Labor Movement in the U.S. Brief History of Labor Movement in the U.S. Jobs: Exportable and Nonexportable The Economic Power of Labor Unions The Economic Power of Large Employers Collective Bargaining

Labor Movement in the U.S. Early Industrial Labor Source of early U.S. Factory Labor – Migration from Farm to Cities  Not accustomed to working for wages  Work oriented  Fairness concerns not an issue  Received what the land would provide  Used to working long hours with little or no time off  Used to working for themselves A motivated, hard working labor pool!

Labor Movement in the U.S. Early Business Owners Businesses were family owned or independently owned Capital investment improved productivity of workforce Business owners were profit motivated, and therefore Focused on cost minimization, including cost of labor Business owners had support of government and legal system Industrial Issues not considered * work week* Wage equity * Safety* Benefits * Health Issues* Security (Job Protection)

Labor Movement in the U.S. Organization Attempts Labor unions are a traditional American institution Although trade union movement is over 200 years old Modern union era dates to the last quarter of the 19 th century Business consolidation and emergence of larger corporations reduced individual labor bargaining power Perceived abuses of business power led to attempts by labor to organize For the most part U.S. attitude was that labor unions were subversive until the 1940’s

Labor Movement in the U.S. Organization Attempts Early attempts at unionization were plagued with a lack of clear, universally accepted objectives  Some wanted broad social change elimination of wage systemuniversal 8 hour day establishment of producers cooperatives  Some focused on betterment of job conditions wagesworking conditions work hours Lack of leadership There was a public mistrust and fear of unions Political Control Racketeering Communist Ties Unionization was not well accepted by a society where the ethic was to get ahead by individual merit

Labor Movement in the U.S. Organization Attempts Corporate business fought unions tooth and nail  Had the power in terms of tradition and culture  Had a sympathetic legal system (government backing) Known union members were “blacklisted” Those suspected of union sympathy were fired Court orders were obtained to prevent strikes Businesses sometimes hired “private detectives” and utilized local police to put down strike attempts violently

Labor Movement in the U.S. Early Unions Noble Order of the Knights of Labor ( ) Organized by Philadelphia garment workers in 1869 Opened to farmers, merchants and wage earners Objectives Equal pay for equal work Abolition of child labor 8 hour work day

Labor Movement in the U.S. Early Unions American Federation of Labor (AF of L; AFL)  Organized in 1886  Focused on better working conditions Better pay Working conditions Union labels on produced items Craft oriented

Labor Movement in the U.S. Early Unions Congress of Industrial Organization ( ) Was a part of the AFL until 1935 Broke away because it advocated organization along industrial lines rather than craft lines Finally reintegrated into AFL in 1955

Labor Legislation The National Labor Relations Act, 1935 (Wagner Act) Pro Labor Labor’s right to organize legally recognized Collective bargaining legalized National Labor Relations Board created Power to punish unfair labor practices Power to determine which union should represent organizing workers

Labor Legislation Taft-Hartley Act (1947) Pro Management U.S. President can call for an 80 day postponement of a strike for a “cooling off period” Allows states to ban the “Union Shop” concept (all employees must join the union) Allows states to enact “right to work” laws (employees choose whether or not to join the union) Prohibits jurisdictional disputes between unions vying for same worker pool Outlawed the “closed shop” where a business can only hire union members (construction industry has gotten around this to some degree)

Union Membership, Copyright  2002 by The McGraw-Hill Companies, Inc. All rights reserved. Union membership reached its peak in the late 1970s

Union Membership, Copyright  2002 by The McGraw-Hill Companies, Inc. All rights reserved. Union membership as a percentage of the labor force reached its peak in the late 1950s

Union Membership As a Percentage of Employed Labor Force, Selected Nations, Copyright  2002 by The McGraw-Hill Companies, Inc. All rights reserved. America is one of the least unionized industrial nations in the world

Top Ten Labor Unions, 2002 National Education Association2,700,000 Service Employees International1,600,000 International Brotherhood of Teamsters1,500,000 United Food and Commercial Workers 1,400,000 American Federation of State 1,400,000 American Federation of Teachers 1,000,000 Laborers’ International Union 800,000 Intnat’l Association of Machinists & 780,000 Communications Workers of America 740,000 International Brotherhood of Electrical 728,000 United Automobile and Aerospace 710,000 United Steel Workers 700,000

Evolution of the Labor Movement Note from the previous slide the majority of union members are now employed in service industries Also, the union with the largest membership represents a class of “professional” employee, the teacher Finally, note that the jobs of certain service workers are more secure from outsourcing than manufacturing

Jobs: Exportable and Nonexportable Work that can be done abroad: Imported goods and services represent work that can be done abroad Auto manufacturing Steel manufacturing Textiles and apparels

Jobs: Exportable and Nonexportable Work that must be done in the U.S. Distribution: Transportation and Warehousing Where face to face customer contact is necessary Medical Services Legal Services Home Repair, Remodeling, Etc. Teachers Personal Trainers Social Workers

Decline of Organized Labor Growth of the Service Sector – More difficult to organize Competitive pressures on business from foreign competition Labor force reductions in traditionally union job lines Emergence of a new generation of smaller corporations Establishment of foreign firms in the U.S. which have successfully resisted union organization Automation and the impact on traditional union jobs Industrial growth in the South which has historically resisted unionization

Economic Power of Unions Question: Are unions monopolies? Think of longshoremen, teamsters and certain construction trades that may be 100% unionized Some unions may appear to be monopolies Union Methods of exerting power The method of Inclusion – taking in as members virtually everyone who works in a craft, trade or industry The method of Exclusion – keeping people out of the union, thereby reducing supply Tests Sponsorship Experience

Inclusive and Exclusive Unions Copyright  2002 by The McGraw-Hill Companies, Inc. All rights reserved. The wage rate is set by supply and demand

Economic Power of Large Employers Its all about Power and who has it! Corporate mergers have continued to consolidate corporate power just as much as unionization has increased the power of the union When business is good, demand for workers is high, power may be on the side of the union When business is bad, business automates, outsources, etc. demand for workers is reduced, power shifts to the side of business Bilateral monopoly – Unions control total supply vs an industry that controls total demand – Interdependency, like Oligopoly At the end of the day, its still a matter of the supply and demand for labor

Economic Power of Business – The Monopsony Monopsony – A single buyer for a particular product Monopsonist faces the entire supply curve of labor, sloping upward to the right – to hire more means paying more The employer who is the only employer for an area or a skill The Factory Town Professional Sports – draft rules, salary caps, free agency, etc. “Today the professional baseball, football, and basketball leagues have pure monopsony power” Slavin, 321. Player salaries are high, but would be even higher if there were more bidders for their services

The Collective Bargaining Process Collective Bargaining is the main arena of the power struggle between labor and management Labor asks for substantial increases in wages, benefits, and working conditions Management offers considerably less than what labor wants So, they bargain And he who has the power wins

Collective Bargaining Process Labor’s ultimate weapon is the strike  Best time to strike is right after payday Management’s ultimate weapon is the ability to withstand a strike Sometimes management will “lock out” workers  Best time to lock out workers is just before payday

The Collective Bargaining Process The ability to take a strike will vary from firm to firm Manufacturing oftentimes fares better than services because it can build up inventory in advance of a strike A diversified firm can ride out a strike more easily than a single product firm Availability of competent, non union labor A multinational corporation might just shift production to another country

The Collective Bargaining Process In recent years, the survival of the business has depended upon union workers making concessions due to global competition or new business models by emerging companies (United Airlines vs Jet Blue) Unions have begun to understand that if the business fails, the union fails and workers lose Business realizes that strikes can be costly So, incentives to avoid strikes are there for both parties

The Collective Bargaining Process Incentives to avoid strikes Cost to both labor and business Real issues need to be addressed and solved Productivity – the source of wage increases for labor COLA’s Wages themselves benefits Pattern setting – the settlement with one union may set the pattern for settlement with other unions

The Strike Why Strike? Failure by both management and labor to properly analyze cost-benefit – strikes are usually a lose-lose proposition Opposing sides are too far apart Hope to settle strike quickly – “We’ll show ‘em and they’ll cave” Ego Few Strikes have been disruptive to the economy Exception – 1959 Steel Strike Exception – 1970 UAW Strike against General Motors

Work Time Lost Because of Strikes, Copyright  2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Averting Strikes Commitment to bargain in good faith until an agreement is reached Mediation (not binding) – Choosing a third party to act as go between; Parties assemble separately and mediator goes back and forth trying to get each party to concede a little more and take a little less Arbitration (binding or not binding) – Case is submitted to the arbitrator who makes the decisions which may be imposed upon the parties