Assault on Unions

In recent days I’ve come to think more about unions. I’ve been involved in a dialog on education hosted by Studentsfirst, an organization to reform education where much of the discussion revolved around the evils of teacher’s tenure and unions that support it. It turns out that the movement is applauded by the new Republican Governors along with organizations interested in privatizing education. My suspicion that this organization was a cover for an attempt to break up the public sector unions was supported by the recent events including those by the Governor of Wisconsin.

I have no direct experience with unions and have issues with some of their practices as I have come to understand them. Whenever it comes to economics and politics, I try to think of them in terms of Free Market Capitalism and who is selling and buying what and how are they trying to gain an advantage. So here is my attempt to try to understand the role of unions today and the consequence of eliminating them.

I tend to think of the market not as a single place but as several markets where in one are traded goods and services, capital in another and labor in the third. The basic premise is that everyone coming to the market is looking for the best deal they can get. The sellers want to get the highest price, the buyers (yes, we consumers are driven by the same self interest as the merchants) the lowest. So there are negotiations going on between the buyers and sellers and both are trying to influence policy. The role of government is to provide the currency and regulations so that the market can function without collapsing upon itself and in the quest of self interest the general good is coincidentally served. Each participant in the market is trying to convince the government, through lobbies, bribes etc., to pass laws that give them some advantage or avoid passage of laws that advantage their opponents.

In the market for labor, the buyers are the makers, miners and growers, the more affluent private individuals, the providers of services and the largest one by far, the government, federal, state and municipal. The sellers of labor are individuals who cover a wide range of skills and prices, from the maids in a homes or hotels, waitresses in restaurants, workers in factories, teachers in schools, lawyers and doctors who do not have a private practice, managers and CEOs of public companies and multi-million dollar athletes and entertainers. Over time there are shifts in the degree of advantage to buyer or seller depending on the changes in demand, however in almost all circumstances the buyer, business and government, have the edge over an individual worker. The buyers are in a stronger negotiation position because in the larger enterprises, private or public, they have HR staffs of professionals who study labor markets with skills to sell the enterprise for the best price to potential employees. They also have trade organizations and business organizations like the Chamber of Commerce or in the case of very large organizations, sufficient mass to influence politicians to enact legislation that favors buyers or more likely not pass any legislation favoring the sellers of labor. Unlike buyers, the individual seller of labor, the worker, does not have the clout to influence policy. Furthermore, in a standoff, the buyer has more resources to outlast the individual seller. (After all one needs to eat)

During the middle part of the industrial revolution, the buyers of labor had such a strong advantage and wielded it so ruthlessly that workers started to organize so as to be able to negotiate as a group and by virtue of organizing they were also able to start influencing policy. Gradually, through unions, their influence with government started to pay off and laws eliminating child labor and improving working conditions and safety started to come into being. Over the years union participation declined substantially (from 35+% to less than 7%). Laws were already in place to protect workers and the economy was growing creating adequate competition for labor that businesses’ advantage was felt less by many workers. Another reason for their demise is that unions had become very large and powerful and “power corrupts”. There was and still is, a strong effort on the part of the business along with its supporters, the Republicans, to discredit unions now focused on the public sector unions. Though factory worker participation has declined there are still unions representing entertainers, athletes, and writers among others, but they don’t have much mass.

The only unions remaining with enough membership to influence policy are the public sector unions representing government workers; teachers, police, firemen etc. These are the only things that stand in the way of all political influence going to the buyers of labor. In the last election, 7 of the top 10 campaign contributors supported the Republican Party candidates and the remaining 3, supporting the Democratic Party were public sector unions. So it is thought that eliminating unions is not an issue of collective bargaining and shifting the playing field between buyers and sellers of labor to the advantage of the buyer but more broadly to weaken the Democratic Party and turn the reigns of government over to the Conservatives.

There is a saying “when it rains lemons, make lemonade”. The political right, representing business interests, is using this recent economic downturn to further the advantage of their important constituency. There are exaggerated financial crises being exploited by the recently elected Republican Governors. Last Sunday Fareed Zakaria, host of a CNN show was interviewing Jamie Diamond, the CEO of Merrill Lynch-Chase. When asked about the risks brought about by the fiscal crises in the regional government, he responded saying that states have the ability to deal with the situation. He cited the example of California where he said the deficit is 1% of the States GDP and all it would take to mitigate the crisis is to raise the taxes by that small amount. The municipalities, however, have fewer options. These Conservative governors chose to respond to the “crises” not only by cutting back on benefits public employees have gained over the years but eliminate unions altogether. There is a concerted effort underway to totally eliminate, not only the ability of their employees to bargain collectively, but to argue their case for policies. This is evidenced by recent events in Wyoming, rhetoric from Governor Christy of New Jersey and the support an organization like studentsfirst is gaining from conservative governors and the business community. The public sector workers are vilified by the right, accused of being lazy, incompetent and overpaid.

Beside the normal desire to gain an advantage in seller/buyer competition, businesses feel that to compete in the global economy, the cost of labor represented by wages and benefits must fall. They fear that the public sector workers, who they argue cost more than the private sector workers (no evidence of this) through negotiations will maintain their standards and creating a “benchmark”, an expectation, for wages and benefits that the private sector will then need to meet. The obstacle to lowering the bar are the unions and their political supporters the Democrats. Somewhat as the campaign to vilify the Africans to justify slavery by plantation owners, businesses and their minions are vilifying the public sector workers. They are promoting the idea that somehow someone working for a living and living relatively comfortably is a bad thing for our society. I am afraid the idea is developing traction among the uninformed.

I believe with global competition in place, the demand for labor indeed has, and there is a reasonable probability for a period of time it will continue to decline and along with it the advantage of the buyers of labor, large now, will grow even larger. We are becoming more and more a Country with a dual social structure. You can see this even in the way businesses target their consumers. Fading is the store that catered to the middle class. They are being replaced by the Wall-Marts, for the poor and Neiman Marcus the wealthy. On TV you see more adds for BMW, Cadillac and Mercedes and the low-end Chevy and Ford. We are faced with a social problem caused by the widening gap between the haves and have-nots and the disappearance of the middle class. This gap is bringing with it a deterioration of our moral fiber and various forms of mental and physical illnesses. During this decline, depriving labor from bargaining collectively and arguing their case for policy will hasten and ensure the growing divide and all the accompanying ills.