The Economic Development of the World: Part 11

The Rise of the Unions

By 1914, leading families in the United States and Europe carve up the world.  They drove the working class so hard that most became unhappy. They wanted to do something about their conditions.  In many parts of the western world came unions. For many parts of the western world, this is the answer to the powerful hand of the corporate managers.  From 1914 to the 21^st Century was a time of strong Unionism in the West.

Labor unions are legally recognized as representatives of workers in many industries in the United States. Their activity today centers on collective bargaining over wages, benefits, and working conditions for their membership. They represent their members in disputes with management over violations of contract provisions. Larger unions also typically engage in lobbying activities and electioneering at the state and federal level.

Unions began forming in the mid-19th century in response to the social and economic impact of the industrial revolution. National labor unions began to form in the post-Civil War Era. The Knights of Labor emerged as a major force in the late 1880s, but it collapsed because of poor organization, lack of effective leadership, disagreement over goals, and strong opposition from employers and government forces.

The American Federation of Labor, founded in 1886 and led by Samuel Gompers until his death in 1924, proved much more durable. It arose as a loose coalition of various local unions. It helped coordinate and support strikes and eventually became a major player in national politics, usually on the side of the Democrats.

American labor unions benefitted greatly from the New Deal policies of Franklin Delano Roosevelt in the 1930s. The Wagner Act, in particular, legally protected the right of unions to organize. Unions from this point developed increasingly closer ties to the Democratic Party, and are considered a backbone element of the New Deal Coalition.

Most unions in the United States are aligned with one of two larger umbrella organizations: the AFL-CIO created in 1955, and the Change to Win Federation which split from the AFL-CIO in 2005. Both advocate policies and legislation on behalf of workers in the United States and Canada, and take an active role in politics. The AFL-CIO is especially concerned with global trade issues.

In 2010, the percentage of workers belonging to a union in the United States (or total labor union "density") was 11.4%, compared to 18.4% in Germany, 27.5% in Canada, and 70% in Finland. Union membership in the private sector has fallen under 7% — levels not seen since 1932. Unions allege that employer-incited opposition has contributed to this decline in membership. The most prominent unions are among public sector employees such as teachers and police. Members of unions are disproportionately older, male and residents of the Northeast, the Midwest, and California. Union workers average 10-30% higher pay than non-union in the United States after controlling for individual, job, and labor market characteristics.

Although much smaller compared to their peak membership in the 1950s, American unions remain a prominent political factor, both through mobilization of their own memberships and through coalitions with like-minded activist organizations around issues such as immigrant rights, trade policy, health care, and living wage campaigns. Of special concern are efforts by cities and states to reduce the pension obligations owed to unionized workers who retire in the future. Republicans elected with Tea Party support in 2010 have launched major efforts to rewrite state laws that encourage unionization of public sector workers but which, they allege, impose costs higher than the states can afford.

The economist Joseph Stiglitz has asserted that, "Strong unions have helped to reduce inequality, whereas weaker unions have made it easier for CEOs, sometimes working with market forces that they have helped shape, to increase it." The decline in unionization since WWII in the United States has been associated with a pronounced rise in income and wealth inequality.

Post-war

Many people on the left and/or within the labor movement consider the Taft-Hartley Act of 1947; for example, a conservative anti-union law that contained numerous measures to weaken unions (for example, by banning union contributions to political candidates and restricting the power of unions to engage in strikes that "threatened national security"). Others feel that the Taft-Hartley legislation served mostly to curb union excesses. Some note the unions were further weakened in the 1950s by highly publicized reports of corruption in the Teamsters and other unions.

The percentage of workers belonging to a union (or "density") in the United States peaked in 1954 at almost 35% and the total number of union members peaked in 1979 at an estimated 21.0 million. Membership has declined since (currently 14.8 million and 12% of the labor force). Private sector union membership then began a steady decline that continues into the 2010s, but the membership of public sector unions grew steadily (now 37%).

After 1960 public sector unions grew rapidly and secured good wages and high pensions for their members. While manufacturing and farming steadily declined, state- and local-government employment quadrupled from 4 million workers in 1950 to 12 million in 1976 and 16.6 million in 2009. Adding in the 3.7 million federal civilian employees, in 2010 8.4 million government workers were represented by unions, including 31% of federal workers, 35% of state workers and 46% of local workers. As Daniel Disalvo notes, "In today's public sector, good pay, generous benefits, and job security make possible a stable middle-class existence for nearly everyone from janitors to jailors."

Unions were responsible for giving its members such things as Life, health, and accident insurance. They won such things as dental coverage and many other benefits.

By the 1970s, a rapidly increasing flow of imports (such as automobiles and steel from Germany and Japan, and clothing and shoes from Asia) undercut the market share of corporations with high wage rates. The intellectual mood favored deregulation and free competition, with a lesser role for union rules. Many companies closed or moved factories to Southern states (where unions were weak), or offshore to low-wage countries. The effectiveness of strikes declined sharply. On the political front, the shrinking unions lost influence in the Democratic Party, and the pro-Union liberal Republicans faded away. Intellectuals lost interest in unions, focusing their attention more on the Third World. Conservative, free market business interests, using think tanks as idea farms, began to fight back against unions, state by state. The climax came when Ronald Reagan--a former union president in his liberal younger days--broke the illegal PATCO strike of air traffic controllers in 1981. Union membership among workers in private industry shrank dramatically, while after 1970 there was growth in unions of employees of the federal, state and local governments. 

Union Density

Union Density a measure of the membership of trade unions, calculated as the number currently enrolled as members as a proportion of all those employees potentially eligible to be members.

Although most industrialized countries have seen a drop in unionization rates, the drop in union density (the unionized proportion of the working population) has been more significant in the United States than elsewhere. Dropping unionization rates cannot be attributed entirely to changing market structures. In fact, scholars have shown the tremendous complexity inherent in explaining the decline of union density. In my opinion, workers are happier now that they have a 5 day, 8 hour work week and can spend time doing something other than work.

A broad range of forces have been identified as potential contributors to the drop in union density across countries. Sano and Williamson outline quantitative studies that assess the relevance of these factors across countries. The first relevant set of factors relate to the receptiveness of unions’ institutional environments. For example, the presence of a Ghent system (where unions are responsible for the distribution of unemployment insurance) and of centralized collective bargaining (organized at a national or industry level as opposed to local or firm level) have both been shown to give unions more bargaining power and to correlate positively to higher rates of union density.

Unions have enjoyed higher rates of success in locations where they have greater access to the workplace as an organizing space (as determined both by law and by employer acceptance), and where they benefit from a corporatist relationship to the state and are thus allowed to participate more directly in the official governance structure. Moreover, the fluctuations of business cycles, particularly the rise and fall of unemployment rates and inflation, are also closely linked to changes in union density.

Economic globalization

More recently, as unions have become increasingly concerned with the impacts of market integration on their well-being, scholars have begun to assess whether popular concerns about a global “race to the bottom” are reflected in cross-country comparisons of union strength. These scholars use foreign direct investment (FDI) and the size of a country’s international trade as a percentage of its GDP to assess a country’s relative degree of market integration. These researchers typically find that globalization does affect union density, but is dependent on other factors, such as unions’ access to the workplace and the centralization of bargaining.

Sano and Williamson argue that globalization’s impact is conditional upon a country’s labor history. In the United States in particular, which has traditionally had relatively low levels of union density, globalization did not appear to significantly affect union density.

Employer Strategies

Studies focusing more narrowly on the U.S. labor movement corroborate the comparative findings about the importance of structural factors, but tend to emphasize the effects of changing labor markets due to globalization to a greater extent. Bronfenbrenner notes that changes in the economy, such as increased global competition, capital flight, and the transitions from a manufacturing to a service economy and to a greater reliance on transitory and contingent workers, accounts for only a third of the decline in union density.

Bronfenbrenner claims that the federal government in the 1980s was largely responsible for giving employers the perception that they could engage in aggressive strategies to repress the formation of unions. Richard Freeman also points to the role of repressive employer strategies in reducing unionization, and highlights the way in which a state ideology of anti-unionism tacitly accepted these strategies

Goldfield writes that the overall effects of globalization on unionization in the particular case of the United States may be understated in econometric studies on the subject. He writes that the threat of production shifts reduces unions’ bargaining power even if it does not eliminate them, and also claims that most of the effects of globalization on labor’s strength are indirect. They are most present in change towards a neoliberal political context that has promoted the deregulation and privatization of some industries and accepted increased employer flexibility in labor markets.
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Union responses to globalization   

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 In the 1960s, 1970s, and 1980s, many governments in the West allowed corporations to smash the unions in the belief that spreading production over many nations will reduce cost. The families that control the multinational corporations moved manufacturing to low labor cost countries. The overall agenda of the multinationals is to create several common markets around the world. These common markets would control and manage worldwide production.

Regardless of the actual impact of market integration on union density or on workers themselves, organized labor has been engaged in a variety of strategies to limit the agenda of globalization and to promote labor regulations in an international context. The most prominent example of this has been the opposition of labor groups to free trade initiatives such as the North American Free Trade Agreement (NAFTA) and the Dominican Republic-Central American Free Trade Agreement (DR-CAFTA). In both cases, unions expressed strong opposition to the agreements, but to some extent pushed for the incorporation of basic labor standards in the agreement if one were to pass.

However, Frederick Mayer has written that it was precisely unions’ opposition to NAFTA overall that jeopardized organized labor’s ability to influence the debate on labor standards in a significant way. 

During Clinton’s presidential campaign, labor unions wanted NAFTA to include a side deal to provide for a kind of international social charter, a set of standards that would be enforceable both in domestic courts and through international institutions. Mickey Kantor, then U.S. trade representative, had strong ties to organized labor and believed that he could get unions to come along with the agreement, particularly if they were given a strong voice in the negotiation process.

When it became clear that Mexico would not stand for this kind of an agreement, some critics from the labor movement would not settle for any viable alternatives. In response, part of the labor movement wanted to declare their open opposition to the agreement, and to push for NAFTA’s rejection in Congress. Ultimately, the ambivalence of labor groups led those within the Administration who supported NAFTA to believe that strengthening NAFTA’s labor side agreement too much would cost more votes among Republicans than it would garner among Democrats, and would make it harder for the United States to elicit support from Mexico.

Jonathan Graubart writes that, despite unions’ open disappointment with the outcome of this labor-side negotiation, labor activists, including the AFL-CIO have used the side agreement’s citizen petition process to highlight ongoing political campaigns and struggles in their home countries. He claims that despite the relative weakness of the legal provisions themselves, the side-agreement has served a legitimizing functioning, giving certain social struggles a new kind of standing.
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Transnational labor regulation

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Unions have recently been engaged in a developing field of transnational labor regulation embodied in corporate codes of conduct. However, Robert O’Brien cautions that unions have been only peripherally involved in this process, and remain ambivalent about its potential effects. They worry that these codes could have legitimizing effects on companies that don’t actually live up to good practices, and that companies could use codes to excuse or distract attention from the repression of unions.

Braun and Gearhart note that although unions do participate in the structure of a number of these agreements, their original interest in codes of conduct differed from the interests of human rights and other non-governmental activists. They believed that codes of conduct would be important first steps in creating written principles that a company would be compelled to comply with in later organizing contracts, but did not foresee the establishment of monitoring systems such as the Fair Labor Association. These authors point out that are motivated by power, want to gain insider status politically and are accountable to a constituency that requires them to provide them with direct benefits.

In contrast, activists from the non-governmental sector are motivated by ideals, are free of accountability and gain legitimacy from being political outsiders. Therefore, the interests of unions are not likely to align well with the interests of those who draft and monitor corporate codes of conduct.

Arguing against the idea that high union wages necessarily make manufacturing uncompetitive in a globalized economy is labor lawyer Thomas Geoghegan.

Busting unions, in the U.S. manner, as the prime way of competing with China and other countries [does not work]. It's no accident that the social democracies, Sweden, France, and Germany, which kept on paying high wages, now have more industry than the U.S. or the UK.

That's what the U.S. and the UK did: they smashed the unions, in the belief that they had to compete on cost. As a result, they quickly ended up wrecking their industrial base.

Unions have made some attempts to organize across borders. Eder observes that transnational organizing is not a new phenomenon but has been facilitated by technological change. 

Nevertheless, he claims that while unions pay lip service to global solidarity, they still act largely in their national self-interest. He argues that unions in the global North are becoming increasingly depoliticized while those in the South grow politically, and that global differentiation of production processes leads to divergent strategies and interests in different regions of the world. These structural differences tend to hinder effective global solidarity. However, in light of the weakness of international labor, Herod writes that globalization of production need not be met by a globalization of union strategies in order to be contained.

Herod points out that local strategies, such as the United Auto Workers’ strike against General Motors in 1998, can sometimes effectively interrupt global production processes in ways that they could not before the advent of widespread market integration. Thus, workers need not be connected organizationally to others around the world to effectively influence the behavior of a transnational corporation.