Ask a Democrat what created the American Middle Class and many of them will answer: “Unions.” Organized labor gave factory workers badly needed leverage in negotiations with capital owners at a time when government refused to use its power to help them. Armed with that power, unions negotiated working terms and wages that made it possible for laborers to enjoy a decent standard of living.
Now, as the rapidly accelerating pace of technology and automation are eroding demand for low-skill jobs and delivering higher and higher returns to a few, could workers benefit from a new push toward unionization? The answer is “no,” and that answer has serious implications for policy and politics.
The purpose of a union is to provide employees with the bargaining leverage they need to secure reasonable working conditions and compensation. This was particularly important in an industrial setting where human labor was little more than an extension of a factory’s machines.
Each individual employee swinging a hammer was what economists call “fungible” – what he or she offered in value was indistinguishable from the value offered by the next person in line. There was very little about the labor being performed in most industrial era settings that would encourage owners to compete for a specific employee. Workers were as replaceable as a pair of gloves.
Fungible labor set up a permanent downward bidding war in which employers had every incentive to set compensation and working conditions ever lower. By collaborating in unions, workers could apply pressure on capital owners to counter their bargaining weakness. In an atmosphere in which there was virtually no support from government to protect worker’s rights and labor itself was entirely fungible, unions were the key to creation of a decent way of life.
For their time, unions were an innovation that helped ordinary people enjoy a greater share of the wealth generated by industrialization and created a decent life for millions of people.
Many people blame outsourcing and international competition for the decline of labor unions, but that claim misses the more fundamental economic changes that brought those dynamics about. Two very important things have changed in our economy that have undermined the value of unions and converted them into a death sentence for businesses that must work with them.
First, the rise of state regulation of working conditions made the most important work of a union redundant. With a wage floor, safety regulations, workers compensation, universal public education, Social Security, and other state interventions, much of the value unions were organized to deliver became redundant.
Regulation was more attractive than unions in many ways because it imposed a uniform set of conditions on all employers, creating a scenario in which every firm competed on the same level field. In order to maintain their appeal to members, unions evolved into a general buffer between employees and management, adding dense layers of bureaucracy to even the most routine hiring, firing, and administrative decisions.
Add to that the second factor, the rise of automation and information-based competition, and you get a deadly cocktail. The rise of the knowledge economy and the sudden, dramatic expansion in the range of activities vulnerable to automation created a dynamic that killed off union-bound organizations. If every change in work hours, labor force or job descriptions requires a new collective bargaining agreement, it will be impossible to keep pace with innovations that radically reduce manufacturing costs and introduce more rapid adaptive capabilities.
Companies free from the straightjacket of a collective bargaining agreement can change more quickly, adopting new, leaner practices. Employees in the emerging knowledge fields earned more by their own efforts than by collaboration in a union. No matter how well-managed, innovative, or responsible, competitors saddled with collective bargaining agreements drag behind, unable to lower their costs or develop new value fast enough to compete.
In some cases work is shipped overseas where labor is cheaper and less effectively organized, but we are discovering that this is merely an intermediate step in the decline of this workforce. Firms like Nike are already laying off hundreds of thousands of contract workers in the developing world as the race toward higher efficiency and adaptability makes automation more attractive than even the cheapest low-skilled labor. China-based Foxconn, manufacturer of the iPhone and one of the largest commercial employers in the world, is collaborating with Google on a long-term automation project that would eliminate hundreds of thousands of factory jobs.
Innovation, not outsourcing, is the root factor in the decline of manufacturing employment in the US. More restrictive laws and collective bargaining will not help. Market conditions are changing in ways that make low-skilled, undifferentiated inherently less valuable. Those same forces are opening up new opportunities for far more rewarding work, but gaining access to that work is more challenging. That condition is just as relevant in China as it is in Detroit.
The bulk of jobs that benefit most from unionization are simply disappearing. They aren’t merely going overseas. They are going away.
The low wage jobs that remain are mostly in service industries like fast food and retail. We could pressure those industries to unionize, but we would merely be repeating the dynamic that favored non-union companies in manufacturing fields. The problem with unions is that they are too bureaucratic and slow to survive in a highly dynamic economy. Protecting jobs and lifestyles in the information age with unions built to work under industrial conditions is like trying to grab water in your fists.
Pressure to capitalize on the increasing power of automation would only be accelerated by unions. Along the way, a push toward unionization would stifle the wealth-generating power of the economy without halting any of the forces that are driving low-skilled work out of existence. Unions would offer nothing more than stagnation and mediocrity as a fleeting bulwark against the relentless tide of economic dynamism. If we are going to improve living conditions, opportunity, and rewards for those who do not make it into knowledge careers or entrepreneurship, we need an alternative to organized labor.