The middle class is shrinking. Those in power have run up enormous debts on public credit while shoveling most of the money into private pockets. The corporations that have benefitted from this borrowing binge, meanwhile, leverage the global trade system to transfer their profits beyond the reach of national governments.

Meanwhile, we have been told lies by Democrats and by Republicans, divided into artificial camps and led into debates that are either irrelevant or so dramatically scripted that we fail to realize every choice leads to the same result: the dismantling of the social framework that defined and sustained the opportunity of the last century. National mobilization of resources has given way to radical individualism under a narrative that, in the wealthiest nation in the world, we must always expect less.

In this tumultuous time, we search for a way forward - a new Square Deal for the American people.

Thursday, September 15, 2011

A Union Alternative

The notion of workers' rights enforced through collective bargaining goes back for more than a century.  There is a lot of history to the labor movement.  Lately, I have been wondering if perhaps the history is at this point counterproductive.

To explain what I mean, follow me first through a look at where we are now.

Collective Bargaining

At the core of collective bargaining is the concept of a shortgage -- of something constrained.  Constraints dominate business.  The supply of capital may be constrained through restricted lending standards.  The supply of materials may be constricted by transportation delays.  The principle way in which labor is constrained is through bargaining.

How Collective Bargaining Works

Individuals in high-value positions engage in bargaining all of the time.  When they have skills that are in demand, they may threaten to leave unless given more money, better benefits, etc.  The principle reason why American executives have pay packages worth literally hundreds of times those of their lowest-paid employees is that they have created for themselves an aura of overwhelming importance, such that if they are not given what they want and leave for better offers, the perception is that the company that failed to meet their demands would be far worse off.

Collective bargaining works the same way.  Skilled workers are not individually irreplaceable, but in their sumation are made irreplaceable in the quantity that their talents are needed to conduct business.  Thus, several hundred (or thousand) machinists who threaten en masse to leave work if not given better pay and benefits gain leverage comparable to that one executive who made the same threat.  Contrary to what some people imagine, collective bargaining is therefore not a function of overegulation but rather is a manifestation of market force. 

Why Collective Bargaining is Inevitable

Delusions that the government can ban collective bargaining are akin to claims that the government could simply order executives to continue to work for no pay.  Given sufficient oversight -- that is, the threat of physical violence, which in its ultimate form (threat of death) is generally effective as a means of coersion -- a particularly brutal crackdown might indeed force anyone to work, but it cannot force them to work well; if it could, then the Communist model adopted by the Khmer Rouge would have been an astonishing success of production rather than the utter failure that it was (and with an appalling body count besides).  Thus, while it is dangled as a "solution" to the "problem" of high labor costs, government regulation that would ban by decree and enforce by police powers an end of collective bargaining would be no different in practice than a centrally planned economy that nationalized capital or raw materials. 

We can therefore assume that the legality of labor organization is rather secondary to the practicality of it: having recognized that they are more likely to get something when they demand it with one voice, workers will continue to organize to pursue their interests, and any attempt to dismantle the legitimacy of this process as a legal matter will only push the same desperation into more-direct means.

The Role of Unions

Collective bargaining occurs on behalf of people who have essentially the same skills.  Machinists may bargain collectively, as may nurses or fruit-pickers, as each of these groups is made up of people who do comparable work.  In the case of skilled workers such as plumbers and machinists, the criteria for establishing proficiency levels are well-documented and so the workers within these levels really are pretty close to interchangeable at the macro level; fruit-pickers are not certified by ability level but do need to have particular traits to endure the labor.  A union is a formal association of workers from a given labor segment who decide to bargain collectively.

Workers who choose to bargain collectively are exerting market pressure on the basis of labor supply.  Predictably, they thus achieve the best results in their bargaining as they approach monopoly status: a union that represents every worker of a particular type at a given organization will have greater leverage than one that has the support of half of the workers, and if the union is actually able to secure the backing of everyone in the local area who might be brought in to replace them (i.e. potential strikebreakers), they will gain greater leverage still. 

The ultimate embodiment of the union concept would be global representation, where absolutely everyone who had a particular skill agreed to resolutely demand the very same things; this situation would be very difficult to break.  However, it has never happened for a variety of reasons, the principle reasons being geographic distribution, cultural differences, and individually variable values.  This last point is particularly important to understand: the minimum needs of people vary, and if some portion of the workforce decides to accept less than was demanded, it is unlikely that the remainder can continue to hold the line.

Why Collective Bargaining is not (and cannot be) Universal

Some people point to the fact that certain industries bargain collectively while others do not as proof that collective bargaining is an artificial construct.  This reading of the situation is incorrect.

Unions do in many cases affiliate with one another, and some of the most well-known unions (such as the AFL-CIO) are actually collections of unions that come from different industries.  Banding together in this manner helps members by giving organized labor as a whole fewer, louder voices to call for action at the national level, which is helpful because certain issues pertaining to industry (such as those regarding trade) may only be efficiency addressed by the government.  Within particular companies, the ability to threaten impacts to labor across different fields (e.g. "sympathy" strikes) can also help to bring about concessions to worker demands.

The value of different unions working together, however, in no way changes the nature of the union model: workers only seek to bargain collectively when the benefits that they seek are roughly comparable and are only able to maintain pressure through denial of labor supply when the skills that they provide are also roughly comparable.  A union will generally either not form or will be shortlived when any of the following are true:
  • Diversity.  The skills of the workers are disparate not only in quality (e.g. junior versus senior) but also in job function, such that there are few people of any sort who do truly comparable work.  Many office environments reflect this condition, with huge numbers of workers whose actual skills vary sufficiently as to have just a few people doing the same things.
  • Satisfaction.  The workers believe that their total compensation is generous and that they are treated well.  Henry Ford famously invited his employees to unionize at any early point in the history of his motor company, and they refused.  (Less-well remembered is that they did unionize several years later when pay and work conditioned worsened considerably, and at that point, Ford used threats and violence to oppose the move.)
  • Replaceability.  The workers have easily acquired skills and represent a labor pool far larger than their own size in a job market with significant unemployment, circumstances where it would be difficult to convince thsoe currently not working to pass up employment to hold out for union demands.
Notice that the condition discussed above differ in terms of both their nature and with regards to how the workers are affected.  Satisfied workers, for instance, maintain their contented status quo by taking no action, while one can readily assume that replaceable workers are not happy with their conditions but rather recognize that they are powerless to change them, and diverse workers might be happy or unhappy but simply do not see one another as existing in the same worlds.  Yet the result of any of these is the same: collective bargaining does not occur.

Various other factors also enter into the equation.  Satisfaction is relative to perceived inequality; workers in developing nations may be paid far lower wages than their counterparts in the United States yet be comparatively better off than their neighbors and thus feel well-paid.  Similarly, while the desires for food, shelter, and warmth are overwhelming human drivers of action, satisfying these basic needs only leads people to find deeper satisfaction.  Given sufficiently bad conditions, people will seek to change their circumstances even when they are replaceable; the United Farm Workers are the best example of this being the case.

An Alternative Model

From a purely ideological perspective, one cannot be a capitalist -- justifying all behavior as being driven first, foremost, and even solely by the forces of the market -- and then decry labor behaving in a manner consistent with capital. 

People make this argument, of course, but they fall into two categories: those who are ignorant, and those whose actual complaint is against the level of public support that the U.S. government gives to unions, which transforms them from market forces into de facto public entities. 

The latter point is valid.  Nonetheless, the true problem with collective bargaining is not an ethical one (as many conservatives claim) but again is a matter of practicality.  Unions represent employees, and increasingly, businesses and public-sector organizations are shifting away from hiring employees directly and instead opting to hire other companies to deliver services on a contract basis.

There are ways that unions could make a difference under this new model.  They might, for instance, put pressure on organizations to require certain things from their contractors, making it less advantageous to work with contractors and instead encouraging them to hire employees.  But this is probably self-defeating.  For one thing, as the number of employees drops, so does the ability of the unions to apply pressure.  For another, companies want to shift the costs of labor away from their own books and onto those of contractors with specialized expertise.  Hiring is not their goal; their goal is to get work done.

This line of discussion brings me back to my original speculation that the history of the labor movement may now be negatively affecting the labor movement.  It is not important that a union deliver these wages, benefits, and working conditions, nor must these come through collective bargaining.  A union does not exist for its own sake, and collective bargaining is an ideology but rather is a tool.  As organizations shift away from employment and towards contracting, the labor movement has an opportunity to make a similar shift that would place it in a far better position now and for the foreseeable future: workers could form their own contracting firms.

It may sound a little strange, but look at what is really happening already.  The United Auto Workers (UAW) union has agreed to take on many of the pension and benefit costs of its members and made concessions on wages.  Would it be so different if the UAW disbanded and the pool of skilled automotive workers instead formed into a contracting firm that hired auto workers directly, paid them wages, delivered them benefits, and then provided people at loaded labor rates under contract to the auto makers?

There are several compelling advantages to this model.  For one thing, pensions and other benefits could be decided by the employee-owners of the contracting firms for themselves, and the costs would just be tallied into their loaded labor rates (as is true for all contracting firms).  They could choose their own health plans and determine the generosity of their benefits, recognizing -- perhaps for the first time -- that there would be tradeoffs between their ability to secure new business and the generosity of the terms that they offered themselves. 

Employee-owned contracting firms would also have greater incentive to deal with personnel problems.  Policies for resolving issues would be transparent and decided upon by the employee-owners, so they would be fair and equitable, and disputes with clients over particular workers could be dealt with immediately through reassignment to another client, disarming the potential to lengthy and costly squabbles.  At the same time, someone who wasn't working would be harming the company as a whole and would be someone to remove rather than defend, with the full backing of the employee-owners who realized that their own company's ability to pay wages and benefits would be harmed.

Employee-owned contracting firms would have professional managers.  These might be hired from outside or promoted from within, but control could be easily maintained by having frequent shareholder meetings to review both management pay packages and vote on any matters that passed certain thresholds, like redefinition of wages or benefits, or proposals for significant changes in policy.  Enshrining in the bylaws the ability to remove managers by majority vote would ensure that democracy of the process on a level that exceeds what is found in unions today.

Perhaps the best part is that by moving away from the much-maligned image of the union, skilled workers could quickly place themselves within an existing structure that is harder to denigrate.  There are many contracting firms today, in fields like accounting, information technology, security, and project management.  A huge portion of all public-sector work, including much of what is done by the Department of Defense, is already done by contractors!  Contracting firms handling plumbing, carpentry, or flight-attendant services would have more in common with these companies than do the unions that currently represent them, and they would be in the position of benefiting from the growing pro-business slant of U.S. politics rather than being forced to bear the brunt of the assault as the unions do today.

Contracting probably would not work for every sector, particularly for unskilled workers.  Anti-trust legislation would require that current monolithic organizations transform themselves into several competing contractors (though current market conditions suggest that as few as four or five would be sufficient to pass regulatory muster).  Employee-owners adjusting to the reality of the markets in which they work might be surprised to find that the money really isn't there to cover the benefits that they would like to have.

But this is not an either-or proposal.  Union membership is dropping; the way that things used to be done is dying.  This might not be the solution, but we need to let go of the past for its own sake and consider the possibility that the twenty-first century offers better ways to provide workers with fair wages, benefits, and working conditions than the model laid out more than a hundred years ago.

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