On Labor Day, we honor the American labor movement and the contributions that workers make to the strength and well-being of the country. It’s been more than 80 years since Congress passed the National Labor Relations Act (NLRA) guaranteeing the right of private-sector workers to unionize and bargain collectively for better pay and working conditions.
Today, the NLRA still governs the relationship between organized labor and employers—but in 2015, less than 10 percent of American workers belonged to a union. That’s down from nearly 40 percent in the 1950s. With economic competition from overseas and technological innovation changing the value of physical labor in the United States, maybe it’s time to rethink the American model of labor relations.
Oren Cass joins Brian Anderson to discuss labor unions, past and present, and to offer an alternative model for organized labor. This 10 Blocks episode is the third based on City Journal’s special issue, The Shape of Work to Come. The discussion draws on Oren’s essay, “More Perfect Unions.”
Oren Cass is a senior fellow at the Manhattan Institute, where he focuses on issues ranging from welfare to climate change. Previously, he was domestic policy director of Mitt Romney’s 2012 presidential campaign.
Audio Transcript
Brian Anderson: Happy Labor Day to all our listeners. I am Brian Anderson, the editor of City Journal. It has been more than 80 years since Congress passed the National Labor Relations Act, guaranteeing the right of private-sector workers to unionize and bargain collectively for better pay and working conditions. During the booming post World War II manufacturing years, millions of industrial workers were represented by labor unions for the purpose of setting pay and work conditions. The unrest of the 1930s was largely left behind as labor and industry worked together in at least relative harmony. Since the 1970s, changes in the economy and the emergence of foreign competition have drastically changed the market for American labor. In 2015, fewer than 10% of U.S. workers belonged to a union. That was down from nearly 40% in the 1950s. Today’s labor unions are still based on a model of industrial relations that dates back to the Depression and even earlier. Does this old model of labor in perpetual contention with management over basic standards still apply, still make sense in the modern economy? Maybe it is time to rethink how labor organizations operate. Joining us on the show today to talk about that is Oren Cass. Oren’s essay for the special Shape of Work to Come issue of City Journal is called “More Perfect Unions.” It’s subtitle, “Organized labor’s adversarial approach has failed workers and society: it’s time for a new model.”
Hello, I am City Journal editor Brian Anderson. Thanks for joining us for the 10 Blocks Podcast, featuring urban policy and cultural commentary with City Journal editors, contributors, and special guests.
Joining us now is Oren Cass. Oren is a senior fellow at the Manhattan Institute, where he focuses on issues ranging from welfare to climate change. Before joining the institute, he was the domestic policy director of Mitt Romney’s 2012 presidential campaign. Oren, thanks for joining us.
Oren Cass: Thank you so much for having me.
Brian Anderson: It has been nearly a century and the National Labor Relations Act, which was signed in 1935, still governs how unions are organized in the United States. It certainly shaped the relationship between workers and employers over the years. Could you give us a brief overview, Oren, of the law and what exactly it does?
Oren Cass: Sure. So, the National Labor Relations Act provides a framework for workers to organize together into unions and then negotiate with employers. What that tends to mean in practice is that a national union will go to a company and try to persuade a majority of the workers there to vote to unionize. If a majority of the workers vote that they want a union, then that union becomes their representative and negotiates on their behalf with the employer. And, so, then there are a variety of provisions governing exactly how the employer and the union negotiate and whatever agreement they come to then governs all of the employees who are part of the union in the terms and conditions of their employment.
Brian Anderson: Now, the purpose of your essay is to recommend reforms to organized labor or how we think about labor as well, but before we get to that, which is the heart of your essay, maybe you could describe how American labor unions operated during their peak years, which would probably be the 1950s, and what has happened since and where labor unions are today in 2017.
Oren Cass: Sure. So, you know, if you think all the way back to 1935, you were at the height of the Great Depression, American workers had been pushed to the brink, you had violent labor struggles going on, and so the National Labor Relations Act really was something that benefited all sides. It created a framework to bring everyone to the table and then to allow employers and workers to agree on basic terms and conditions. You know, things like how many hours they should be working, what sorts of benefits they should receive, what sort of protections they would have. And that became a system, particularly, as you said, in the 1950s, where, really, an entire industry would reach an agreement about that. And, so, you would actually end up with agreements that were very generous to workers, but that the employers were okay agreeing to because they didn’t have any competition. So, if all of the Detroit automakers agreed to provide very generous pay and benefits to all of the autoworkers, that didn’t really affect them competitively. It just meant that they all raised their prices together and they could all still earn a comfortable profit. So, the companies did alright. The workers who were now receiving the higher pay and benefits did very well. Really it was the consumers who would lose out, but of course many of those consumers were union members and if you weren’t, then all the more reason to join a union. Obviously, what has happened since then is two very important trends. One is globalization, which has opened up competition in these industries to areas that are not governed by these agreements, so the three Detroit automakers may agree on generous pay packages, but if the Japanese and Korean automakers don’t, then you can’t just pass that on via price increases. And the other is a very different role for government regulation in the employment setting. So, really, everything that you would have expected unions to negotiate about back in 1935 is now codified in federal law. In fact, the protections for everything from health and safety, to benefits, to hours and wages for the most part goes way beyond what workers would have asked for in the past. And, so, that creates a very strange dynamic where if the two sides sit down to the table, on the one hand, unions still have to find something to deliver to their workers, and those are going to be things that are ever more expensive for the employer to provide, and on the other hand, employers are less able than ever to afford to make those kinds of concessions. And, so, an adversarial relationship that was setup to really strike bargains that could benefit everybody, as you said, a century ago, really does not create those incentives today and instead produces a great deal of frustration, a great deal of conflict, and agreements that might benefit or be tolerable to existing management and existing workers at a moment in time but end up positioning everyone very poorly to prosper in the long run.
Brian Anderson: These days I think the number is under 10%, around 10% of U.S. workers belong to a union. That is down from, I think, 40% in the 1950s, so it has been a significant decline.
Oren Cass: Yeah, that’s right. I think the height was about 36% and it is even lower than 10% now. You know, one thing that is striking is that unions have increasingly become a public sector phenomena, because, of course, there you still don’t have any competition, so government can strike a deal with its workers and then pass that along to taxpayers, whereas in the private sector it is down below 7% of the workforce is unionized at this point, and it is especially striking in manufacturing. You know, people who support labor in its current form will say well, this is declined because you know, things like manufacturing have declined. But, in fact, manufacturing employment for non-union workers has gone up in recent decades, whereas manufacturing employment for union workers has completely collapsed. And, so, it seems more like it is the unionizing that is not sustainable, not the manufacturing.
Brian Anderson: You mention in your essay that the Volkswagen manufacturing plant in Chattanooga, Tennessee, became the modern Waterloo for organized labor just a few years ago in 2014. What happened there?
Oren Cass: Yeah, so the situation there was very interesting because, you know, you have automakers in Detroit who are unionized, but then a lot of foreign automakers who have opened plants in the southern United States are not unionized. And so that has provided some significant competitive advantages for them. Volkswagen was in an interesting position because in Germany they are used to dealing with unions. They have a very different system of organized labor, and they think it works quite well, and they wanted to be able to have that kind of relationship with their workers in the United States. So, they actually teamed up with the union to try to coordinate a campaign that would persuade workers to join the union. And, so, you had the, both the employer and the union campaigning on the same side for a couple of years, and yet, when everybody came together and voted, the employees still said no. And so it provided this very stark reminder that while labor organizers will say this is a problem of choice, that workers really want to unionize and employers stand in their way, in fact you saw that that wasn’t the case. It was the union organizers wanted to organize, but workers, no matter how positive a story you told them, understood that it just wasn’t the right choice for them.
Brian Anderson: And why are workers reaching that conclusion? What has made unionization less attractive?
Oren Cass: Well, I think what they have seen is what happens in the long run to organizations that are unionized. You know, when a union comes in and strikes a deal with an employer, it might provide higher wages and benefits and so forth to workers in the short run, but if you are thinking about what that is going to mean for the company where you want to work, it is going to mean within that company that the company is likely to do better, achieve higher profits, make more investments in areas where it is not unionized. If you are thinking across the industry, it is likely that companies that are not facing those pressures are going to do better than yours. And then even if you are thinking globally, it is likely that competitors in other countries entirely are going to do better than you do. And, so, what you see over time is that you might have struck a good initial deal, but the employment opportunities aren’t there in the long run, it is not as good for your broader community, it is not as good as for your own upward mobility. And what seemed like a good deal on day one might mean a layoff five years later. And, so, as people have seen that unions don’t deliver the goods, while they do setup very adversarial relationships with management, while they do collect union dues that are a significant chunk of paychecks, especially for working-class households, it doesn’t turn out to be such a good bargain.
Brian Anderson: Your essay goes on to propose a series of very substantial reforms to how unions would function, or how labor organizations would function in the future. Could you talk a bit about your idea of labor co-ops and what the reforms specifically are that you would like to see implemented?
Oren Cass: Yeah. You know I think something really unfortunate has happened politically in the United States, which is that as big labor has waned as an economic force it has become a political force. It is a means by which funds from union members who are really fairly representative of Americans politically, all that money, then goes almost exclusively to Democrats. And, so, Democrats have shown a very strong interest in keeping the existing system in place, and Republicans, on the flipside, have said they are happy to see it wither. And that is a really missed opportunity, because there’s nothing inherently partisan or counterproductive about the idea of having workers organize. We should want workers to be able to organize together, to provide mutual aid to each other, and to represent their interests collectively. And we actually have models of that working very well, particularly in Europe. You know, I’m certainly not one to look across the Atlantic and say wholesale that we should adopt models that they have there, but we should certainly be open to things that they are doing that seem to make sense. And one that they have in particular is their approach to labor, which is that instead of organizing within a company as I described, where you have a vote and if the majority of your employees vote yes then you are now a unionized company. The unions actually exist independent of companies. So, unions are organizations of civil society that workers join voluntarily because they recognize that they provide benefits, and those organizations are then able to collaborate with employers in a way that benefits everybody. The idea is not to essentially equip workers with this power within the workplace to claim benefits from the employer. The idea is to actually find ways to create value that wouldn’t exist in the absence of the relationship. And, so, I think that’s something that certainly makes a lot of sense, both economically and politically, and that could absolutely work in the United States and could provide a lot of benefits, particularly to some of the conditions and challenges that we are facing in the economy today.
Brian Anderson: Could you elaborate a little bit on that, such as your thinking of retraining workers and educational programs?
Oren Cass: Yeah, sure. So, you know, I guess there are a number of things I would list. One is these what I would call these co-ops can actually be very good mechanisms for providing social support in terms of social insurance programs like unemployment insurance, disability insurance, even healthcare. They are a logical purchaser of group insurance. And so, you know, right now we already have a system where the states administer that system for the federal government. You could actually push it further to the point where organizations led by workers are responsible for administering that, supported in part by the dues that their own members pay. And, so, it truly does become a form of social insurance. A second, like you mentioned, is job training. You know, I think job training is something that our government programs and even nonprofits really struggle with today because they are not the right decisionmakers. They have a lot of trouble figuring out what the market actually wants from the employer side and what workers, what will work for workers, and their incentives at the end of the day tend to be to boost enrollment statistics or graduation statistics, not to actually form employment relationships, whereas if you had co-ops directly responsive to workers and in collaboration with employers trying to find ways to get the skills that people need to the people who need them, I think you would find a system that was aligned much better to achieve what the actual participants, the employers and the workers are trying to achieve. A much broader point that I think is important to bear in mind with co-ops is that unions in general, and co-ops could be a very important mediating institution in civil society, you know, by which I mean something that a lot of folks on Left and Right are concerned about is the breakdown in social capital, particularly in working-class communities. But it can be very hard to figure out what policy levers can you actually pull, how do you actually, as, from the side of government, intervene in a constructive way and I think creating institutions that encourage workers to collaborate and use their collective resources and interests to further their needs is something that could really rebuild some of that social capital, for everything from helping a disconnected worker or a young person from a disadvantaged background figure out how to get into the workforce to making sure that the little league has enough coaches. And then I’ll mention one more, which is particularly unique. It is not something I think people talk about a lot, but, you know, this point I was raising that government provides all of the regulation today is very inefficient. Government is providing all the regulation in theory because we say well, workers can’t represent their own interests so we need all of these government rules, but then when workers do organize we say they have to put stuff on top of those government rules. I think it would make a lot more sense to say look, if you are organized in a co-op and if you are representing workers and want to negotiate with an employer, you can actually negotiate over those government rules. So, by default, the employment regulation is in place but now employers have an interest in a good negotiation also. You know, I like to use the example of a retailer who might say you know, look, we can get rid of this on-call scheduling that saves us money but on the other hand is really very challenging for households to manage, but on the flip side we need to get rid of time-and-a-half overtime. You know, when people are able to work and we do put it in their schedule, we need that to be at the standard wage. And so that could be something that saves money for the employer, is of great benefit to the employee, and actually represents a model of labor and capital finding agreements that add value instead of just fighting over a fixed pie.
Brian Anderson: It is a far less adversarial model. But, speaking of that, unions are, today, powerful political players, even as private sector union membership has dwindled. The unions have become much more politically active and they contribute millions of dollars yearly to politicians, almost entirely, right now, to the Democratic Party. How would your new idea of labor organizations, labor co-ops, affect that political reality?
Oren Cass: Well, I guess there are two parts to that answer. One is how do you overcome that political reality to actually make progress in reform, and then the second is how do you make sure what replaces it looks better?
Brian Anderson: Right.
Oren Cass: You know, I think in terms of making progress the important thing to remember is we don’t need to get rid of the NLRA, the National Labor Relations Act. If a union is happy, if its members are happy, we don’t need to blowup that relationship. What we should be pushing for is choice, which, by the way, is what the union leaders at least claim to care about also. We should be saying look, alongside this structure of very adversarial unions, let’s also offer the opportunity of co-ops. Let’s offer the possibility of creating a nonprofit organization controlled by its workers, collaborating with government on providing services, able to negotiate with employers over employment regulations, and let’s see if people want to join them. And if they do, what ground would you have to object, and if they don’t, we haven’t touched the system that is already in place and that some folks want to defend. You know, I think in terms of how politics would look in a world with these co-ops, a co-op essentially as a nonprofit would not be a political entity. You know, even Left-leaning labor scholars will acknowledge that there is no reason why a union needs to be both an economic and a political entity. And we have all sorts of nonprofit entities, a thinktank like the Manhattan Institute included, that by virtue of its status cannot participate in certain times of electioneering activity, and so co-ops would be in that exact same basket, by virtue of their cooperation with government on social services and so forth and the dues they collect from their members, they would be precluded from directly trying to channel any of those resources toward political action. Now, they of course would be welcome to setup a PAC, or their own independent entity that does political campaigning, but that would have to be a separate activity. It could not be the case that the co-op work in the economic sphere or the resources for that were also dedicated toward political campaigning for any party.
Brian Anderson: A final question, Oren: The gig, or sharing economy as it is called, has obviously disrupted the labor market. Many have noted that it has also revealed a kind of hole in our current labor laws. Uber has been fighting vigorously against state regulators which want to classify its workers as independent contractors. What are your thoughts on this particular debate and does that plug into your argument in this essay?
Oren Cass: Yeah, I think it’s a great question and a critical element of this, which is that what we have seen over the past decade is a very aggressive push by employers to try to get away from employment relationships, in part because of the combination of regulatory burdens and the prospect of having to fight with a union. And so, in fact, I think it’s, you know, between 2005 and 2015 the entire growth and employment in this country was in nontraditional relationships. A little bit of that is the high-profile gig economy, stuff like Uber drivers. A lot of it is just independent contractors, and temps, and folks who have lost control over the employment relationship that they want because it is so heavily burdened, and the NLRA really compounds that problem. It pushes employers away from wanting to have employees and then says once they have done that there is no support left for the now independent worker. I think a co-op could really have the opposite effect. You know, on the one hand it would provide support for those independent workers, so whether you are an Uber driver, a contract coder, a call center temp, those are groups that would ideally fit into a co-op-like structure. There’s actually a nonprofit called the Freelancers Union, that provides a lot of these kinds of services to a lot of freelance workers today. And, so, you would be providing support to those kinds of folks and then you would also be actually providing a very strong incentive for employers to want to partner more closely with them. So, an Uber for instance, if it actually were to establish a closer employment relationship with co-op-affiliated workers, would now have more scope to negotiate over employment regulation, might now have more scope to establish training programs that would come with public support as well, and so instead of pushing employers and employees further apart you would actually be recognizing a very important, valuable relationship that can benefit both sides if government’s role is to contribute to that instead of enflaming it.
Brian Anderson: Don’t forget to check out Oren Cass’s essay, “More Perfect Unions.” It was featured in our special issue, The Shape of Work to Come, and you can find it on our website. You can also follow Oren on Twitter, @Oren_Cass. Lastly, if you like our show and want to hear more, please leave ratings and reviews on iTunes. Thanks for listening and thank you again, Oren, for joining us.
Oren Cass: Thank you for having me.
Brian Anderson: You can subscribe to this and other Manhattan Institute podcasts in the iTunes store. The audio edition and transcript is available on our website, www.city-journal.org. This is City Journal editor Brian Anderson. Thanks again for listening to the 10 Blocks Podcast.
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