Labor Unions

Chapter 27

McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

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Learning Objectives

1. Summarize the early history of the labor movement.

2. List and explain the major labor legislation.

3. Define and differentiate between craft and industrial unions.

4. Summarize union organizing since the 1950s.

5. Discuss and distinguish between economic power of unions and employers.

6. Assess the process of collective bargaining.

After this chapter, you should be able to:

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A Short History of the Labor Movement

Labor unions are a traditional American institution. Until the 1940s, most Americans had unfavorable

opinions of unions. American Federation of Labor (AFL): rang in the

modern era of unions in 1886.• Emphasized craft unionism (after failure of Knights of Labor)• Emphasized “bread and butter” issues

With the emergence of the large corporation, individual workers had little bargaining power.

Congress of Industrial Organizations (CIO): industrial unionism, peaked in the 1930s and 1940s.

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A Short History of the Labor Movement (continued)

Employers fought labor unions tooth and nail.• Union members were blacklisted.

• Those who were suspected of union sympathies were fired.

• Court orders were obtained to prevent strikes.

• Some times private detectives, labor goons, and sympathetic local police were used to put down strikes violently.

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Key Labor Legislation

National Labor Relations Act (Wagner Act, 1935)• Put the force of government behind collective bargaining• Prohibition of unfair labor practices

Taft-Hartley Act (1947): was put forth as a measure to protect “employers” rights:

• Allows the president to impose 80-day cooling off period during a strike

• In Section 14b, allows states to enact “right-to-work” laws, which prohibit Union Shop (must join union within 30 days of being hired)

• Limits Closed Shop (employer must hire union member)• Prohibits jurisdictional disputes (picketing during organizing

campaign) and secondary boycotts

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Craft Unions vs. Industrial Unions

Union membership rose spectacularly in the mid-1930s.

Craft Unions Industrial Unions AFL-CIO merger (1955) Private sector union

membership declined beginning in the 1970s.

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Union Accomplishments by the 1940s

By the 1940s, unions were well established and widely accepted.

Accomplishments included:• 8-hour workday• 5-day (40 hour) work week• Paid vacations• Employer health care benefits• Sick days• Health and safety regulations• Ban on sweatshops and child labor

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Union Organizing since the 1950s

The south continues to be the least unionized section of the country.

Wal-Mart is the nation’s largest employer.• Wal-Mart has 1.4 million employees the U.S. with none

unionized.• When UFCW tried to organize a Wal-Mart store, the company

shut the store; organizing has suspended.• Similar tactic used in Quebec, Canada.

UAW workforce has shrunk from 1.5 million in the mid-1970s to 160,000 at the Big Three auto makers.

• No foreign owned auto plants are union organized.

Move to service workers: janitors, casino workers, home health aides.

Largest unions today in the service sector.

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Membership of Top 10 Labor Unions, 2009

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The Formation of Change to Win Coalition In 2005, 5 large unions withdrew from the AFL-CIO

(40% of federation membership) and founded Change to Win.

Coalition is made up of the Teamsters, the Service Employees’ International Union, the United Food and Commercial Workers, Unite Here!, and United Farm Workers, with more joining each year.

• It has targeted 50 million workers whose jobs cannot be sent overseas or replaced by machines.

• Many of these jobs pay poverty wages.• Possible targets are Home Depot, Wal-Mart, Federal Express, as well

as large hotel chains.

Coalition is frustrated with lack of AFL-CIO time and money committed to organizing and that America is one of the least unionized industrial nations in the world.

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Union Membership as a Percentage of Labor Force, Selected Industrial Countries,

2008

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Jobs: Exportable and Nonexportable

Nonexportable jobs:

• Jobs that must be done in the U.S.

• Examples: doctors, lawyers, plumbers, electricians, teachers, social workers, truck drivers

• The jobs must be done with essentially local labor.

• These jobs are relatively safe from foreign competition.

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Jobs: Exportable and Nonexportable

Exportable jobs:

• Jobs that can be done abroad.

• Examples: Autos, steel, textiles, and apparel industries

• The jobs can obviously be done by workers outside the U.S.

• These jobs are not safe from foreign competition.

• Employers are finding a way to export more and more jobs, e.g. reading X-rays and MRIs.

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The Economic Power of Labor Unions

Are unions a monopoly…• a seller of a good or service for which there are no close

substitutes?• Technically, labor is not really a good or service, but a factor

that helps produce a good or service.• If we brush aside that technicality, then for all intents and

purposes unions are sometimes monopolies. Two ways for unions to exert power:

• Inclusion: Take as members virtually anyone who works in a certain craft or industry (power in numbers), e.g. UAW, Teamsters.

• Exclusion: Don’t just take anyone; try to reduce supply of labor through qualifications and tests, for instance.

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Inclusive and Exclusive Unions

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The Economic Power of Large Employers

Unions can be quite powerful. Corporations not only have remained powerful, but this

power is becoming increasingly concentrated because of the rapid pace of corporate mergers.

An extreme case of corporate power is that of monopsony:

• Only 1 single buyer for a product.• Company in a “company town”.• Sometimes 60-80% of jobs in an area are provided by a

single employer.• Wal-Mart! Also, professional sports teams.• In the former Soviet Union, hundreds of company towns

called “monotowns” grew around a single plant; still 450 left in Russia today.

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Collective Bargaining

Collective bargaining is the main arena of the power struggle between labor and management.

• Labor generally tries to secure substantial increases in wages, fringe benefits, and perhaps better working conditions.

• Management, of course, offers considerably less than labor wants.

• And so, they bargain.

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Strikes, Lockouts, and Givebacks

Labor’s ultimate weapon: the strike.

Management’s ultimate weapon: its ability to take a strike.

• Sometimes management has been known to “lock out” their workers.

But, does it really make any sense to lock out workers who are about to leave anyway?

It might if you lock them out right before payday. Conversely, the best time to begin a strike is right after pay

day.

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Strikes, Lockouts, and Givebacks

Manufacturing fares better than services because inventories can be built up in anticipation of a strike.

A diversified firm can ride out a strike more easily than can a firm that produces a single good or service.

Service industries cannot make up for lost sales because their competitors will have picked up the slack.

A multinational corporation might simply shift operations to another country.

The ability to take/withstand a strike varies from firm to firm.

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The Collective Bargaining Process

A union might be hesitant to strike a company that was about to go under.

• You might win the strike and lose your job.

If a company is financially weak, union demands will likely be moderate.

• During recessions, some unions actually negotiated not only no wage increases but even wage reductions.

• Saving jobs can sometime take precedence over anything else.

• Examples: autos, airlines

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Pressure to Reach a Settlement

The cost of a strike can be extremely high.• General Motors lost $90 million a day during a 67-day strike in

1970 (about $5.7 billion total).• United Auto Workers lost $50-$60 million a day (almost $4

billion total).

Real issues are presented and discussed.• COLAs, productivity, wages and benefits, grievance

procedures, union security, management rights are always key.

Pattern setting is always a major consideration on both sides.

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The Strike

In fact, very few strikes have disrupted the U.S. economy.• Only two have caused major economic disruptions:

1. the 1959 steel strike

2. the UAW strike against General Motors in 1970

• With the exception of 1946, in no year did strikes result in as much as a 1% loss in total labor hours worked.

o 1946 was an aberration because unions had been restricted from striking during the war.

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Work Time Lost Because of Strikes, 1945-2007

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Averting Strikes: Mediation and Arbitration Collective bargaining is the basic way of averting

strikes.• The two sides sit down together.• After some tough bargaining, they hammer out an agreement

both can live with.

What if they can’t reach agreement, or even agree to sit down together in the same room?

• This is where mediation and arbitration come in.

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Mediation

A mediator is literally a go-between.

The mediator tries to speed up the process of negotiation, getting each side to give a little more and take a little less.

The mediator does not have the power to impose a settlement but can play a valuable role as an expediter.

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Arbitration

The job of an arbitrator is to impose a settlement.• This takes the decision out of the hands of labor and

management.

• This makes arbitration, a situation both sides want to avoid.

• Under compulsory arbitration, a labor contract or law actually stipulates that if the two parties cannot reach an agreement, an arbitrator will make the decision.

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Will You Ever Be a Union Member?

50 years ago most families had at least one union member.

Think about:• Your anticipated industry/employer?• Your anticipated job title?• Your anticipated place of region of the country, or state? Or

country of the world?• What is union density in these areas?

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Current Issue: Card Check Proposed Employee Free Choice Act. Objective: to make union organizing easier and prevent

employers from stopping success at various points:• Employer tactics include threats to employees before election,

dragging feet in negotiations after election but before first contract.

• Proposed act known as “card check”.• When 50% + 1 union cards signed indicating interest, then a

union can get certified.• No separate election.• Then collective bargaining for first contract begins.• If no agreement within 90 days, can go to mediation.• If so agreement then, can go to arbitration.

Card check is very controversial; largest lobbying opponent is Chamber of Commerce of the U.S.