Unions Can Retool for the New Economy

If labor laws are outdated in an era of mass franchising, surely it’s possible that the union model is also outdated.
Have times really changed ... and shouldn't they?

The Official Blog Spouse was on Melissa Harris-Perry's show this weekend to talk about a variety of topics, including the recent decision by the National Labor Relations Board that McDonald's Corp. is a joint employer with its franchise owners, and it can therefore be jointly charged in labor disputes. As I noted last week, this potentially opens the door to unionizing fast-food franchises, which would be a major change in labor law and the franchise market.

In the interest of impartiality, I won't highlight the comments from the OBS, other than to point out that they were erudite, intelligent, and OMG isn't he a dreamboat? But I was struck by something that David Cay Johnston suggested at the opening of the segment: that this is happening because our labor laws were written in the 1930s, when there were a lot more jobs in heavy manufacturing. They need, he said, to be updated for the franchise era.

Perhaps so. But how? I've heard this argument before, and the implication is usually that we need to change the law to make it easier for unions to organize franchise employees. But if the labor law is outdated in an era of mass franchising, surely it's possible that the union model is also outdated.

One way to think about unions is that they take a lot of negotiated "soft" processes and make them explicit and rule-bound. For example, salaries used to be determined by what you were willing to take for doing the job and what the employer was willing to pay; now they are set by a scale. Putting that scale in place requires laying out a lot of specifications, such as exact job descriptions for every wage class and precise conditions for getting raises. This is inherently reductive: It necessarily reduces flexibility and de-emphasizes intangible qualities that are easy to see but hard to describe, such as "they're a pleasure to be around" or "the line seems to move slower when they're on the shift."

On an assembly line, where the object is already to reduce jobs into discrete, repetitive actions, this may not be so costly. As the scale of the organization shrinks and the nature of the work changes, it becomes more and more problematic. Smaller businesses don't have room for 97 different neatly-spelled-out job descriptions and no overlap, thank-you-very-much—I'd-better-not-see-that-mechanic-changing-a-lightbulb! They can't so easily afford to carry unproductive workers who are in the middle of a lengthy grievance and disciplinary process. They don't have extra money for labor-law experts to help make sure they're in compliance with a contract that runs into the hundreds of pages.

When discussing unionization, people tend to focus on wage and benefit costs. But when you talk to small-business owners, they're just as apt to talk about the problem of onerous work rules and the ponderousness of adding a third party to any problem they have with a worker.

It's not impossible to run a small business; construction companies do it with multiple unions. But construction is a bit of a special case for a number of reasons, not least because such companies can "fire" workers relatively easily by simply sending them back to the union hall at the end of a job. And even so, union shops are finding it harder and harder to compete with open shops, not so much because of the wages (you don't get a licensed electrician at starvation wages), but because of the legacy costs and the administrative overhead.

And a rigid union process is particularly difficult when we're talking about customer service work because what makes a human interaction successful -- or unsuccessful -- is impossible to specify in a written agreement. For example, it's quite easy to imagine a unionized waiter who carried out every item on his job description to the letter -- and yet also made customers uncomfortable and unwilling to come back to your business.

I'm not sure that McDonald's is really the new GM of the American workforce. But if it were, that still wouldn't mean that the workforce's problems could be solved by importing a union model designed to be implemented in a huge central factory. We may need to update our labor laws for the new realities of the economy. But if we do, then it's probably time to rethink the union side as well as the business side.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

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    Megan McArdle at mmcardle3@bloomberg.net

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