January 25, 2009
Will the Decline in Union Membership be Reversed?
Will the Decline in Union Membership be Reversed? Becker
Unions strongly supported President Obama during the presidential race, and naturally they expect some pay back. A first step would be passage of the so-called Employee Free Choice Act that was supported by both President Obama and Vice-President Biden when they were in the Senate. This act would provide, among some other things discussed by Posner, public voting by employees on whether they want to form a union. I do not like public voting since workers might then be intimidated into voting in favor (or against) a union. Secret voting gives a truer picture of worker attitudes toward unions. While public voting and other pro-union legislation would tend to increase the number of union members, the economic and social forces are aligned against any major comeback by unions.
Union membership has been declining ever since 1954 when it peaked at 28% of total employment -unions' share of nonagricultural employment was then 35 %. During the subsequent half century the union share declined more or less continuously, and now is only about 11%. A mere 7% of private sector employees are unionized. The one bright spot in the union picture is the growth in their share of government employees to about 37%. The overall decline in union membership is seen also from its sharp decline with the age of individuals: the union share of workers is highest among those aged 45-64 at almost 15%, which significantly exceeds the 11% for workers aged 25-44, and the only 5% union share for workers under age 25. Older workers are more likely to be in declining more unionized industries,while younger workers are in the newer less unionized sectors.
The development of what is essentially a non-union private sector of the American economy is due to basic economic and social forces, not to the politics of Congress and the President, for union membership declined under Democratic as well as Republican administrations. The decline of jobs in manufacturing and in heavy industries, like steel and autos, clearly contributed to the overall decline in unionization since large manufacturing companies have been more unionized than other companies. The shift of jobs to smaller service-sector firms has also had a big impact since unions have been unimportant in these firms; also significant was the deregulation of the communications, transportation and utilities industries.
The degree of unionization within each private sector has also fallen greatly, as can be seen from the rapid growth of non-union workers in the automobile sector, particularly among foreign carmakers who produce in the South. For example, membership in the United Automobile Workers union (the UAW) has declined by more than one-third since 1970 as a much larger number of cars were imported from Japan and other countries, and as foreign companies set up mainly non-union plants in the Southern part of the US.
The growth of imports and the shift of employment overseas also have adversely affected the power of unions since international competition from cheaper producers has eroded the ability of unions to raise earnings of their members. In the early days of the unionization movement, unions sometimes increased worker security by providing health and retirement benefits and payments to unemployed union members, and often enforced fair and non-discriminatory rules about discharge and promotions. Non-union companies and governments are also now offering health and retirement benefits, and they have codified their personnel relations, which also considerably reduced the advantages of being in a union.
These forces apply to other developed countries as well, and many of them, especially Anglo-Saxon countries like Great Britain and Canada, also have had large declines in union membership. The declines in union numbers is much less in some countries, like Sweden and Norway, where governments enforce large scale bargaining between unions and employer confederations. But even in these countries, globalization has severely constrained the economic power of unions.
From the 1930s to the 1960s, unions enjoyed considerable popularity in public opinion. I remember being surprised when a graduate student to hear the arguments by Milton Friedman and some of my other teachers that unions were often monopolies that benefited their members at the expense mainly of other workers. As various arguments hostile to unions became more common during the past half-century, public opinion shifted against unions. Unions are considered too selfish, sometimes corrupt, as with the well-publicized troubles of the teamsters union, and they are no longer believed considered necessary to protect employee interests.
Given this radical shift in public opinion, and the fundamental economic and social forces that contributed to the decline of unions, it is unlikely that the new Congress and new President would push for radical pro-union legislation, despite the impressive victory in the past election of the Democratic Party, and the strong financial and other support the larger unions gave to this party.
The Employee Free Choice Act--Posner
In 2007, the House of Representatives passed the Employee Free Choice Act, a law to promote unionism. The bill failed in the Senate because of Republican opposition. Obama in his presidential campaign urged passage of the bill, and with greater Democratic control of the Senate as a result of the recent election there is a good chance that it will be passed, though not a certainty in view of the fierce opposition of the business community and the Republican senators, who could filibuster the bill; but the Democrats might persuade enough of those senators to defect, to have enough votes to shut down the filibuster.
The Act would do three things. The first is strengthen the very weak machinery for enforcing the prohibition in the National Labor Relations Act (the Wagner Act) of unfair labor practices, such as employers' discriminating against employees who support unionization. This part of the Act is uncontroversial. The second thing the Act would do is dispense with the requirement of a secret election to determine whether the employer must recognize a union as the representative of his workers (more precisely, of a "bargaining unit" consisting of workers having similar jobs; a large employer might have a number of such units). Recognition means that the employer must try in good faith to negotiate a binding collective bargaining agreement with the union that will specify terms and conditions of employment. The Act would require the employer to recognize the union if the union obtained signed union-authorization cards from a majority of the workers in the bargaining unit. This is the most controversial provision of the bill. The remaining provision, which is also controversial, would require that if within a specified period (including a period for mediation) union and employer could not agree on the terms of a collective bargaining agreement, their dispute would be submitted to binding arbitration. The arbitrators would thus determine those terms.
The card-signing provision would undoubtedly make it easier for unions to organize companies in which there was considerable union support but not quite enough to assure victory in a secret-ballot election. Supporters of unionization are likely to feel more strongly than opponents, and so will be more likely to exert pressure on waverers to sign cards than opponents will be to exert pressure on them not to sign. Compulsory arbitration would also promote unionization, and perhaps more so than the card-signing provision of the Act. It would eliminate the costs of striking against a stubborn employer, and would appeal to workers because an arbitrator could be expected to be more generous in setting terms and conditions of employment than the employer, though there will be cases in which a union could extract more from an employer by striking or threatening to strike than an arbitrator would be likely to give it.
I doubt that the Act would have a great effect on unionization. Unions have been in steady decline in the private sector for decades and now account for only about 7 percent of nonfarm workers in that sector (farm workers are not covered by the National Labor Relations Act). Elaborate government regulation of workplace safety and health has reduced the value of unions to workers, as has greater job mobility and the increasingly technical and individualized character of many jobs, which makes it difficult for workers to agree on the terms and conditions of employment that they should be seeking. International competition has reduced the power of unions to extract supracompetitive wages, benefits, or work rules, as has the deregulation movement, which has made the formerly regulated industries, such as transportation, more competitive. Unions have little power in a competitive industry, because a supracompetitive wage, by increasing the employer's cost, will shift his output to competitors. We are seeing this happen in the automobile industry, where union intransigence has been a factor in the decline of the Detroit automakers, now on federal life support.
These economic forces will not be changed by passage of the Employee Free Choice Act, and so the Act's effect on unionization and therefore on the economy will probably be marginal. But whatever the magnitude of the economic effect, that effect will be negative. This is not because all unionization is bad. One should distinguish between nonadversarial unionism and adversarial unionism. In nonadversarial unionism the union recognizes that it is in partnership with the employer and focuses on activities that are supportive of rather than antagonistic to the efficient operation of the company. These activities include protecting workers from abusive supervisors and coworkers, forwarding the concerns of workers to management, assisting workers to obtain skills necessary for their advancement, providing social amenities, interpreting management to the workers, and, in short, mediating between the workforce and the management. One might think that these are functions that the employer itself could perform, and often this is true. But an independent union (company unions are forbidden) may have a degree of credibility with the workers that the employer lacks and may reduce agency costs by monitoring the behavior of supervisors over whom the employer has limited control.
The Act will not promote nonadversarial unionism, because an employer will not resist being unionized by a union that will make his company operate more efficiently. It will promote, though one hopes to only a limited degree, adversarial unionism, illustrated by the relation between the United Auto Workers and the Detroit automakers. The union is determined to squeeze the companies for all it can get for the shrinking number of workers employed by the companies--the union being responsible in significant part for the shrinkage. Adversarial unionism is also conspicuous in education. More of that we do not need.
We especially do not need an uptick in adversarial unionism during what increasingly appears to be a depression. The fact that Democrats in Congress should be pressing for a revival of the union movement at this time indicates a lack of understanding of the economics of depressions. A depression involves a severe reduction in output, resulting in a reduction in inputs, including labor inputs: hence increased unemployment. Adversarial unions increase unemployment, by obtaining wage increases that reduce employers' output by increasing labor costs. A similarly incoherent New Deal program of fighting depression combined sensible measures like going off the gold standard, expanding the money supply, and increasing employment by public-works programs with output-restricting programs like the National Industrial Recovery Act, which encouraged the formation of producer cartels, the Agricultural Adjustment Act, which curtailed agricultural output in order to raise farmers' incomes--and the National Labor Relations Act (the Wagner Act), which encouraged the formation of workers' cartels: adversarial unions such as the United Auto Workers. Some economists believe that such measures prolonged the depression. They certainly did not shorten it.