local newspaper or TV reported on them? Without access to the media unions have a hard job of even explaining what they are about.

There seems to be some revival of energy in the union movement, but it is mostly with low wage service jobs. Even if they sign up this won't produce much in the way of funds for the unions to operate on. They need a new model which can attract the knowledge workers.

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Mon Mar 6th, 2006 at 06:53:00 PM EST
[ Parent ]
Yes, that's right. FWIW, my take on that is that US organized labor became rather conservative after the mid-1950s and failed to put much effort into organizing new workers.
by TGeraghty on Mon Mar 6th, 2006 at 09:28:35 PM EST
[ Parent ]
I was involved in a graduate student union that was an AFL-CIO affiliate for a while.  Unsurprisingly, it was fairly activist, and got aggresively involved in various organizing drives around the campus.  The narrative I picked up in that environment is that in the post-war period the major American unions more or less stopped organizing in either existing or new sectors of the economy, and let the structures in already-unionized sectors more or less wither away.  Instead of an organization of the members and for the members, it became more and more oriented towards using member fees to support a large professional caste, who dispensed services from upon high to a largely disconnected membership.  As professional managers, they had a disturbing tendency to be closer to the employers than the employees they represented, and oftentimes chose strategy and tactics that reflected this closeness, further driving their members away from any sort of involvement or identification with the union.

One common result was that the large national unions focused the majority of their attention upon legislation in Washington DC, and very little of their attention on the companies for which their members worked or on organizing new members.

That is a dangerously complacent model, and unions suffered as a result.  When American business started its efforts to end unions in America, the professionalized unions were too weak on the ground to really fight back.

It is true that a union cannot really do much if a company moves all of its operations abroad.  However, there is a lot that unions could have done which went un-done because they were too weak, or simply decided not to.

As far as the larger effect of unionization on an industry or economy as a whole, the prevailing wisdom was that substantial unionization, even in the range of 30% or 40%, is enough to dramatically improve the working conditions of everybody in the industry.  The example cited was Los Vegas casino workers, where because of a fairly substantial union presence, most workers get pay and benefits equivalent to union members.

by Zwackus on Mon Mar 6th, 2006 at 09:34:00 PM EST
[ Parent ]
Isn't this what is happening again?

I've argued that the big issue with China is that it represents over-capacity because we live in a world of "over-productivity" but perhaps it is just a repeat of the previous phenomena you describe.

Question is, with your insight, any ideas on how to fix it?

by Metatone (metatone [a|t] gmail (dot) com) on Tue Mar 7th, 2006 at 09:18:22 AM EST
[ Parent ]
Not again but still.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Tue Mar 7th, 2006 at 09:24:44 AM EST
[ Parent ]
Yes, still.
by TGeraghty on Tue Mar 7th, 2006 at 11:30:50 AM EST
[ Parent ]
Yes, I think what is needed to fix it are a couple of things, essentially a global version of the US New Deal in terms of regulating international labor and financial markets.

One is international labor standards, which could be anything from a global right to join a labor union to a global minimum wage adjusted for a country's level of productivity along with standards of health and safety. This would boost global demand by helping ensure that wages rise with labor productivity.

The other is to reform international financial institutions, especially the IMF, to make them more growth-oriented along the lines originally proposed by Keynes back in the 1940s.

Keynes envisioned a much better-funded institution [IMF] . . . Keynes's institution would have been capable of taking action on a larger scale. . . .  Keynes saw a balance of payments imbalance as a problem for both surplus and deficit countries, both of which needed to be encouraged to change their policies [as opposed to] the problem of the country running the deficit alone.

There's more:

[Keynes's] own designs for the World Bank and IMF were decidedly more friendly to the poor and the indebted than to wealthy creditors. He wanted the two new multilateral agencies -- largely free of domination by the United States or anyone else -- to serve as "global banks" and "global treasuries." At the same time, he wanted them to be able to issue their own "currency" (called the "bancor") in order to provide liquidity in times of crisis and for long-term growth, and to do so at levels beyond those that private capital markets would provide. In Keynes's plan, moreover, exchange rates were to be managed by governments, not 28-year-old traders staring at computer screens; commodity prices were to be stabilized by publicly controlled buffer stocks; and trade policy was to be shaped by domestic concerns for equality, democratic sovereignty, and stable growth, not by a free-trade-whatever-the-cost ideology. His model was, in essence, a generously liberal version of domestic Keynesianism, rewritten for the world.

The details can be debated, but essentially the problem is to ensure that global aggregate demand keeps up with global supply, which is what Keynesian economics is all about.

by TGeraghty on Tue Mar 7th, 2006 at 11:44:59 AM EST
[ Parent ]
I would imagine that the economic improvement of huge areas of the rest of the world, and their competition with the US and Europe, must have had something to do with it.  So many industrialized jobs that were heavily unionized, and still are in the US, are being rapidly replaced by companies in other countries with much lower wage scales.  While the auto industry has certainly done a poor job of managing their US businesses (as I've commented before), There is just no way that "Detroit" could  compete in the global economy with the hourly rates they have, the "job bank" (I think that's what it's called--we discussed this several weeks ago), healthcare programs where the retirees get the most advanced healthcare in the world--translplants, angioplasty, Viagra,--all for free with very little out of their pockets.  Neither the business nor the unions are going to survive that competitive onslaught.  

I guess if you take a broader view than the US or any specific country,,,,a world view,,there sure are a lot of people making great cars around the world, with life styles that are unbeliev able better than they had in the '60's and '70's.  That's a good thing, but it sure doesn't help the guy in Detroit, or Ohio, or Gary, Indiana a lot.

by wchurchill on Mon Mar 6th, 2006 at 08:32:02 PM EST
Many of the "foreign" cars sold in the US are built in the US. The hourly wages of these companies are comparable to those of the big three. So the usual arguments about organized labor making these firms uncompetitive is not correct.

What is correct is that the foreign companies being more recent have a younger workforce and therefore they have a smaller burden of retirees and less healthy workers to deal with. The actual manufacturing cost per vehicle is not that different.

Why the big three hasn't pushed for government administered health care is beyond me. Perhaps the management's allegiance to their golf club partners is more important than the financial stability of their firms. They have no problem running plants in countries with national health care like Canada and the UK. In fact many plants have been built in Canada just because of the lower benefits cost from the national medical plan.

It may be of interest to labor historians to analyze the causes of organized labor's decline, but I'm really interested in the questions of what to do next.


Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Tue Mar 7th, 2006 at 09:18:19 AM EST
[ Parent ]
Regarding what to do next, the auto industry might be a good area for analysis.  Of Toyota's 12 plants in the US, 9 are not unionized.  Of course all 77 of the GM plants are unionized.  

My understanding is that labor rates are slightly lower at Toyota, 10+%.  Work rules are far more flexible, allowing workers to move among different tasks, so that balancing skills across the plant is more efficient.  The GM health care program for workers is nothing like healthcare programs for other companies today, where healthcare costs are shared between employees and employers, with workers more aware of the cost of healthcare, and incented to make some economic decisions in conjunction with health decisions--generic versus brand drugs for example.  My guess is that Toyota's health care program looks much more like today's healthcare programs than the legacy auto industry.  I agree that the healthcare costs per car are certainly different, it would be interesting to see how much is due to the differnece in the programs versus the age of the work force--but I would imagine your point on age is very relevant.

by wchurchill on Tue Mar 7th, 2006 at 01:14:29 PM EST
[ Parent ]

A major portion of the "legacy costs" are health care - providing health-care benefits to a growing population of retired employees. In 1999, GM had legacy costs per vehicle of $527; Ford's legacy costs were $304. In 2003, those costs had risen to $928 and $619 respectively. Figures for Chrysler weren't available.

In 2003, GM had 2.53 retired workers for every worker on the job. Chrysler had just .98 retiree per worker.

"At GM, this could become a life or death issue," McAlinden said.

Domestic manufacturers, he said, pay $2,000 to $2,500 per car in current work health-care and retiree legacy costs - costs that are unsupportable in a world with capacity of 80 million units and demand of 60 million, Cole said.

source: http://www.facsnet.org/tools/biz_econ/detroit_auto.php

Notice that now companies that provided good benefits to their workers and retirees are being blamed for this practice. It wasn't voluntary, but won by the unions. The mistake was not making it a national goal, but rather treating it on a company or sector basis.


Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Tue Mar 7th, 2006 at 04:25:19 PM EST
[ Parent ]
The mistake was not making it a national goal, but rather treating it on a company or sector basis.
Somehow I'm glad that American competitiveness was not wiped out by following the auto industry's lead on healthcare, labor practises, or labor rates that would make us uncompetitive in world markets.
by wchurchill on Wed Mar 8th, 2006 at 01:57:05 AM EST
[ Parent ]
The amusing thing is that Volkswagen (for example) is certainly not in the best of shape for various reasons, but in the core factories it gives better benefits than the US manufacturers and makes more money. To attribute the decline of the US auto industry to labour issues would seem rather erroneous.
by Metatone (metatone [a|t] gmail (dot) com) on Wed Mar 8th, 2006 at 02:54:11 AM EST
[ Parent ]
My posts on this go back a few months.  the primary cause of the loss of market share for Detroit is poor quality product, and poor management.  I just don't think we should bury our heads in the sand and ignore the role of union rules, bureaucracy on interchanging jobs, healthcare plans that can't be sustained, and labor rates that make it difficult to compete.
by wchurchill on Wed Mar 8th, 2006 at 03:13:13 AM EST
[ Parent ]
Slightly off topic, but I read in the travel section of the local rag (the part where they warn you where not to go) that Air France union members are planning a one day strike.

I guess I don't get the "one-day" part.  I thought the point was to strike until The Man agreed to meet your demands or at least meet you partway.  If The Man knows, in advance, that you are planning a 24 hour strike, and at the end of the day you'll go back to work ... I guess I just don't see how that's very effective.  Or is this just one of those "The French love to strike just because they can ..." things? ;)

Those who can make you believe absurdities can make you commit atrocities. -Voltaire

by p------- on Mon Mar 6th, 2006 at 10:55:25 PM EST
Well, "one day strikes" are a signalling device. They say  "we are serious and can do you damage" which gives the union some leverage at the negotiating table.

Most of the time, neither side actually wants to bring things to the "nuclear option" of an all-out strike. A full strike damages the company which can hurt management and workers. But each side has to present their credentials, else how can they leverage a compromise without going all the way?

by Metatone (metatone [a|t] gmail (dot) com) on Tue Mar 7th, 2006 at 09:22:20 AM EST
[ Parent ]
Indeed most of the strikes in my company were so-called warning strikes, sometimes taking just hours (but those were rush-hours), and they usually worked. (Then again, they were never really ambitious.)

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Tue Mar 7th, 2006 at 10:29:27 AM EST
[ Parent ]
The graph produced showing the relationship between real wages and the unionization rate indicates that there is a lag of more than a decade, perhaps two, in this association. It also shows that as the unionization rate declined, wages began to stagnate. Until we see data covering the most recent decade, it cannot be asserted that wages did not decline with decline in unionization. It is also possible to make the case that union negotiated wage scales provide a standard by which other nonunion work is paid.

by shergald on Tue Mar 7th, 2006 at 06:27:40 AM EST


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