May 13, 2012
Labor unions have long been a potent force in American business and politics. But the last several decades have seen a steep decline in corporate union power as membership ranks have dwindled. Aside from a few industries where unions remain formidable, including airlines, where US Airways' efforts to merge with American Airlines were given a recent boost by support from American's unions, the dwindling of labor union power and influence is likely to continue.
"They have declined to the point of irrelevance in most workplaces," says Peter Cappelli, Wharton management professor and director of Wharton's Center for Human Resources. And rather than focusing on expansion, unions are simply trying to minimize the ground they are losing every year, he notes. "They are having a hard time hanging onto whatever [contract] arrangements they have."
The statistics on union membership tell the story. According to the Bureau of Labor Statistics, in 2011 11.8 percent of wage and salary workers in the U.S. were members of a union, or 14.8 million people. That is down from 17.7 million people, or 20.1 percent of workers, in 1983. But those membership ranks include public sector workers. In the private sector, the decline has been even starker with just 6.9 percent of workers, or 7.2 million people, belonging to unions, down from about one third in the 1950s. "[Unions] can't be seen as the voice of a significant group," says Wharton management and legal studies professor Janice Bellace. "Even when they may be voicing an opinion that would be supported by a majority of working people, it is easy to say they are a small group, a special interest."
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That decline has had far-reaching effects on labor markets in the U.S. According to research by Wharton management professor Matthew Bidwell, drops in levels of unionization are associated with declines in employee tenure and therefore greater turnover. Whether that is a net positive for employees (workers are finding better opportunities by changing jobs) or a net negative (longtime employees have less chance to move up the ladder at their existing workplace) is unclear. But regardless of how it impacts workers, the trend has significant implications for the workplace, including employee training and recruitment.
Other research has shown a connection between union decline and the widening income gap. According to a study published last year by researchers from Harvard University and the University of Washington, the decline in private sector union membership between 1973 and 2007 accounted for between one fifth and one third of the growth in income inequality among male workers in the U.S. during that period.
"Unions had an impact on non-union worker pay too, because some employers may have [previously] been worried about a unionization drive so they would raise their scale to match union pay," notes Jake Rosenfeld, a sociology professor at the University of Washington and a co-author of the study. "Unions established what was considered right and fair in the marketplace when it came to wages, and non-union workers benefited from that. It is hard to think of a way to tackle income inequality without a vibrant labor movement."
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The decline of unions also has political ramifications. Certainly unions continue to have political muscle. "There are still, in absolute terms, a lot of people who are union members, so they have feet on the ground," says Cappelli. "They can run voter registration drives, and they can help get out the vote, so they will still be a force in the election." But Rosenfeld notes that the decline of private union membership has outsized impacts on voting patterns. Research published by Rosenfeld in 2010 shows that private sector union members have a predicted probability of voting that is 6.7 points higher than similar people who are not union members. That boost to the probability of voting is much higher than the increase seen among public sector union members. And Rosenfeld points out that as union membership declines, the engagement of working-class Americans in the political process is likely to fall as well. "Unions could never compete with corporations in terms of [political donations] so they competed with manpower," says Rosenfeld. "That has diminished."
There is also evidence that unions increase the odds that workers will understand and capitalize on the rights they are entitled to under existing law. "Studies show that union members were likely to have heard of and understand what they were entitled to under the Family Medical Leave Act (FMLA) and are much more likely to take unemployment insurance, probably because unions provide information on them," notes John Budd, a professor at the University of Minnesota's Carlson School of Management. "Unions do help make employment law stronger."
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Other impacts may be harder to measure, but no less important. Bellace says union decline also impacts how workers are represented in the legislative process. "If you think of major pieces of legislation that have been very important to working persons, you will often see that the legislation was pushed by unions," she notes. "The Employee Retirement Income Security Act of 1974 (ERISA), which gave employees the right to vested pensions and has rules on pensions, including how employers can invest pension funds, was pushed by the unions and almost no one else. And the Pregnancy Discrimination Act of 1977 grew out of the Gilbert case, which was brought by the International Union of Electrical Radio and Machine Workers (IUE) and went to the Supreme Court." There are political parties but outside of unions, "we don't have any other national voice for the average working person," Bellace argues.
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That reality, union proponents insist, will eventually lead to a revival for unionization. "Allowing CEO pay to reach unprecedented heights, reducing regulation on the financial sector, opening up trade in an unbalanced way, increasing income inequality: All this has failed 99 percent of the population," says Jeff Hauser, who is leading the AFL-CIO's political media work for the 2012 election. "I think there is an increasing recognition of that failure and openness to reversing it, [along with a] recognition among workers of the need to stand together."
But changing the trajectory of unionization will be a tall order. Many point to the 1981 strike by the Professional Air Traffic Controllers Organization (PATCO) as a critical turning point. President Ronald Reagan fired some 11,000 air traffic controllers who ignored his order to return to work. And while that was a strike by federal workers, Reagan's move emboldened private sector employers to take an aggressive stance with unions as well.
According to Georgetown University history professor Joseph McCartin, the result was a significant decline in the use of strikes by unions, with the number of workers participating in a strike in 2002 falling to 1/60th of what it was in 1952. "Workers have simply lacked the leverage to secure a proportional share of rises in productivity and profits, contributing to an increasingly distended and, in my view, unstable economy," he notes.
More recently, public sector unions in Wisconsin and other states have increasingly come under fire by politicians pushing for the passage of legislation that would restrict their collective bargaining power, in effect taking away a union's right to negotiate over salary, seniority, pensions, health care and other work-related issues.
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The aggressive actions by corporations to block unionization have been aided by changes in regulations, Cappelli states. "The National Labor Relations Board, which oversees the implementation of rules around unions, is run by political appointees, and the rulings in recent years have gotten more sympathetic to the interests of the employers," says Cappelli. "The rules governing how elections are run have made it easier for management to oppose unions, and the penalties for violating the law are pretty trivial. If you fire someone for supporting the union, it takes years to seek remedies for that, and the elections are over by then. The remedies are usually just reinstating the employees [who were fired], [but] the conditions [for those people] are so miserable they never stay."
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Bellace notes that the decline of manufacturing in the U.S., a sector where unions have been heavily concentrated, and the opposition of management to unionization are significant factors in the decline of unions. But she says the way labor laws were written in the U.S. is also a major factor in that downward slide. "The National Labor Relations Act, passed in 1935, is a dated and very limited statute," Bellace states. "It puts [individuals who want to unionize] at high risk. It also set up an election mechanism [for unionization] that is unusual. In most countries that doesn't exist. [That mechanism] doesn't include half the workforce, or example, anybody who is considered a supervisor or manager. And that definition is interpreted very broadly. It also doesn't include public employees, agricultural workers and groups like domestics." At the same time, Bellace adds, the American view of worker rights is fundamentally different than the view held in many other parts of the world. "Americans think that many of their rights stop at the door of the workplace. They are more willing to accept employer authority," says Bellace. "That is quite unlike other advanced countries."
At the same time, Cappelli contends that union missteps have also played a role in their current plight. "Unions faced a dilemma all organizations have: Do you use your resources to recruit new members or to take care of the members you have?" Cappelli observes. "The unions in the 1970s and 1980s were not spending much time organizing new members."
A CHALLENGING OUTLOOK
Of course, unions still have significant power in certain markets. Unions remain major players in industries like autos, construction and airlines. Take the case of American Airlines, which is attempting to reorganize after a Chapter 11 bankruptcy filing. Rival US Airways announced in mid-April that it had won the backing of three American unions for its effort to merge the two airlines. The union backing for a deal is significant, and hampers American's chances to remain independent, because the unions hold seats on the creditor committee that is overseeing the reorganization.
But even in industries where unions are still a force, the outlook is challenging. In autos, for example, unions have failed to penetrate the U.S. operations of foreign automakers like Honda and Toyota. And while United Auto Workers (UAW) President Bob King had said the union was going to pick a transplant target to unionize, in late 2011 he backed away from that position. "We are not going to announce a target at all; we are not going to create a fight," King told Automotive News. And while the UAW is still working to unionize the transplants, the conciliatory move signals recognition that doing so will be next to impossible if the automakers fight it aggressively.
Many employers see the decline of unions as only good news. But Wharton management professor Iwan Barankay says there is a downside for companies. Negotiating with a union, notes Barankay, "may be unpleasant, but it is a process that is well understood. Company executives know their enemy, and they are able to calculate the cost of a strike."
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Thanks to the Internet and social media, however, employees have new tools for expressing their dissatisfaction. "Now people can organize themselves very effectively and aggressively online," Barankay points out. "We are entering an era where employees can connect with other workers and customers to put enormous pressure on employers. They can go viral, form coalitions with customers and, out of the blue, a company can come under financial strain. That is more difficult to manage than a face-to-face negotiation with a trade union."
In fact, Budd argues that unions could regain momentum if they became more creative about how they organize. Today's workers, he notes, are more independently minded and do not see the need for a one-size-fits-all approach to the workplace. He points to the unions in the entertainment and sports industries as examples of successful, but flexible, labor organizations. In those industries, "the union doesn't try to come in and negotiate everyone's salaries," says Budd. "They negotiate a skeleton: some minimum rates, a common health care plan and the procedures for negotiating individual contracts. Individuals still have the resources of the union behind them. These types of movements can more empowering to a workforce looking for autonomy."
Despite that sort of model for success, however, observers like Wharton's Cappelli don't see resurgence for the union movement. "Unless the political climate in the U.S. changes quite radically," he notes, "It's hard to imagine any scenarios where this turns around."
This article originally appeared in Knowledge@Wharton and is used by permission.