Why Private-Sector Union Membership Declined. And Why Public-Sector Unions Might Follow.
Washington Post columnist Robert Samuelson has written a rarely seen, free-of-cant disquisition on the rise and fall of labor unions in the private sector. He notes that private-sector union membership is lower now (6.9 percent) than it was the Wagner Act, which mandated that employers allow and negotiate with unions, was passed in 1929. The percentage of private-sector workers in unions climbed to around 35 percent during World War II and then began a long slide that greatly accelerated in the '70s and '80s.
Georgia State's Barry Hirsch explains that, in 2006, union workers made about 19 percent more than non-unionized workers and that such a premium can exist when productivity and hence profits are higher.
The productivity advantages of unionized firms are scant, Hirsch says. The formula worked, because many heavily unionized industries were dominated by a few large firms with similar labor costs. These could be recovered in higher prices.
That changed in the 1970s and 1980s. Imports and "transplant" factories created new competition in steel and autos. Airlines, trucking and communications (telephones) were deregulated, allowing new low-cost rivals into the market. Digital technology and the Internet transformed communications and threatened many industries, including traditional phone companies and newspapers.
Samuelson, whose book The Great Inflation and Its Aftermath is one of the great explications of the post-war economy in America, goes to note that labor and management in big, typically long-protected firms, were slow in reacting to changes.
By and large, union concessions were too little, too late. Corporate managers, their business models besieged, were also slow. Both executives and union leaders underestimated the vulnerability of once impregnable market positions. The downfall of the "Big Three" automakers epitomized this disastrous cycle. Nonunion firms gained market share; union membership fell. Unions also had a harder time organizing other companies, because both managers and workers feared job loss.
How does this translate into the public sector, which is where the action is (literally: more union members are in the public sector now, despite the far lower number of workers in that sector)? This is especially a tough question since efficiency in the public sector is tough to enforce. In the private sector, increasing productivity means doing more with less, including fewer workers. In the public sector, "investment" works in the other direction. The very goal of many education reforms, for instance, is to increase the number of teachers per student, which is by definition a decline in the conventional understanding of productivity.
Among government workers, 36.2 percent are unionized. Their growth partially offset the erosion of private-sector unions (the combined unionization rate for private and public workers: 11.9 percent). Traditionally, public-worker unions flourished in an alliance with liberal Democrats. But the huge loss of state and local government revenue has—like new competitors for firms—transformed the economic and political climate. Labor costs put upward pressure on taxes and downward pressure on public services.
The result is a dilemma that transcends partisan union-bashing. Striving too hard to protect existing wages and benefits will stimulate more political opposition, and not just from Republicans (see Gov. Andrew Cuomo in New York). But sacrificing too much may trigger a revolt from angry rank-and-file members. Private-sector unions couldn't solve this dilemma; they never reconciled past successes with future survival. So Big Labor became Little Labor. If public-sector unions fail, Little Labor could become Mini Labor.
Samuelson is right to note that Cuomo, along with Jerry Brown in California, are going to be doing the same thing as seen in other Republican-led states: They're going to be cutting total compensation for state workers, whether unionized or not. Progressives such as George Lakoff, Rachel Madow, and the folks at Alternet may think that the whole "we are out of money" is a "ruse" but wishing away the godawful bottom-lines of oh, about 50 out of 50 states ain't gonna help unions or taxpayers in the long run. That's exactly what the brainiacs at GM and US Steel did on both sides of the bargaining table did back when the world changed and look where they are now.
Check out Andrew Cuomo's ruse in this video about why state budget showdowns are coming to your state's capital city soon: