1. McGraw-Hill/Irwin © 2009 The McGraw-Hill Companies, All Rights Reserved Chapter 27 Labor Unions

2. Copyright  2009 by The McGraw-Hill Companies, Inc. All rights reserved.27-2 Learning Objectives 1.A short history of the labor movement. 2.Labor legislation. 3.The economic power of unions and employers. 4.The economic power of monopsonies. 5.Collective bargaining. 6.The strike.  These are the high points of this chapter:

3. Copyright  2009 by The McGraw-Hill Companies, Inc. All rights reserved.27-3 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.

4. Copyright  2009 by The McGraw-Hill Companies, Inc. All rights reserved.27-4 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.

5. Copyright  2009 by The McGraw-Hill Companies, Inc. All rights reserved.27-5 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

6. Copyright  2009 by The McGraw-Hill Companies, Inc. All rights reserved.27-6 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.

7. Copyright  2009 by The McGraw-Hill Companies, Inc. All rights reserved.27-7 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 1.3 million employees the U.S. with none unionized. UAW workforce has shrunk from 650,000 to 220,000 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.

8. Copyright  2009 by The McGraw-Hill Companies, Inc. All rights reserved.27-8 Membership of Top 10 Labor Unions, 2007

9. Copyright  2009 by The McGraw-Hill Companies, Inc. All rights reserved.27-9 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 and Unite Here, 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.

10. Copyright  2009 by The McGraw-Hill Companies, Inc. All rights reserved.27-10 Union Membership as a Percentage of Labor Force, Selected Industrial Countries, 2006

11. Copyright  2009 by The McGraw-Hill Companies, Inc. All rights reserved.27-11 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.

12. Copyright  2009 by The McGraw-Hill Companies, Inc. All rights reserved.27-12 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.

13. Copyright  2009 by The McGraw-Hill Companies, Inc. All rights reserved.27-13 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.

14. Copyright  2009 by The McGraw-Hill Companies, Inc. All rights reserved.27-14 Inclusive and Exclusive Unions

15. Copyright  2009 by The McGraw-Hill Companies, Inc. All rights reserved.27-15 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

16. Copyright  2009 by The McGraw-Hill Companies, Inc. All rights reserved.27-16 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.

17. Copyright  2009 by The McGraw-Hill Companies, Inc. All rights reserved.27-17 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.

18. Copyright  2009 by The McGraw-Hill Companies, Inc. All rights reserved.27-18 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.

19. Copyright  2009 by The McGraw-Hill Companies, Inc. All rights reserved.27-19 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

20. Copyright  2009 by The McGraw-Hill Companies, Inc. All rights reserved.27-20 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.

21. Copyright  2009 by The McGraw-Hill Companies, Inc. All rights reserved.27-21 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. o1946 was an aberration because unions had been restricted from striking during the war.

22. Copyright  2009 by The McGraw-Hill Companies, Inc. All rights reserved.27-22 Work Time Lost Because of Strikes, 1945-2005

23. Copyright  2009 by The McGraw-Hill Companies, Inc. All rights reserved.27-23 Time Lost to Strikes: U.S. and Selected Countries, 2006

24. Copyright  2009 by The McGraw-Hill Companies, Inc. All rights reserved.27-24 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.

25. Copyright  2009 by The McGraw-Hill Companies, Inc. All rights reserved.27-25 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.

26. Copyright  2009 by The McGraw-Hill Companies, Inc. All rights reserved.27-26 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.

27. Copyright  2009 by The McGraw-Hill Companies, Inc. All rights reserved.27-27 Current Issue: 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?