After the U.S. recovers, will unions?

Today’s topic: With U.S. manufacturing jobs on the decline, what will American labor unions look like in the future? What sectors of the U.S. economy should we expect to be heavily unionized? Previously, Madland and Dalmia discussed autoworker unions.

Healthy unions pump money into the economy
Point: David Madland

The future of labor unions is very much in doubt, but the need for them continues to grow. The essence of what labor unions do -- give workers a stronger voice to get a fair share of the economic growth they help create -- is and has always been important to making our economy work properly for all Americans. The worse our economy gets, the more important this function becomes.

Even when times were relatively good, workers were getting squeezed. The real median income for working-age households -- those headed by someone younger than 65 -- fell between 2000 and 2007 by about $2,000. Though workers helped the economy grow during this time period by becoming ever more productive -- increasing productivity by 18% -- they did not receive a share of the new wealth they helped create, and instead fell further behind. As a result, 2000-2007 was a period of growth in which the nation’s middle-class families had less real income at the end than when they started.

One of the primary reasons for why our current recession endures is the fact that workers do not have the purchasing power needed to drive our economy. Consumer activity accounts for about 70% of our nation’s economic activity, and for a while, workers used debt to sustain their consumption. Yet, as we are plainly seeing, debt-driven consumption is not sustainable.

What is sustainable is an economy in which workers are adequately rewarded and have the income they need to purchase goods -- which is where unions come in.

Unions raise wages for their members by about 12% compared with similar nonunion workers, according to the Center for Economic and Policy Research. And when unions are strong and able to represent the people who want to join them, these gains spread throughout the economy; nonunion companies increase their wages, and all workers have more purchasing power, producing a “virtuous circle of prosperity and jobs,” according to UC Berkeley professor Harley Shaiken.

Less than 8% of today’s private-sector workers are unionized -- even though polls show that more than half of Americans would join a union if they could -- because the union selection process is broken, exposing workers to the aggressive tactics of anti-union employers and endangering workplace democracy. It will take substantial legislative changes -- such as the Employee Free Choice Act -- to allow all Americans a stronger voice on the job and a true opportunity to unionize.

If the Employee Free Choice Act becomes law, it is likely that the number of workers in unions will grow. It is impossible to predict by how much or what industries will grow the most, though it seems likely that organizing efforts would focus on fast-growing sectors of the economy such as healthcare, alternative energy and education, as well as the very large service sector, which accounts for about 70% of the country’s gross domestic product. New research from the Economic Policy Institute estimates that if 5 million service workers joined unions, these workers would get a $7,000 annual raise on average, and $34 billion in total new wages would flow into the economy. These working-class employees would be more likely to spend their money during an economic downturn than CEOs -- who can afford to save during lean economic times -- and thus provide a significant boost to the economy. There is both a moral and economic argument for empowering workers and their unions.

Whatever industry workers choose to organize, it is key for our economy that they do so.

David Madland is director of the American Worker Project for the Center for American Progress Action Fund.

If unions are so good for the economy, how do you explain Michigan?
Counterpoint: Shikha Dalmia

David, I agree with your opening comment that the future of labor unions in this country is bleak -- at least in the private sector. The public sector is another story.

Before getting into that, however, let me address some outstanding issues from Tuesday. I can’t correct all of your claims here, but you allege that I oppose “workers joining together in unions to better themselves.” That is a total strawman argument. I support the right of workers to use any and all forms of collective or non-collective action to get the best possible deal from employers, even, as I indicated Monday, wildcat strikes that are currently illegal.

What I don’t support are unions that are accountable neither to their own members nor to market realities. Regrettably, organized labor in this country is guilty on both counts. And that is the major reason for its decline.

Only 8% of private-sector employees are unionized today, as you point out, compared with 35% in the 1950s. However, citing unnamed polls, you suggest that this dwindling membership is the result not of employee choice but some insidious anti-union plot by employers. Employers may indeed have such a plot (although James Sherk of the Heritage Foundation examined this claim in his 2007 brief, “The Truth About Improper Firings and Union Intimidation,” and found less than compelling evidence for it). But that’s not why unions are going kaput; it’s because they offer a poor “value proposition.”

Successful clubs constantly look for ways to offer their members better services for lower fees. Not so with unions. Once they set up shop, they gain the right to collect membership dues in perpetuity without giving most workers any say in how this money is spent. An analysis by the Mackinac Center for Public Policy in 2006 found that Michigan unions on average spent only 43.5% of these dues on workplace representation issues, with much of the rest going toward political activism. Most workers want “paycheck protection” laws that would require unions to obtain their approval before diverting their hard-earned dollars toward candidates and causes they may not always support. But union bosses have fought tooth-and-nail against even such elementary accountability measures. This can hardly be a selling point during unionization drives.

David, you claim that the key to reviving the U.S. economy is boosting worker wages by strengthening unions. By that logic, Michigan, where I live, should be the economic superstar of the nation. After all, its unionized autoworkers earn three times more in wages and benefits than the average private-sector worker. Sadly, the opposite is the case: Michigan has been in a single-state recession for years, even when the rest of the country was booming. Its home foreclosure rates are among the highest in the nation, and its unemployment rate -- 10.6% -- is the highest. And much of its auto industry -- the mainstay of its economy -- might have been dead were it not for the grace of federal taxpayers.

Nor is Michigan an anomaly. States with the heaviest union presence tend to perform far worse in nearly every economic measure -- job growth, cost of living, entrepreneurial activity and tax rates -- than those with a lower union presence.

The reality is that companies can’t afford to pay their workers more in wages and benefits than these workers produce in value. When unions insist they do, they make these companies less able to compete and usher in their decline. And dying companies don’t make good candidates for unionization.

The only entity that can ignore this reality is the government, because it doesn’t have to compete for its survival. It has been the main growth industry for unions in the past, and it is likely to an even bigger one in the future, given the big boost Uncle Sam will likely give it through the $800-billion-plus “stimulus” spending bill.

Things might be different if unions manage to get more powers to coax, cajole and coerce private-sector workers into joining through the so-called card-check legislation. More on that tomorrow.

Shikha Dalmia is a senior analyst at the Reason Foundation.