Unionization: A Private Sector Solution to the Economic Crisis

Unionization: A Private Sector Solution to the Economic Crisis

One of the most important solutions to the current economic crisis is a bill that, outside the labor movement and anti-labor business lobbies, almost no one has heard of: the Employee Free Choice Act, which would make it easier for American workers to form unions. The EFCA would not increase public spending by a cent or add a single bureaucrat to the federal government. It would not impose new regulations on business, nor would it dictate anything about the wages and benefits employers pay their workers. Yet it just might be the key to restoring the ability of American workers to attain a modest, middle-class lifestyle.

Beneath the credit freeze, beneath the distressed financial industry, and beneath even the collapse of the housing market lies the root cause of the frightening meltdown we are facing: thirty years of stagnant wages for the two-thirds of Americans who work for an hourly wage. While executive earnings have skyrocketed, and corporate profits and the Dow Jones Industrial Average rose handsomely (until recently) over the past few decades, average Americans have not participated in this prosperity. The decline in unionization, the export of jobs abroad, the increasing use of temporary labor, and the steady withdrawal of health insurance and pension benefits, have left workers too insecure to demand a fairer share of the pie. For thirty-plus years, we’ve witnessed a generation of Americans who are slowly slipping backward. Nor is this a problem of employees not working hard enough or intelligently enough. From 1973 to 2007, the productivity of American workers rose by 87 percent; but the average weekly earnings for nonsupervisory workers in the private sector actually fell by 5 percent.

The popularity of subprime mortgages has been described as an epidemic of irresponsible overreaching. In fact, working- and middle-class people were not deluding themselves into thinking that they could live like the rich folks on television. Rather, they were unable to afford even a simple home on what they were earning. Extreme debt and manipulated mortgages became the only route through which millions of people could buy a home.

The past few decades have witnessed the first generation of downwardly mobile Americans. Not only homeownership but health insurance, a reliable plan for old age, and even a full-time job have become unattainable for millions of Americans. This is not a generation of selfish materialists trying to live higher on the hog than their station in life warrants. It is, rather, a generation of Americans unable to reproduce even the modest lifestyle of their parents and turning to unsustainable debt and untenable mortgage terms as a last-gasp attempt to hold on to a modest standard of living.

Moreover, no one can point to an up-and-coming industry that’s likely to provide the millions of needed jobs anytime in the foreseeable future. Various innovations offer the promise of new products—nanotechnology, biotechnology, green energy—but as soon as any of these innovations reaches the stage of mass production, the jobs will be shipped overseas to wherever labor is cheapest. There is no new technology, no industrial innovation that can save us.

Even in the profitable industries that remain—construction, service industries, and those parts of manufacturing that for various reasons can’t be relocated—the past few decades have seen a radical departure from the formula that fueled economic growth between the end of the Second World War and the mid-1970s. For those decades, it was axiomatic that when corporate profits were growing, so were hourly wages. The rich still got richer, but everyone benefited from good times. More recent business cycles have seen rising corporate profits matched by increasing insecurity for the mass of employees. We still have large swaths of the economy where companies are profitable enough to pay a decent wage, and the jobs are not vulnerable to being shipped abroad, but even in these sectors workers increasingly can’t make a middle-class living.

Why can’t American workers make a decent living even when the companies they’re working for are pulling in healthy profits? There is more than one cause, of course, but the single biggest cause is the decline of unions. If you chart the growth in income inequality and the stagnation of real wages over the past thirty years, it follows almost exactly the decline in the percentage of Americans with union representation. And this correlation makes obvious sense: without the pressure of collective action, there is little reason for a company to share its wealth. Indeed, as the labor market has gotten worse over the past thirty years, employers no longer need fear the loss of talented people to competitors. In the non–college-educated, non-professional labor market—that is, the job market occupied by two-thirds of Americans—everyone is afraid to make any but the most minimal demands of their employer. Simply put, outside the shrinking share of workplaces where employees have unions, workers have virtually no means of guaranteeing that the rise of corporate boats will lift them as well.

As we look for any possible instrument that might restore the broad American middle class, there is nothing more important than enabling more employees to bargain collectively with their employers. Moreover, unionization is the perfect private sector tool to accomplish this mission. It is the opposite of the top-down, government-mandated standards so disliked by economists. It is the opposite of one-size-fits-all decrees. This is not the Department of Labor dictating what wages must be for workers in particular occupations. Economists typically decry such efforts by noting that it is impossible for central planners to take into account the differences between one worker and another, between small and large firms, or among the firms’ market strategies, and that the inevitable result of one-size-fits-all mandates is to crush many businesses.

Unionization is the opposite of all this. By simply giving employees the ability to negotiate terms of employment with their employers, unionization offers a supple, sophisticated, and infinitely variable tool for finding the level of compensation at which both can prosper. Union negotiations are perfectly suited to improve the workers’ standard of living while leaving the firm profitable and competitive.

Although business lobbies frequently raise the specter of unions’ driving employers out of business, there is no empirical basis for this fear—neither in the auto industry nor anywhere else. Nor is there any logic to it. No one is more concerned with the long-term viability of a company than the people who depend on it for their livelihood. In the worst-case scenario, if a company goes out of business, its owners are generally okay; they’ve lost money, but still have their homes, their cars, their health insurance, and money for their kids’ education. It is the employees whose lives are devastated. The notion that employees would insist on terms that force their employer out of business is ludicrous. Nor is it legally tenable. Federal labor law provides that, if an employer cannot afford what employees are proposing, the company must open its books and show the financial record proving that the union’s proposals are unaffordable. In times of recession, this is not an infrequent occurrence. There is not a single known case in which a union, after being shown that its proposals are not affordable, proceeded to strike over those demands.

We have already seen that union organizing tends to concentrate exactly where it makes most sense for the nation’s economy. Over the past twenty years, organizing has been increasingly focused in industries that share two attributes: they are sufficiently profitable to pay decent wages and benefits; and they can’t be moved abroad. Construction, health care, transportation, the service industries, and parts of manufacturing that for various reasons must remain in the country—these are the obvious places to concentrate our hopes for a revival of the American job market. And in all of them, the single most important factor in determining whether the jobs they provide can support a family at a minimally decent standard of living is the ability of employees to represent themselves in negotiating with their employer.

Enter the Employee Free Choice Act. EFCA does three things to make it easier for American workers to bargain with their employers. First, it mandates that, whenever a majority of employees sign statements declaring their support for a union, their employer is required to recognize the union and commence good faith negotiations. Under current law, employers have the option of recognizing unions on this basis, but are only required to do so following a workplace election supervised by the National Labor Relations Board (NLRB).

Second, the Act requires that if employer and employees reach an impasse in negotiations for a first union contract the matter will be settled by an impartial arbitrator. Finally, it establishes increased penalties for employer violations of the law, imposing treble back pay for the most egregious offenses.

The urgent need to rewrite federal labor law can be seen most clearly in the massive gap between the number of Americans who say they want a union in their workplace and those who have one. AFL-CIO polling data show that nearly sixty million nonunion American workers currently say they wish they had a union. Business lobbies dispute these figures; but even the most conservative business organizations estimate that twenty-five million nonunion workers say they want a union. This desire is unsurprising, because the total compensation of unionized employees is about 30 percent higher than nonunion workers in similar industries and occupations. But only about half a million jobs become newly unionized each year. Depending on whose figures one chooses, then, there is a gap of between 24.5 million and 59.5 million Americans who want a union but can’t get one.

The single most important barrier preventing these workers from realizing their desire to be unionized is the system of workplace elections, administered by the NLRB, which private sector employees must go through in order to win union recognition.

What’s So Bad about the Election System?

When people hear there’s something called “union elections,” they assume it must work more or less the same as elections to Congress. Unfortunately, the NLRB system more closely resembles the “election” system of the old Soviet bloc or the discredited practices of rogue regimes than anything we’d recognize as American democracy.

Defenders of the NLRB system focus on its use of secret ballots. But secret ballots alone do not guarantee that an election is free and fair. After all, even Saddam Hussein used secret ballots. Indeed, all three of the “axis of evil” countries use secret ballots. Under U.S. law, for an election to be democratic, it must meet a series of standards above and beyond the secret ballot, such as equal access to the voters by both parties, equal access to media, free speech for both candidates and voters, and protection of voters from economic coercion. Our government regularly condemns elections abroad as undemocratic even when there’s no question that they ended in a secret ballot, because they violated these other fundamental norms. Unfortunately, the NLRB system fails every single one of these norms. Opponents of the EFCA are spending tens of millions of dollars to lock American workers into a Soviet-style election system that we don’t tolerate for voters anywhere else in the world. A few of the most egregiously undemocratic aspects of the NLRB system include

When the National Labor Relations Act was first enacted in 1935, its authors explicitly intended it to introduce a measure of U.S.-style democracy into the workplace. That intention has never been realized. Indeed, if foreign elections were held by NLRB standards, the U.S. government would deem them undemocratic. In 2002, for example, the State Department condemned elections in Ukraine for failing to “ensure a level playing field”—employees of state-owned enterprises were pressured to support the ruling party; faculty and students were instructed by their university to vote for specific candidates; and the governing party enjoyed one-sided media coverage, while the opposition was largely shut out of state-run television. Every one of these practices is completely legal under the NLRB. Effectively, then, the government has demanded higher standards of democracy for voters abroad than for Americans in workplaces across the country.

NLRB defenders insist that it represents the “gold standard” of democratic process because it ends in a secret ballot. The truth is that NLRB elections make a mockery even of the secret ballot by allowing employers to detect how employees are voting before they ever cast their ballots. In federal elections, voters cannot be forced to engage in conversations designed to make them reveal their political preferences. But in NLRB elections, management consultants train supervisors to repeatedly grill their subordinates in what they term “eyeball to eyeball” conversations aimed to uncover their feelings about unionization. Employees cannot refuse such conversations, but very few can go through them without revealing how they stand. As a result, management consultants report that they are often able to predict vote totals with remarkable accuracy. Such practices, illegal in federal elections, undermine the very meaning of the “secret ballot.”

EFCA does not, in fact, do away with NLRB elections. If 30 percent of workers call for an election, one will be held—the same as under current law. The EFCA simply gives employees a choice as to whether they prefer that process or simply want to establish a union by all signing cards. Both those methods of establishing a union already exist under current law. But currently, it is the employer who has the power to choose among them. The primary change created by EFCA is to put that choice in the hands of employees.

Thus, apart from the economic imperative of enabling more Americans to bargain with their employers, there is a critical need to pass the law in order to restore reasonable democratic standards to the workplace.

Business lobbies like to cast themselves as defenders of workers’ rights. Are we really supposed to believe that what keeps corporate lobbyists up at night is fear for the democratic rights of their employees? Even in a culture that’s gotten used to an appalling level of misinformation in political discourse, this may be the biggest lie of all. Companies that would never dream of asking their employees to vote on cutting health and pension benefits or on whether jobs should move to China, now want us to believe that the top priority on their agenda is securing democracy in the workplace. In fact, of course, these employers want nothing more than to force employees into sham elections that corporations are almost guaranteed to “win.” And in this case, the essence of “winning” is guaranteeing that workers will never have a chance to vote in any form about what proposals they want to offer management. A union is the only institution in which workers vote on anything or through which they have any say whatsoever over the policies that govern the workplace. The goal of anti-union business lobbies is not to promote workplace democracy but to abolish it.

This is not a secret. Whatever the business spokespeople may proclaim before Congress, what they say among themselves is more revealing. Management-side labor attorneys and consultants throughout the country are very open about the fact that they seek above all to prevent workers from gathering enough signatures to trigger an NLRB election. For example, attorneys from the Jackson, Lewis firm—perhaps the biggest management-side labor law firm in the country—advise their clients that “winning an NLRB election undoubtedly is an achievement; a greater achievement is not having one at all!”

Opposition to Unions

Recently, corporate spokespeople have come out with a new, and more honest, rationale for opposing EFCA: they just don’t want more people in unions. “A fast-moving, successful tech company with differential compensation and incentive compensation and the need to adapt quickly is inconsistent with the straitjacket of a union environment,” explains Consumer Electronics Association president Gary Shapiro. “The tech industry executives I represent simply can’t believe Congress would enact a card-check law that could force jobs overseas.” Shapiro’s is not really an argument against EFCA, but against the right to unionize at all: the country can’t afford more people with union representation. This argument has become increasingly commonplace as business lobbyists and their Republican allies line up for a legislative fight that the Chamber of Commerce has vowed will be “Armageddon.”

In testimony before Congress this past January, multimillionaire Mitt Romney argued that the Employee Free Choice Act “is an idea that would have devastating impact on the economy…. It would lead…. jobs to relocate elsewhere…. [Majority sign-up] is a very bad idea under any circumstances. In these circumstances, it would be calamitous.” What Romney is saying boils down to this: the last thing we can afford in this moment of economic crisis is more Americans with health insurance and pensions.

The claim that raising employment standards will drive companies out of business or out of the country is now at the heart of business opposition to the Employee Free Choice Act. History suggests, however, that we should be skeptical of such claims. The Chamber of Commerce, National Association of Manufacturers, and others leading the fight against EFCA have sung the same song for a hundred years. At every step of improvement in the workplace—the abolition of child labor, the creation of the eight-hour day, the establishment of the minimum wage—these lobbies warned that making workers’ lives better would render their employers insolvent.

The NAM denounced the outlawing of child labor as a “monstrous proposal,” slamming it for proceeding on the “absurd assumption that Congress will be more tenderly concerned for children than their own parents.” When Congress took up a bill to mandate the eight-hour day, the Association likewise declared its “unrelenting opposition to this vicious [and] preposterous proposition.” “Shorter hours,” argued the NAM, “increases the cost of living, raises taxes, [and] creates a condition for [workers] that is really worse than it is for the manufacturers.” In 1911, when the State of Washington proposed to mandate an eight-hour day for women only, the Spokane Chamber of Commerce insisted that even this modest step would lead to a business exodus and hard times for all. The establishment of the minimum wage in 1938 elicited similar warnings.

We have heard the same tune from employer lobbies for one hundred years. If we had listened to them earlier, we would still have eight- and ten-year-olds working industrial jobs and the rest of us toiling for twelve hours a day. On the eve of signing the Fair Labor Standards Act, Franklin Roosevelt explained his contempt for these arguments. “Do not let any calamity-howling executive with an income of $1,000 a day,” the president warned, “tell you…that a wage of $11 a week is going to have a disastrous effect on all American industry.”

FDR’s response to the Mitt Romneys of his day is the same one we should give to the executives who are now spending tens of millions of dollars to avoid negotiating with their employees. Because Romney has it exactly backward: the most pressing thing we need at this moment of economic crisis is for more Americans to have the freedom to bargain for health insurance, pensions, and a living wage.

Michael Payne is the pen name for Gordon Lafer, who is an associate professor at the University of Oregon’s Labor Education and Research Center.