CHAPTER TWENTY-FIVE
Are Labor Unions Becoming Irrelevant?
WITHIN ONE SHORT YEAR—the year 1982—three well-known American union leaders called on me for counsel—the president of a large union of government employees, the president of a large union in a primary industry, and the head of a large district of a mass-production union. Each came with his own specific concerns. Yet each one asked—and fairly soon—whether the labor union still has a function in America or is becoming irrelevant.
Each of these men believes that to remain legitimate and to continue to be accepted as the spokesman, representative, and defender of the American working people, the labor union will have to develop positions and take actions that are incompatible with its traditions, its commitments, and its rhetoric.
“It is our proudest boast,” the mass-production unionist said, “that the total wage package in our industry is some 30 percent to 40 percent higher than the average wage package in American manufacturing. But would there be record unemployment in our industry, approaching the levels of the Depression, if that 30 percent to 40 percent had been put into plant modernization instead of into wages and benefits? I know that all my colleagues in the union leadership ask themselves this question. But not one dares come out with it into the open—he wouldn’t last ten minutes if he did.”
Ten, even five, years ago, anyone who mentioned “capital formation” or “productivity” to a labor leader was dismissed as a “tool of the bosses.” At best such matters were considered none of the union’s business and “what management is being paid for.” By now, few inside or outside union ranks would deny that the worker’s welfare depends on capital formation and productivity, even in the very short run. The two largely determine how many jobs there can be, how secure they can be, and how well paid they can be.
To focus on capital formation and productivity, however, would be tantamount to accepting that the interests of the enterprise and the interests of its employees are identical—and this would be seen as a denial of the union’s very reason for existence. So far no labor leader has even tried to build concern for capital formation and productivity, that is, for workers’ jobs, into union thinking, policies, and actions.
A second challenge confronting labor leaders is that the union may no longer be able to maintain the unique position it has reached this century in all developed noncommunist countries. To use traditional terms, the union has become an estate of the realm with substantial immunities—from taxes, from antitrust, from damage suits, for instance—and with legal privileges that are not too dissimilar to those enjoyed in earlier times by the army in Prussia or by the church in prerevolutionary France. The union is considered legitimate as no other nongovernmental institution is. And in accepting and protecting the union’s “right to strike” we have given one group in society a “right to civil disobedience.”
The reason for this is the union’s claim to be more than an interest group. It claims to be a cause. It wants more for its members as do all other interest groups, whether farmers, druggists, or undertakers. But the union also presents itself as the champion of all “underprivileged” or “exploited” groups in society. The true strength of the labor movement in developed countries has been moral: its claim to be the political conscience of a modern secular society.
And this claim, as most of my friends in the labor movement are beginning to see, cannot be maintained any longer. It is being destroyed by demographics. No matter how fast the economy will grow, “more” for the older people inexorably means “less” for the younger, working ones—and vice versa. One of my union friends—the president of the union of government employees—said that “the generation conflict between older and younger people rather than the conflict between management and labor will be the central social conflict of the next fifty years.”
Today the support of the older nonworking population, in Social Security and pension fund contributions, takes roughly 20 to 25 cents out of every dollar available for wages and salaries to the working population. If we do nothing at all, this will go up to perhaps 33 cents within ten years—in part because older people are living much longer, in part because the low birthrates of the last twenty years limit the number of young people entering the labor force.
It is inconceivable that working people will stand still for this transfer to nonworking people. In years past, we bought their acquiescence by raising wages and salaries as fast as Social Security and pension-fund contributions, or faster. But this way is barred. With wages and salaries already taking 85 percent of GNP, all we can do is create inflation, which lowers real incomes for both the older retirees and the younger people at work. We will have to decide whether older retired people are to get “more” by taking it away from younger working ones, or whether the younger working ones will get “more” by such measures as reducing early-retirement pension payments, lowering Medicare health benefits, and delaying the age of full retirement benefits.
If the labor union ignores this dilemma—as most union leaders understandably would like to do—the members will, of necessity, form new competing organizations that bypass the union and make it irrelevant. Retired people are already doing this. But if the union takes sides it will be fractured from within in short order. In either event it will soon cease to be the “cause,” or to have a unique legitimacy.
An even more difficult problem for the union arises out of the fact that employees are fast becoming the only real capitalists and the only real owners of the “means of production.” In Japan this has been accomplished through lifetime employment, which in effect means that, short of bankruptcy, large businesses are run primarily for the employees who, in traditional legal terms, are the “beneficial owners.”
In the United States, where pension funds now own up to 50 percent or more of our large businesses, the employees are the real owners, and their pension funds the main source of capital for productive investment. Conversely, the stake in the retirement fund is increasingly the largest single asset of the American family, once the head of the household is forty-five years or older.
“Power follows property” is one of the oldest and most thoroughly tested laws of politics. Employees—or “trustees” supposed to act for them and accountable to them—will predictably be brought into the supervision and the management of pension funds. The only possible alternative is control of the funds by government and its appointees.
The result will be what any union fears the most and fights the hardest: an organ of the employees that expresses the identity of interest between enterprise and workers, is independent of the union and bypasses it, and, inevitably, will oppose the union as an outsider. This is, in effect, what has happened in Japan. There lifetime employment, by restricting labor mobility and thereby reducing the threat of strikes, has made the union impotent in the private sector and little more than an organ of management. The alternative is for the union to claim that it represents the employees both against management and in management—whether through “co-determination” as in Germany; through control and management of the pension funds, which is what the unions in Sweden now demand; or through board membership as, for example, at Chrysler in the United States.
But “responsibility follows power” is also a law of politics. If it is disregarded—as it was, for instance, by the union members on the board of Volkswagen in Germany who in the late 1960s delayed the company’s plan to build a plant in the United States because it would have meant “exporting German workers’ jobs”—the result is serious damage. In VW’s case, the company’s share in the American auto market fell from 8 percent in 1969 to less than 1 percent now—seriously threatening the viability and survival of the whole enterprise and the jobs of its German employees.
But if the union representatives in management and ownership act responsibly, that is, in the interest of the enterprise, they soon will be tagged as “company stooges” and accused of having “sold out to management.” This happened in the 1970s to the labor representatives on the boards of the German steel and coal companies and, a few years later, to the leaders of the United Automobile Workers in America when they accepted wage concessions to save companies in severe crisis. Indeed its Canadian members revolted and split off from the automobile workers’ union.
There is a precedent in political history for the resolution of this conflict: the constitutional design that integrated the populus, the working people of Rome, into the power structure by enabling their representatives to veto actions by the patrician Senate. But it is not a problem that can be solved by good intentions or by rhetoric. It requires a redefinition of the role and function of the “countervailing power,” the union, and its reestablishment as the embodiment of the ultimate identity of interest between employer and employee.
Management, no matter who “owns” and no matter whether the institution is a business, a government agency, or a hospital, has to have considerable power and authority—power and authority grounded in the needs of the enterprise and based on competence. And power, as the drafters of the American Constitution knew, needs to be limited by countervailing power. Modern society, a society of organizations each requiring strong management, needs an organ such as the labor union—events in Poland in the last few years have amply proved this. The alternative is an uncontrolled and uncontrollable government bureaucracy. But to become again a dynamic, effective, legitimate organ, the labor union will have to transform itself drastically. Otherwise my union friends will be proved right: The union will become irrelevant.
(1982)