Sunday, November 6, 2011
Union advocates dislike the ‘right-to-work’ movement and right-to-work advocates abhor traditional unions. There is another way forward.
In Romeo and Juliet two young lovers sought togetherness in spite of the hostilities between their families. Their challenge was trivial compared to the idea of uniting the "right-to-work" family and the "unionism" family in U.S. labor relations. Truth be told, traditional union advocates are contemptuous of what the "right-to-work" movement represents, and right-to-work advocates are contemptuous of what the traditional union movement represents. Their respective crusaders in elected office have adopted those views almost as if they were religious dogma.
This need not be so in matters as worldly as economic organization, however. The mutual contempt is grounded in a specific legal and organizational regime. But that regime could, and should, be radically changed. There is one good feature of collective bargaining by labor in the 21st century: it levels the playing field in bargaining power between economic returns to capital and returns to labor. On the other side of the ideological divide, the quintessential insight of the right-to-work movement is that the wide-ranging union rights, rules, and customs that developed under the National Labor Relations Act strangle both companies and individual workers.
So it's worth asking if we can attempt and indeed achieve more than the Montague and Capulet families—especially since the offspring in this case is the American economy. The essence of what is needed is to eliminate public sector unions and reform private sector unionism. How to do this and merge the best features of each labor relations ideology first requires consideration of a bit of political and economic history.
How we got here
The essence of what is needed is to eliminate public sector unions and reform private sector unionism.
In a speech earlier this year in San Francisco, conservative columnist David Brooks noted that the big government vs. small government political debate overlooks a third tradition in American history: a desire for limited but energetic government action to promote productivity in the economy. The Railroad Act and homestead legislation in the 19th century, and public education, highways, and water projects in the 20th century, were some of the examples that Brooks cited. Rural electrification and the GI Bill could be added to such a list, and some would add public hospitals, too. This phenomenon is not just a thing of the past; indeed, it's worth remembering that the Internet and other important technologies had their origins in government spending for national defense.
Consider the way in which the American electorate swung from big Democratic victories in 2008 to big Republican victories in 2010. If we credit voters for being more rational than fickle, then the apparent "swing" may in fact be a search by stable voters for a path between what they perceive as the Scylla and Charybdis of the two major parties. While those elections were not cited by Brooks, the path being sought could well be the third tradition to which he referred.
America is at a point in which good policy may indeed be good politics, and it may be possible to navigate these cross-currents. What is needed is to abolish public sector unionism and to significantly overhaul private sector unionism to the point where it barely resembles the current landscape. On a political level, this will occur either by a third-party movement or if Republicans accept a wake-up call and become the champions of working Americans by promoting policies to enhance wages. Why Republicans and not Democrats? Because the institutional and organizational support structures among public employee unions, traditional private sector unions, and the Democratic Party will not permit the kind of changes that are needed to come through that party.
There is much that could be said about the economic effects of promoting higher wages. For Republicans, the disadvantages should be trumped not only by the advantages but also by a vital consideration of political philosophy: the society of limited government to which most Republicans aspire will only come about in the real world if most Americans earn enough money to save for retirements and college educations, and provide for their long-term healthcare through substantially private markets. Achieving this requires some measure of support for a high wage economy.
The quintessential insight of the right-to-work movement is that wide-ranging union rights, rules, and customs strangle both companies and individual workers.
The civil service movement of a century ago created pride and effectiveness in public service. Adding union protections to civil service protections, however, created suffocating redundancy, and in one government agency after another an organizational culture emphasizing public service was replaced by a culture emphasizing worker convenience. So while Americans may be open to revisiting limited, energetic government to promote economic productivity, most will not actually cross the river of trust in government until public sector unionism is abolished.
Private sector unions, on the other hand, provide benefits that are not redundant to a civil service system. The central problem with private sector unions is that under current labor relations regimes they stifle economic innovation. This terrible effect of private sector unions, however, should not obscure the great benefit they have provided: helping to direct wealth to the people whose labor is vital to creating that wealth. For example, notwithstanding the bad effects of the United Auto Workers union on auto company operations, there is no doubt that it channeled enormous wealth to generations of workers who would not have been as prosperous without the union.
The way forward
While American voters are wary of government spending promoted by Democrats, especially with unionized government workers operating inefficiently and ineffectively, they are equally wary of Republican policies that do not address growing income inequality. While the greatest cause of increased income inequality in the United States over the last three decades has been improvement in the top tiers, there also has been a lot of stagnation and some erosion in the middle and lower tiers. Increased income inequality is doubly objectionable to the American electorate if it is happening in the context of an increasingly "winner take all" economy where upward mobility may be more limited than before. As if this political and economic terrain were not ominous enough, a current fundamental problem is a shortage of economic demand; companies won't increase hiring, and certainly not wage levels, unless there is demand for their products and services.
In 1994, the Republican Party's Contract with America included "The Job Creation and Wage Enhancement Act" as one of its stated goals. Did the GOP mean that laws and policies should aim to enhance workers' wages? It should mean that now. In the very long run, the incomes of working Americans can be best supported by a greatly improved public education system (with the elimination of public school teachers' unions as one essential step towards that), so that worker productivity is enhanced.
It's worth remembering that the Internet itself, and other important technologies, had their origins in government spending for national defense.
That is not the sole solution, however. Legal structures and labor market customs also matter, as evidenced by sustained differences over time in worker incomes in comparable economies. Anyone who doubts that legal structures matter need only be reminded of the history of employee compensation in professional sports over the past century. Insofar as capital has more bargaining power than individual workers when they are bargaining with company founders and managers for economic returns, collective bargaining in some form is a principled solution to the imbalance in bargaining power. Only then does labor as one business resource have comparable bargaining power with capital in their negotiations with management, as sellers in the market of business resources. Even libertarians who are skeptical about anything collective need to rethink their understanding of the business resources market.
Unions in the 21st century
The "ah-ha!" moment that needs to occur is for Republicans (or else third party advocates) to recognize that the words, "collective bargaining" do not have to mean just industrial unionism of a 1930s vintage. Collective economic activity has a long tradition in the United States. "Cooperatives," other associations among buyers and sellers, and organizations of licensed professionals are among its many forms (as are chambers of commerce and even mutual insurance companies). Employee associations that are very different from 20th-century industrial unions have the potential to both improve the American economy and to change the political landscape.
The fundamental solution to the myriad of problems identified above is to radically overhaul American labor relations. The stifling of economic innovation in unionized companies starts with the litany of subjects on which collective bargaining is not only permitted, but in many cases mandatory. The only mandatory subject of bargaining in the 21st century should be employee compensation.
Radically different employee associations that don't suffocate both their companies and their members need to be created. New types of employee associations should support worker incomes by enhancing worker training and worker mobility between companies. This last goal will be realistic, however, only if there is a wide variety of such jobs to be found—which in turn will require steps to make it easier to organize the employee associations.
Congress should authorize employee associations that are easier to form than current unions, but which do not have the power to interfere with managerial prerogatives.
Thus, Congress should authorize employee associations that are easier to form than current unions, but which do not have the power to interfere with managerial prerogatives (which is pretty much every subject other than employee compensation as determined by a collectively bargained contract). Of course, if the new types of employee organizations are not suffocating their members, they may in fact find it easier than old unions to attract new members.
A related issue goes to the heart of labor relations as it has traditionally been practiced in unionized companies: structures for worker compensation. Uniform compensation for workers of the same job classification led to a "race to the bottom" with regard to worker productivity. Workers of the same job classification who receive the same compensation lack incentive to be productive, and indeed those who could be more productive have been subject to social peer pressure not to make co-workers look bad.
This highlights a difference between aggregations of capital bargaining for economic returns and aggregations of labor bargaining for economic returns. When capital bargains with management for returns to capital, each dollar is more or less the same, while in collective bargaining by labor there can be significant differences in the productivity of individual workers.
A solution for retaining the appropriate aggregation of bargaining power in collective bargaining by labor, while allowing for differences in productivity of workers, is that the new employee organizations should be negotiating minimum compensation levels for workers. Each individual worker can then negotiate for additional and incentive compensation above the minimum. This could include, as one example, workers negotiating for individual grants of stock options, which would help link the worker's success to the company's success. Tax laws could be changed to promote such grants.
The political dimension
The only mandatory subject of bargaining in the 21st century should be employee compensation.
The reforms described above should be undertaken on the basis of their own merits—to enhance worker wages, reduce income inequality, and increase demand in the economy while promoting productivity and removing the practices that have stifled innovation in unionized companies. There is also a political dimension: This kind of reform will appeal to swing voters. While those who advocate the elimination of public sector unions may be maligned as being "anti-worker," that charge can be blunted if advocates of eliminating public sector unions can also claim to be genuinely promoting new organizational structures with the aim of enhancing workers' incomes.
With the abolition of public sector unions, Americans may regain trust in the ability of government to deliver services competently. Public works of the types noted by David Brooks could again become fiscally and politically feasible—to the satisfaction of many people across the political spectrum. The system of public hospitals might even be rejuvenated before a public health catastrophe occurs, which is an ominous latent risk in a shrinking world.
With visionary and politically bold leadership, the best features of both the right-to-work view and the old-fashioned union view can be realized. There is plenty of room for legitimate debate about the many details required to implement these recommendations. Old unions will resist narrowing the mission of employee organizations. Management will fear that any change that makes it easier for employees to organize collectively will merely lead to more of the old, octopus-like unions. (A better name than "right-to-work unionism" may also be needed.)
One can fairly ask if the political journey necessary for this is even possible. In response, the words, "if not us, who? And if not now, when?" come to mind. They were most recently spoken by Ronald Reagan—the only person to have been president of a labor union and the United States.
Alan J. Haus has worked in and around labor relations since the mid-1970s. He is a graduate of Wesleyan University, and holds an MBA from the University of California at Berkeley and a JD from the University of California's Hastings College of the Law.
FURTHER READING: Andrew G. Biggs explains “Why Wisconsin Gov. Scott Walker is Right about Collective Bargaining” and provides “A Primer on Government Pay.” Michael Barone writes “Obama Acts as Shop Steward in Chief,” “Public Unions Force Taxpayers to Fund Democrats,” and “Why the Civil Service Is No Way to Run a Business.” Michael M. Rosen discusses “The Real Problem with Government Employee Unions.” Ike Brannon asks “Who Really Stands to Win in the Union Fights?”