THE BLOG

Unions Labeled. Workers Trapped.

03/18/2014 01:41 pm ET | Updated May 18, 2014

The beating that the UAW took in the election at the Volkswagen (VW) plant in Chattanooga, Tennessee a month or so ago was nothing compared to the beating that unions took before and after that defeat.

In the good old days of organized labor, it was "look for the union label." In these extremely trying times for them, it is look at the unions being labeled. In our opinion, this is bad for the American worker and the American economy.

We'll explain why later in this blog. Let us begin, however, by examining some of the discussion leading up to and following the 712 to 626 employee vote not to unionize the VW plant in Chattanooga.

In Tennessee, much of the business and political community from inside the state and around the country united to fight against the UAW. On the political front, federal and state elected officials voiced concerns about the negative impact that unionization would have on the plant's competitiveness and Tennessee's business climate.

Specific assertions included: Auto suppliers would not come to Chattanooga if they would be close to a unionized plant; VW would not expand the plant to produce its new mid-size sport utility vehicle if the plant went union; and, the state legislature was not likely to support future subsidies to a unionized VW.

On the business front, a group put up a billboard stating, "Auto Unions Ate Detroit. Next Meal: Chattanooga." The National Right to Work Committee brought legal challenges against the UAW's organizing activities and Grover Norquist's Center for Worker Freedom weighed in as well against the labor union.

This show of force on multiple fronts carried the day for those with anti-union positions. It wasn't just the staunch opposition that led to the UAW's defeat, however, according to Robert Samuelson of the Washington Post.

After citing other causes such as "the South's anti-union tradition" and political and conservative opposition -- Samuelson asserts, "But the deeper cause is simpler. Private sector unions can no longer provide big benefits to members."

We partially concur with Mr. Samuelson's assessment. Private sector unions can no longer deliver or guarantee the same benefits to workers that they once did.

Witness the Boeing contract settlement with members of the International Association of Machinists in Seattle at the beginning of this year and the Caterpillar settlement in Joliet in the summer of 2012. In both cases, the membership voted against their leadership to approve contracts.

The Boeing workers did so by a narrow 51-49 percent vote after overwhelmingly rejecting a similar contract proposed in November. After that earlier vote, Boeing solicited proposals from states around the country to site its new 777X plant within their boundaries and received responses from 21 of them. It also sweetened the pot a little bit for employees in terms of benefits coverage and pay progression.

Nonetheless, the contract which the Boeing union members approved for the next eight years contained significant concessions including: effectively ending workers defined pension benefits, cutting retirement benefits, reducing healthcare insurance benefits and lowering entry level wages and slowing pay growth over time.

The concessions that the Caterpillar workers agreed to resembled those at Boeing: a six year wage freeze for employees hired before 2005, a pension freeze for the senior two-thirds of the workforce and a "steep increase" in the portion of the health care insurance to be paid by workers.

As one looks at this, there is no question that because of current economic conditions and a variety of other factors, unions today have much less influence than they used to have. The question becomes would workers be better off if there were no unions -- or something like them -- to try to level the playing field in terms of how economic rewards and benefits are shared by and within organizations.

The answer to that is incontrovertibly no. The overriding reason for this is a simple and straightforward fact -- on average, workers in union companies earn more and have better benefits than those in non-union businesses.

A Bureau of Labor Statistics study in March 2011 showed that private sector union workers' wages averaged $23.02 per hour compared to $19.51 per hour (a difference of $3.51) and the union worker received total benefits costing $14.67 per hour compared to $7.56 for a non union worker (a difference of $7.11). The combined hourly difference between a private sector union worker versus a non-union worker is $10.62 per hour, or almost $85 per eight hour day.

The other compelling reason is that without some form of representation, workers must bargain as individuals with those who have considerably more power and resources than they do over how organization wealth will be distributed. They are trapped. As an example of this, consider the following.

Lydia B. DePillis, writing for the Washington Post after the Chattanooga verdict observes:

The biggest fallout from the loss, however, isn't for the workers who already have jobs at the German-owned plants. Rather, It's the ones who work at places such as the Nissan plant in Smyrna, Tenn., which has gradually been replacing its full time positions with temporary jobs that pay much less and grant no sense of stability. The UAW lost a vote there in 2001...

Those workers in Smyrna are part of the new normal for employment in the United States. According to Challenger and Gray & Christmas's annual Labor Day Outlook released in 2013, "It is estimated that 1 in 3 Americans are considered contingent workers...By 2020, some forecasts have the portion of contingent workers rising to 50 [percent]."

We would like to think that all those who run organizations are committed to "doing the right thing" and to sharing the pieces of the organizational pie in an equitable manner with the members of the workforce whether they are part or full time, union or non-union. Unfortunately, there are too many examples from across the United States and around the world of businesses of all sizes and in all industries providing substandard wages, benefits and working conditions to support that construction of reality.

American unions came into existence and gained traction and bargaining power because they were a necessity to create balance in an economic system that was out of balance. We have similar circumstances today.

Companies with record profits are shedding jobs, shrinking wages and benefits, and distributing wealth disproportionately. Workers are caught in a vice. They are feeling the pain and getting very little -- if any -- of the gain. It is once again a time of necessity.

In spite of this, we do not expect to see an overwhelming renaissance of the traditional union movement. The big unions have been labeled and are seen as part of the problem. Private sector unionization in 2013 was below seven percent.

What we do expect is for a whole new breed of "representation" to emerge to advance the concerns and causes of the worker. That representation will take a variety of forms ranging from workers' councils of the type that Volkswagen wanted in its plant in Chattanooga to workers' cooperatives, such as those operated by the Mondragon Corporation.

It will also include approaches, such as nonprofit groups that are not unions organizing low wage workers, and coalitions of interest groups collaborating to achieve collective bargaining through ballot measures on items such as increasing the minimum wage and health care coverage.

We need these new measures to be successful in order to extricate the American workers from their current trap in this time of great necessity. As the saying goes, necessity is the mother of invention.

We need American innovativeness now. What we do not need is to label unions and to blame them solely or primarily for the deterioration of the Detroit automotive industry as those with ideological blinders have done and will do.

There is more than enough blame for that to go around as David Halberstam points outs in his masterful book, The Reckoning, written in 1986 about the seismic confrontation between America and Japan in the automotive industry during the 70s and 80s.

In his book, Halberstam states that, based upon five years of extensive research, he found "huge systemic problems" at all domestic manufacturers. The contributors to those problems included executives, managers, interpersonal relationships, business models -- and, yes, unions.

We are in a pivotal period -- a time of a new reckoning. If we continue to address this time by "labeling" and "trapping" rather than by finding ways to cooperate and collaborate in pursuit of some kind of common good that reckoning will be for America and the American dream.

We are close to that reckoning. We ignore it at our nation's peril.

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