Wed, Nov 20, 2019 - Page 9 News List

The US could revive its middle class by bringing back unions

By Noah Smith  /  Bloomberg Opinion

If the US is going to make a big dent in income inequality and raise living standards for the middle class, it is going to need a multipronged approach. Higher taxes and more spending on healthcare would help. Minimum-wage laws can raise pay for workers at the bottom without reducing employment much, but they only benefit a relatively small slice of the workforce. However, something else is needed.

One big idea is to bring back unions and collective bargaining. Several teams of economists have examined the historical record and concluded that unions were important in reducing inequality. However, although unions are still important in the public sector, in the private sector they have been almost wiped out.

People argue about the cause of the decline. Some blame weak enforcement of labor laws or the rise of state right-to-work laws. Others blame global competition and technology.

However, Martin Manley, an entrepreneur who previously served as assistant secretary of the US Department of Labor under former US president Bill Clinton, thinks he has the answer.

In a new book titled A Better Bargain: Organizing Employers and Workers to Grow America’s Middle Class, Manley argues that the US union system was doomed from the start.

Before 1935, Manley said, there were several types of collective bargaining in the US.

However, the one that ended up being enshrined in law, in the National Labor Relations Act, was called enterprise bargaining. Under that law, workers at each workplace have to vote to unionize; if they do, all workers at that workplace are covered by the union contract. However, if they reject the union down, there is no collective bargaining.

This system has a huge downside: competition. Suppose the workers at a McDonald’s want to form a union. The managers know that if the workers unionize, wages will go up and prices for hamburgers at that McDonald’s will rise. That will put the restaurant at a competitive disadvantage versus the non-unionized Burger King down the street, eventually resulting in layoffs. The managers will make this argument to the workers, who probably will find it convincing.

If both the McDonald’s and the Burger King could coordinate and unionize together, competition would be no problem; wages would rise and the profits of the two giant corporations might fall while consumers paid higher prices for burgers.

However, because US labor law forces each workplace to act independently on unionization, they cannot effectively coordinate. The situation is even worse for companies such as General Motors (GM) that face international competition, because there is no way for GM workers to coordinate with Volkswagen workers in Europe or Toyota workers in Asia.

Manley has a two-pronged solution to this problem. Both pieces would require a major rewrite of US labor law, and both would involve a shift from enterprise-level bargaining to sectoral bargaining, with negotiations taking place in an entire industry, not individual workplaces or companies.

The first piece is industry associations — groups of companies in the same industry and region that bargain collectively with their workers all at once.

Though it might seem counterintuitive to let employers collaborate like this, it would remove the competitive threat that unions represent, because the resulting agreements would constrain all businesses equally.

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