Henry Ford used to say that he wanted his workers to have enough money to buy his cars. Our current business leaders seem to have forgotten that simple economic idea. That is why, for their own self-interest, business, and their Republican allies in Congress, should embrace broad unionization.
The sound you just heard is a retinue of CEOs letting out a collective shriek, clutching at their wallets and hearts and making it clear that anyone making this argument has lost their minds (or is perhaps a closet socialist!!!). But, unionization makes sound economic sense and is perhaps the best road out of the longer-term threat to the livelihoods of millions of Americans---and the smartest way to patch corporate bottom lines.
The logic is simple. The severe recession and the economic turmoil we are facing are, at heart, a logical outcome of a three-decade long wage depression. If wages had tracked productivity from the mid-1970s to now, the minimum wage would be over $19-an-hour, not the current $6.55 an hour. President Obama's campaign promise to raise the minimum wage to $9.50 by 2011 will still leave that wage at a poverty level, not a living wage.
Without any real increase in wages, consumers in the past 20 years have piled up debt upon debt. According to Demos, Americans overall credit card debt grew from $211 billion to $876 billion between 1989 and 2006. When credit cards were maxed out, they turned to their sole remaining economic lifeline: home equity. Demos estimates that homeowners sucked out $1.2 trillion in home equity, not for mansions and yachts, but for basic living expenses.
So, with credit virtually dried up, how will future consumer spending---which accounts for 70 percent of the economy---be financed? We are now facing perhaps several years, or maybe a decade, in which consumers will have to go through a painful unwinding of the debt morass they have sunken into--not because they were profligate but because they had no choice. I don't disagree that there is an important debate to have about how much we buy and whether we need all the stuff that gets piled up in our homes. But, the fact is, paychecks have been inadequate to cover the basic costs of life and, now, people simply have no money left--as the recent steep decline in consumer spending proves.
What does this have to do with unions? Union median wages are 30 percent higher than non-union wages across the economy, not to mention the better pensions and health care union members enjoy. Higher wages means people have money to spend. In the short-term, opposing unions might have left a few more shekels in the bottom line--partly to finance gargantuan pay, bonuses and pensions for a few executives. But, in the long-term, business shot itself in the foot: highly-paid executives can only buy so many flat screen televisions.
You would think that would be a no-brainer point worth remembering as we approach the anticipated pitched battle in Congress over the Employee Free Choice Act, which is labor's number one legislative priority. The bill would make for more fairer union representation elections and, as important, dramatically speed up the process to reach a first contract once workers choose a union. Candidate Obama pledged to sign the bill if it reached his desk. Inevitably, labor, and its allies, will spend a lot of energy and money, running entirely predictable and uncreative TV ads that speak only to the converted. The campaign will whip up a portrait of soulless, uncaring corporate chieftains fighting the legislation and denying basic workplace rights.
The business community has two choices. It can hang on to its ideological opposition to unions, and trot out the fear-mongering that unionization means saddling consumers with higher prices. It can spend billions of dollars to fight union organizing drives, create a war-like atmosphere at work, and, economically, keep workers (meaning, consumers) on a financial precipice and prevent them from opening up their pocketbooks and buying the products companies sell--while business executives hoard an outsized share of the company's resources for their personal enrichment.
Or, business can channel Henry Ford. I am suggesting a very easy psychological adjustment for corporate leaders: they do not have to travel a moral road to a new enlightenment about fairness and equity, and they can still take part in the country club chatter about the evils of unionism.
But, in the privacy of their offices, business leaders should be dispassionately non-ideological and do a little back-of-the-envelope calculation. Yes, having to deal with a union might mean sacrificing a little control and power and upper management might have a bit of a watchdog looking over its shoulder. Rather than passing costs on to consumers of modest wage increases likely to result from unionization, executives might have to let go of a bit of the large pay and benefits they now take home (in some companies, the pensions of a few executives equal the entire cost of pensions for thousands of employees),
But, a more broadly shared prosperity would likely mean a better bottom line. Put simply, people who make more money will buy cars, electronics, clothes, food and other stuff. And, at the end of the day, that might even make business leaders feel good, not just because they increased profits but simply because they opened the door to a slightly better life for their fellow citizens.
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