The demise of organized labor

The demise of the American trade union movement is a topic of lively current debate. Many reports tally the significant downturn in union membership in the private sector from its high points in the post-war 1950s to its lowly 15 percent level of all workers today. Commentators also highlight the rise in public service worker unionization to its current high level of 36 percent of total employment.

Most analyses of the current situation miss key points:

• Private-sector unionization levels include membership among public employee groups. For example, the Teamsters Union, private sector”™s largest, boasts more than 250,000 members in the public employee sector. Therefore, the 15 percent figure for private-sector unionization is overstated.
• Public-employee unionization at state and municipal levels is concentrated among teachers, by far the largest group, and lower paid hospital, hotel and other so-called service employees.
• Both trade-union sectors are facing strong pressures from their collective bargaining counterparts for major concessions. Even the largest industrial unions are being forced by current economic conditions to grant both short- term and longer-term concessions especially on costs of health insurance and pensions.
• Public service unions are facing the greatest challenges in history from both Democrat and Republican governors who are demanding wage freezes, increased employee contributions to benefit costs and in the case of Wisconsin a major reduction in union collective-bargaining rights. Gov. Scott Walker has guaranteed retention of collective bargaining on wage issues, but his pending legislation removes work rules, health and pension benefits and state administered union dues paying from the list. He tops his “anti-union” demands by legislating that each collective bargaining unit must hold a recertification election on an annual basis. Requiring members to pay their $1,000 annual dues to the union and re-voting the union in once a year are seen as a huge danger to continued union membership levels.
• And last, and most important, is why the trade unions, both private sector and public employees, are in great trouble and perhaps in danger of becoming irrelevant on the industrial and economic scenes (a disaster for the Democrat Party).

There are several key reasons. One rarely mentioned is how company managers, having discovered human resource management during and following World War II have with skill and endurance developed policies and programs that have convinced employees in the private sector that unionization brings no needed benefits. New unionization campaigns have fallen to a near zero level and recertification elections have also reduced membership levels. In short, employees ask, “Who needs a union?”

Co-incidentally, management of public service unions has not kept pace with upgrading the managerial skills of their top managers, local unit managers and have continued to rely on union organizers from the big industrial unions or their out of date methods in organizing new employee groups. All union leaders could use an effective development course in modern management, especially HR, methods and techniques.

So what does all this mean to the owners and managers of small and medium-size companies? First, if the governors ”“ both Democrat and Republican ”“ are successful, we may see major progress in at least halting the increasing state and local deficits, and, hopefully some “clawback” financial support for health and pension costs.

Perhaps in time these could lead to lower property taxes or at least lower increases. At minimum, the factors creating the current high levels of uncertainty facing operational and capital investment decisions could become clearer and possibly more attractive. And, of course, reducing personnel costs at state and local levels should encourage our legislators to think long and hard about lowering income and the multitude of fees and taxes currently a burden to businesses ”“ big, medium and small.

Speaking of state legislators, the situation in Connecticut should focus all of our attention as to how governance operates at the state level. If as many claim, the current game played by union officers and elected political officials uses increased benefits to union members to enable them to pay more dues and feed the union political campaign coffers which in turn are used ($600 million in 2008, $250 million in 2010) to support their favorite politicians. (In grade school we had a game called “ring around the rosie”). Newly elected Connecticut Gov. Dannell Malloy has created a furor by suggesting that from now on the state legislature should carry out its governance and oversight function by reviewing and voting on each and every negotiated settlement or arbitration decision. When asked recently why the Connecticut legislature has not reviewed any negotiated settlement agreements for the past 30 years, the current Speaker of the House was quoted as saying, “If we are going to pass them anyway why bother to review?” So our ring- around game gets extended to elected political officials who have a legislated responsibility and obligation for oversight of every contract negotiation at State and local level.

In corporate governance, the laws require that the company”™s board of directors act in a fiduciary manner regarding the rights of the equity shareholders. The Connecticut law gives the lawmakers the same fiduciary responsibilities. They have failed to carry out their oversight responsibilities and the state finances are in a shambles.

One last item.  If state legislators are our taxpayers”™ board of directors, where have we as “shareholders” been in making sure they carry out their duties. They haven”™t and like many others who stood by and allowed the offenses to bring down the economy in 2008 we voters, too, are to blame.

It is clear that a better educated and informed electorate will be required to oversee the proposed solutions to the present crisis and hopefully do a far better job in the future in supporting candidates who will take their fiduciary responsibilities a lot more seriously than they have had to date.

One great political observer once opined, “a people get the kind of government they deserve!” I believe what he had in mind is that if you don”™t care enough about who or what for you vote for, well, who really is to blame?

John Alan James is professor of management and corporate governance, Lubin School of Business, Pace University, New York City. He can be reached at jjames@pace.edu.