Labor

Stronger Labor Unions Could Do a Lot of Good

Nothing else has been able to stop the decline in workers' bargaining power.

Not much of a threat these days.

Source: Kim Vintage Stock/Corbis/Getty Images

It's pretty well known that U.S. workers have lost a lot of bargaining power over the past few decades. Wage gains, for example, haven’t kept pace with rising productivity:

These Two Were Supposed to Be Inseparable

Labor productivity versus pay*

Source: Federal Reserve Bank of St. Louis

* 1947 = 100

Clearly, workers have been unable to take home a fair share of the new value they were creating. Why? One big potential culprit is the decline of labor unions. Unions use strikes and other collective action as a bargaining chip to force employers to raise wages. For this reason, union workers get paid about 22 percent more than non-unionized workers. Even non-union workers often benefit from unions setting the bar higher for wages. But unionization rates, never more than 50 percent, have declined to a negligible level in the U.S. private sector:

It's Been a While Since the Union Made Us Strong

Share of workforce belonging to unions in the private sector

Source: Barry T. Hirsch and David A. Macpherson via Unionstat.com

Why has this happened? This question is endlessly debated. Some blame government policy changes -- the Taft-Hartley Act of 1947 outlawed certain union tactics and made it easier for states to enact anti-union laws, while various regulatory changes weakened unions’ bargaining ability. Others blame globalization and increased international competition, which forced U.S. companies such as automakers to cut costs or die. There are other explanations as well. Given that unionization rates are higher in other countries, but have also been declining, it’s likely that a mix of these factors is at work.

This is an important debate, but a more important question is: What, if anything, can be done to restore unions to their former place of importance in the U.S. economy?

Changing the laws and the regulatory climate to be more union-friendly would undoubtedly help, but even if that happened -- and with Republicans in control of all branches of government, it seems very unlikely -- it wouldn’t solve the problem overnight. U.S. private-sector workers would have to be re-unionized from scratch. At the very least, unions will have to learn how to appeal to a workers who have become used to bargaining on their own. And if globalization or other structural factors in the economy continue to create a headwind for organized labor, unions will have to find new value propositions that don’t involve raising wages to levels that make American companies globally uncompetitive.

So unions should be thinking about new ways to adapt to the reality of the 21st century American economy. Here are a few out-of-the-box ideas:

1: Organize at the regional level, not the company level.

Cities have become more and more important to the U.S. economy. Meanwhile, companies have become more widely dispersed, making it harder to unionize all the workers in a single company -- especially if some offices and factories are in other countries.

A solution is to have unions organize across many different industries in a particular region. This idea -- which is somewhat similar to how German unions work -- would allow workers in one industry to support workers in another industry, through strikes, local electoral action or other traditional methods. But it would also allow more cooperative, constructive interactions between employers and employees.

Since an individual employer would be justifiably afraid of raising wages if competitors failed to do the same, it would make sense to have collective bargaining take place between employees and employers of many companies at once. But collective bargaining at the industry level -- for example, all restaurant workers bargaining with all restaurants at the same time -- is very difficult, since the U.S. is so huge, and conditions vary so much from place to place. Instead, it makes sense to have bargaining occur at the city-industry level -- for example, all restaurant workers in Phoenix bargaining with all Phoenix restaurants. That would reduce employers’ fear of wage increases affecting some, but not all, restaurants.

Meanwhile, the increasing importance of cities potentially strengthens unions due to local service businesses’ increased incentive to stay in town. And local organization would also give unions the power to influence local politics, if employers decide not to come to the bargaining table.

2: Have unions provide more services to their members.

The idea of unions as bargaining collectives is so firmly cemented in our minds that we forget that they also provide other services to their members, such as legal advice. Unions should experiment with expanding the range of benefits they provide.

One example is job searches. Often, workers lose their jobs because an employer goes belly-up or has to close some of its operations. If a union or confederation of unions organizes across different industries, it can help laid-off workers quickly find new employment. This is especially important for service-industry workers, since employers don’t often spend a lot of money and time on searching for these employees. A union can also help vouch for a worker, reducing an employer’s risk that the new hire will end up being a bad apple. Unions in China already provide a similar service.

Obviously, if unions are organized at the city level as per the previous suggestion, providing job-search assistance becomes much easier. Having unions act as a cushion against city-wide unemployment would also make them more valuable to municipal governments, increasing their local political clout and allowing them to push for regional minimum-wage increases in good times.

The advantage of these ideas is that they complement unions’ classic function and mission, rather than conflicting with it. City-level organization and increased member services would preserve and enhance unions’ traditional role as bargainers, while also increasing local political clout and giving non-unionized workers more incentive to join up. Instead of merely dreaming of restoring the golden age of the mid-20th century, labor unions need to push forward into the new, changed world.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

    To contact the author of this story:
    Noah Smith at nsmith150@bloomberg.net

    To contact the editor responsible for this story:
    James Greiff at jgreiff@bloomberg.net

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