Organized Labor in
America has lost its way. The most telling evidence is that unions
have been shedding members for decades. It is time for Americans to
ask why this is happening, not whether it is happening. A powerful
example of how lost unions have become was seen during the debate
over Social Security reform, when the AFL-CIO and other unions
fought loudly against President Bush's proposals. Unions demonized
all solutions aiming at solvency except one: an increase in payroll
taxes. In retrospect, their argument was stunning-a direct call by
a special interest for higher taxes that are paid exclusively by
their interest: labor.
events highlight the peculiar dilemma facing modern American
unions. The slow demise of General Motors (GM) is visibly
intertwined with the inefficient labor contracts that the United
Auto Workers (UAW) secured in decades past. Regular media stories
showcasing problems at GM and Delphi send a potent signal to other
U.S. workers that big labor's ideal business model is a bust. The
AFL-CIO splintered last summer when a number of major member unions
broke away. Finally, the federal government has begun implementing
significant changes to labor regulations. The Labor Department is
enforcing accounting transparency in an effort to weed out
corruption and bring some accountability between labor bosses and
membership. That has been decried as an attack on organized labor,
but it may instead prove a powerfully rejuvenating tonic.
Paradox of Modern Unions
Iliad, Homer sang that "." The modern experience shows the
opposite can be true as well: There is weakness in some unions of
very strong men.
philosophy of organized labor is that a union can bargain for
higher wages and better treatment than workers could obtain
individually. But the union philosophy sees the economy through a
1950s lens where only two agents negotiate how to cut the economic
pie: management as the agent of capital and investors, and
organized labor as the agent of individual workers. It assumes
monopoly power for employers, lifetime employment for workers, and
non-unique (lower-skilled) labor. Consequently, unions tend to
prosper only in the rare cases where all three conditions exist-an
increasingly rare situation in the modern economy. The economic pie
is dynamic, and burgeoning entrepreneurship simply does not make
sense to the union philosophy.
Why would a
uniquely skilled artist, or uniquely skilled knowledge worker, need
general representation? The new rules of the technological economy
mean smaller firms and more individualized work, not assembly
lines. About the only place monopoly power remains a reality is
What is most
interesting about the union philosophy is its intellectual roots in
19th century Marxism. Karl Marx famously saw the march of history
in terms of a dialectic between two forces. But the forces of
"capital" and "labor" were synthesized soon after the publication
of Das Kapital when Great Britain formalized in law the
limited liability stock corporation. In modern times, no one thinks
twice about employee ownership of stock options, or of profit
sharing, but they make the capital-versus-labor framework an
anachronism. Entrepreneurs create capital out of nothing. They are
neither worker nor capitalist. Yet economists who study growth now
recognize that the entrepreneurial role is central-almost
exclusively central-to explaining why productivity rises and why
workers experience wage growth.
But the very
things that big unions have been fighting for in recent years are
hostile to innovation. They protect jobs of the past at the expense
of jobs of the future. They fight for bailouts of inefficient
corporations. They fight for higher minimum wages that price
low-skilled workers out of the market (and out of competition with
their members). Hostility to part-time employment, workplace
flexibility, and capital gains are all antithetical to the virtual
workspace that fosters start-up innovation.
Decline: Overview of the Unionized Workforce
have not remained oblivious to this fact. Over the past 25 years
union membership in America has dropped dramatically: 21.4 percent
of all workers belonged to a union in 1981; today, only 12.5
percent do. The decline of private sector union membership is the
heart of issue, dropping from 19 percent to under 8 percent in just
25 years. In other words, nine out of 10 employees at for-profit
companies are not in a union.
When the public
asks whether unions are relevant, they are asking the wrong
questions. Organized labor is very powerful politically, for now.
But unions are almost totally irrelevant economically in the 21st
century workplace of individualization and technology. There simply
isn't any debate over whether unions are facing extinction, because
the numbers speak for themselves.
Unions do remain a
powerful force among one segment of workers: government employees.
Some 36.5 percent of all government employees belong to unions, up
since 1981. These numbers are highest at the local level, with 41.9
percent of all local government workers holding union cards.
The decline of
private sector unions coupled with the high rates of public sector
unionization has changed the face of the American labor movement.
Decades ago the typical union member worked in the private sector,
often in a very physically demanding job. He would strike to get
higher pay or better working conditions. Today 48 percent of all
union members work for the government. The typical union member
nowadays is a local government worker lobbying city hall to raise
taxes so the city can pay him more. Rather than striking to redress
difficult working conditions, modern unions fight for more
government because they are the government, drifting ever farther
from labor's initial goal of improving the life of working
Review: Transparency Comes to the Union Hall
A new program to
enforce fiscal transparency within unions by the Department of
Labor is well-timed to help unions conduct a much-needed
self-examination. For decades, big labor rightfully decried shady
accounting in corporations, but never faced up to their own shady
accounting. Laws dating back to 1959 require union reporting of
finances, but until the Labor Department's Office of
Labor-Management Standards began enforcing the law, very few
filings occurred. That environment changed significantly on March
31, 2006, the deadline for filing a new LM-2 form that details the
finances of any union with $250,000 or more in dues.
Department makes this new union disclosure data available at its
Web site ,
and a brilliantly easy-to-use Web site has been established
privately at The new disclosures reveal exactly
how union leaders have managed their employees dues. For example,
the National Education Association has 417 employees earning over
$75,000 a year. Seven hundred of the UAW's 1,209 employees have
salaries exceeding $75,000. Moreover, UAW political donations are
very unevenly distributed: Less than 1 percent of its $7 million in
political funds were given to Republicans.
Those who support
American workers can hope that the new transparency will foster the
necessary change in the character and principles entrenched in
union leaders. The splintering of the AFL-CIO may prove to be the
tipping point needed to kick off some diversification,
experimentation, and evolution in what a union is in the modern
economy. This is how unions can survive. In that sense, more
transparency and scrutiny are best interpreted as useful tools for
rank-and-file members to reassert what they want.
Polls reveal that
American workers do not see their workplaces in the negative light
that union leaders do. A full 67 percent of Americans say their
company has a strong sense of loyalty towards them.
wisdom is wrong: American workers are not frightened. Just 9
percent of workers fear their job will be shipped overseas.
Moreover, workers are satisfied with their job security by an 82 to
15 percent margin.
What do American
workers want? According to one survey, 62 percent of workers rated
excessive bureaucracy as their largest barrier to job satisfaction,
while 59 percent rated co-workers who focus on assigning blame
instead of accomplishing tasks.
In another poll, 60 percent of workers said that flexibility was
very important to their job satisfaction.
Unions have not put the effort into addressing these concerns that
they have into fighting outsourcing, but these are the issues that
matter to workers.
sense the discord among splintering unions is perhaps a sign of
hope. For example, AFL-CIO chief John Sweeney is denouncing
immigration reform proposals that would legalize guest workers,
while Service Employees International Union boss Andy Stern has
championed poor migrant workers. This is exactly the kind of
diversity that will be essential for the union movement to evolve
by trying different approaches to the challenges of the 21st
century, not simply applying outdated approaches to modern
Tim Kane, Ph.D., is
Director of the Center for International Trade and Economics, and
James Sherk is a Policy Analyst in Macroeconomics in the Center for
Data Analysis, at The Heritage Foundation.