Twilight of the Labor Union Era

August 26, 2017

“The anxieties of the present are rooted in nostalgia for the past.” - Conor Sen

 

“Every great cause begins as a movement, becomes a business, and eventually degenerates into a racket.” - Eric Hoffer

 

The recent defeat of the UAW to organize a small amount of workers at a Nissan Motor plant in Mississippi caught my attention, as did their defeat at the Volkswagen plant in Tennessee last year. While it is generally recognized that those of a “Conservative” political bent seem to be yearning for a lost past, this debilitating nostalgia for the old days is hardly limited to one side of the political spectrum. Many progressive think tanks and labor economists blame the decline of labor unions for wage inequality and a host of other ills that affect the beleaguered U.S. workforce, but I am of the opinion that they are looking at the history the wrong way, and this is a false correlation: Unions didn't decline because of a concerted effort. They declined organically because the jobs and tasks that once supported the union base simply disappeared, the American workforce splintered into new industries, and a new labor template formed that didn't lend itself naturally to organizing. As the years went by, the union movement, fossilized by it's own traditions, never bothered to adapt to the new reality of a global economy, or a post industrial workforce.

 

In anticipation of Labor Day, some organizations like the Economic Policy Institute have trotted out charts like this:

 

 

 

 

Except as the old saying goes, "Correlation does not necessarily equal causation."

 

 

 

 

The red line above traces the share of manufacturing in total employment in the United States. Unfortunately, the FRED chart only goes back to 1940, but the membership spurt at that time correlates quite well with the EPI chart. In other words, a lot of the trade union movement's "success" comes from the onset of World War II, and the massive growth of America's industrial power, well into the post war years. Moreover, the chart proves that wage inequality isn't due to a slide in union membership, and this disparity affects all workers, from the shop floor to the office cubicle. Most economists know there are other forces at work here. But just to show cognitive dissonance is a universal phenomenon, some econs think there's a direct causation here. And I'm kind of disappointed that some of them would fall for this.

 

The only unions left standing with any real power are the public service kind, who often leverage their political power only to the detriment of other workers, who pay dearly for the benefits the civil services get, that they can't even afford for themselves. In effect, a lateral wealth transfer from one worker to another. This too, puts a dent in wage equality, endangers the fiscal stability of municipalities, and their ability to attract and secure employers. It's high time this part of the equation was acknowledged. There is a reason the public service union structure has survived, while its private complement has withered: it has no foreign competition to erode their leverage.

 

 

 

 

In the private sector, union representation is down to a mere 6.4% of the workforce. Starting from this point, getting union representation to grow meaningfully from here, and reversing a five decade long slide, has to be considered a fantasy. But many in the field of labor economics cling to it, even though there is no native support for the institution. Judging from the time, money and massive organizing efforts the UAW had thrown into these two failed attempts alone, does anyone seriously believe a revival of the union movement is plausible, or even warranted?

 

Judging from what the Nissan workers said, they didn't need an arbiter to better their lot. Indeed, on the Nissan website for the plant, the firm offers:

 

  • Our comprehensive benefits package includes employee and dependent health care plans, retirement benefits plans, disability income protection, incentives for employee wellness, paid vacation, sick pay, 14 paid holidays, 401k employer match, tuition assistance and on-site fitness, medical, pharmacy and banking centers.

 

  • We also provide a variety of services and amenities to our employees and their families including an on-site fitness center, a playground, and a no-down-payment, no credit check car leasing program.

 

I wonder what Walter Reuther would have thought about all of this. Of course, it didn't help that decades of the UAW's high handed methods, which played a role in the decline of the U.S auto industry, spoiled what should have been a reputation for protecting workers rights, and not making life miserable for management, which seemed to be a goal in itself. And that is another mistake the union movement will never acknowledge: in the past, they have overplayed their hand so hard to the detriment of their own industries, they're no longer seen as saviors. 

 

Nevertheless, union advocates cling to the nostalgia of the past, like Civil War reenactors. Time was when unions served their members by using their buying power to fund what used to be called “health and welfare” services, but these have been supplanted by the companies themselves, or government. Some unions ran their own profitable insurance companies, and those that did, quietly worked to prevent single payer health plans to take root lest they run the risk of losing a cash cow. They used to protest unsafe working conditions, but again, the government, over time, has mandated protections in every kind of industry and workplace, and simply legislated them out of existence. Even rules about overtime pay have been mandated at the federal level, which, when you consider it, is the most effective way to go about it. Why have hundreds of union locals fight for a benefit for their members individually, when the same protections can be granted to everyone at a stroke, union member or not, by the government? To quote Frances Perkins, FDR's Secretary of Labor, “I'd rather pass a law than organize a union.”

 

 

The struggle for labor rights has a long history in this country. Conditions used to be brutal for hundreds of thousands of workers, especially newly arrived immigrants. Workplace safety wasn't even an afterthought. The union movement played a large role in righting these injustices, and their place in history in doing so is rightfully recognized and secure. But unions today seem to justify their existence only by reciting their past accomplishments. That's not going to do anything to address today's challenges.

 

During these struggles, there was a competition of ideas between accomplishing reform by force of legislation, or promoting union organizing to bring better conditions and pay for the American workforce. These two movements are both over a century old. But everything has its day. The tales of the hard won victories, and the old Pete Seeger dirges, have little meaning to a new generation when the boss is offering free day care. The battle for a better life for working Americans has moved to a new arena, where national structures for health care, wages, and conditions have to be set. Because I believe the challenge today is fostering equality between labor's share of the economy and that of capital's:

 

 

 

 

That is where tomorrow's victories will have to be fought, and won. If the economy has gone global, no "local" is going to solve the problems of economic inequality, nor can individual unions be effective in addressing this issue by taking on one industry at a time. Not only is such an effort implausible, the amount of time it would take renders such an option as unworkable. The old organizing model just isn't suitable for the job, because the specific problems that are unique to our present day economy has made them as redundant as the job base that once fed them.

 

The gold line in that chart has a long upward path to make before we get to the kind of equilibrium we once knew. Until that happens, there will be a lot of embittered people around. And you've already gotten a taste of the result.

 

 

 

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Donald R. Davret, Investment Advisor Representative

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