Labor Lost

Why the AFL-CIO’s cynical survival strategy is doomed

Organized labor was a one-century phenomenon. Look it up. Union members were only 9.5 percent of the private sector work force in 1999, down from a peak of 37 percent 40 years earlier. The last time union membership was that low was in 1902, when union members were 9.3 percent of the private sector work force. And back then, unions were true member-based organizations poised to play a significant role in the new century’s economic growth, not the government-coddled, coercive institutions they have become. The current union leaders, led by AFL-CIO President John Sweeney, have no realistic plans to change course. They are presiding over the final, terminal stage of organized labor. And they like things just the way they are.

Today union leaders, politicians, and employers conspire to take from their members, constituents, and employees hundreds of millions of dollars every year, in violation of the First Amendment. What was once a proud mass movement that improved and dignified the lives of its members in vital segments of the manufacturing-based economy is now no more than a special-interest adjunct to a political party, humored and tolerated less for the voting bloc it no longer commands than for the soft money it can deliver. Organized labor in the private sector no longer serves the interests of its members. It has failed to adapt to the new information economy, as it successfully adapted to industrialization in the early 20th century. It is dying before our eyes.

No one symbolizes the sad, cynical future of organized labor as just another special interest group with money to throw around better than Sweeney, the well-padded former president of the Service Employees International Union (SEIU). The SEIU, whose core members are janitors and low-level health care workers, is now the single largest union in the AFL-CIO. Sweeney, who majored in economics at Iona College, has been a union employee all his adult life; he started working for SEIU in 1960. He has never cleaned office buildings or emptied bed pans, as have the bulk of the SEIU’s members, whose hard-earned dues paid his expense account and supported his comfortable, six-figure-income lifestyle while he headed up the SEIU.

Sweeney was elected president of the AFL-CIO in 1995, over the opposition of the old industrial unions. His campaign theme: Do what I did. Stop spending so much money on your current members, negotiating and administering their contracts and processing their grievances. Instead, trust their employers to do the right thing. Then spend more money on organizing new members. Sweeney’s goal was to increase AFL-CIO membership by 3 percent annually, i.e., an additional 600,000 new members each year–a tough goal he has yet to meet. In 1998, for example, the AFL-CIO added a record 475,000 new workers to its member organizations. But with other union members leaving through plant closings and downsizings, the net gain was only 65,000.

Even the net gain is deceptive because the union members leaving through plant closings and downsizings are not being replaced by members holding comparable jobs. Organized labor grew in the 20th century as America changed from an agricultural to an industrial economy. Things are very different today, and organized labor has found no analogous role in the post-industrial economy.

Even academics sympathetic to unions concede that they’re on the skids. In his recent book, From the Ashes of the Old: American Labor and America’s Future, Stanley Aronowitz, a Marxist-leaning professor of sociology at the City University of New York, writes: "As we approach the new century, organized labor has fallen on hard times. Once the force that encouraged government intervention in every aspect of economic life, the labor movement, over the last twenty years, has become a symbol of what many see as a surpassed system. Many younger people, who never experienced the Depression, World War II, and the days of postwar prosperity, are now mesmerized by the ideology of individual initiative and the promise of a gleaming high-tech future."

Sweeney already knows that unions have nothing to offer to people "mesmerized by the ideology of individual initiative and the promise of a gleaming, high-tech future." The simple reason: They’re making too much money. But if the New Labor of John Sweeney holds no attraction for employees in the post-industrial economy, and the manufacturing work force of the old economy continues to shrink, what is Sweeney’s business plan for maintaining labor’s cash flow from member dues? His new paradigm for labor is to organize the working poor, those people employed in minimum-wage or near-minimum-wage positions.

That paradigm is embodied in Sweeney’s own SEIU, one of the few unions that consistently shows net membership gains. The SEIU spends 47 percent of its annual budget on organizing, and its locals devote approximately 20 percent of their funds to the same task–a total of more than $60 million, $33 million of it from the locals. To appreciate the magnitude of this, as recently as 1993 no more than 10 of the SEIU’s 77 locals put any money into organizing, and in 1995 the SEIU and its locals spent only $20 million on organizing. Even the SEIU’s 1995 spending level is impressive when you consider that as recently as 1996, according to Richard Bensinger, director of the AFL-CIO organizing department, only 3 percent of union funds nationwide was spent on organizing.

The marketing strategy is working. In 1998 the SEIU won 66 percent of the elections in which workers chose whether to certify it as their representative. By contrast, the Teamsters won only 44 percent of their elections, and the rest of the AFL-CIO, other than the Teamsters and the SEIU, won only 49 percent.

The SEIU’s success in winning certification elections underscores the rank cynicism of Sweeney’s model, which gives the union a swelling stream of dues revenue. The fact is that unions achieve less for the working poor than the market does. A recent study by economists William Even of Miami University of Ohio and David Macpherson of Florida State University shows that during the last 20 years the median percentage wage growth for full-time minimum-wage workers in their first year of employment was 13.8 percent. For all minimum-wage workers, it was 10.1 percent. No union contract today even comes close to what the market produces on its own for the working poor, who rapidly move on to better-paying jobs.

The SEIU is the country’s largest health care worker union, in both hospitals and nursing homes. Health care is the union’s niche, and Sweeney’s successor as SEIU president, Andrew Stern, is pressing his old boss hard for an allocation of markets to eliminate competition from other unions in the health care industry. Last year, the SEIU entered into a jurisdictional agreement with the Hotel Employees and Restaurant Employees Union (HERE) under which the SEIU agreed not to organize hotel workers or gambling employees and, in turn, HERE agreed not to organize janitors or health care workers. (If two companies made a deal like that, of course, they’d be violating the antitrust laws, but unions have long had a get-out-of-jail-free card when it comes to antitrust.)

Why target the health care industry? In a recent monograph, Labor Pains: The Corporate Campaign Against the Health Care Industry, Jarol B. Manheim, a political science professor at George Washington University, offers the same explanation Willie Sutton once did for robbing banks: That’s where the money is. Manheim points out that there are 6 million to 7 million potentially organizable workers in the health care industry, whose dues would produce a revenue stream of nearly $3 billion a year. Moreover, as Manheim observes, "many of these workers are in low-wage, low-prestige jobs and many are women or minorities."

He incorrectly considers this a barrier to organizing, because turnover in these jobs is well over 90 percent. Manheim suggests that high turnover "makes the workers to be organized something of a moving target." Not really. In a dynamic economy, there will always be high turnover in low-wage, low-prestige jobs as the working poor move on to better-paid, higher-prestige jobs and have their places taken by other entry-level employees. This suits the SEIU just fine. All it has to do is win one election with the employees it has organized at that time. Once it wins, it pretty much can just sit back and let the dues roll in.

Unionization doesn’t stop turnover in low-wage, low-prestige jobs. But the new employees who take those jobs after their predecessors move on to better things find themselves saddled with a union they didn’t choose because the labor laws presume that the new employees support the union in the same proportion as the old employees did. The law does provide for decertification elections, but the National Labor Relations Board (NLRB) frowns on them. As a consequence, only 199 were held in the first six months of 1999, down from 247 in the first half of 1998. Besides, to win an initial election, unions need only a majority of those voting. Decertifying a union requires a majority of all eligible voters.

The SEIU is far less successful at representing its members than at organizing them. While it won two-thirds of its elections in 1998, it succeeded in actually negotiating a contract in less than half of those workplaces. The reason has to do with the economics of the health care industry, which is highly dependent on government financing and highly constrained by government regulations. Seventy percent of the revenue in nursing homes alone comes from Medicaid. Starting with the Health Care Finance Administration in Washington, every aspect of the health care delivery system is regulated by one, two, or more levels of government with respect to the quality of care, the type of care, conditions in health care facilities, and reimbursement. These rules and the level of Medicaid reimbursement limit the ability of employers to meet union demands.

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