Two worthwhile op-eds on the state of organized labor in the wake of the UAW-GM agreement last week. (Although we could do without the cancer metaphor, which is distasteful and overused.)
In fact, competition, not corporate greed, is the real problem facing labor unions. When unions negotiate raises for their members, companies pass those higher costs on to consumers. But companies can only pass those costs on if they do not have significant competition. For a long time, that was the case in America. Until the mid-1970s, regulations and trade barriers helped protect the union monopoly.
Those days are gone with polyester and disco. Deregulation and free trade allow Americans to choose from whom they will buy. And Americans choose value for their money. Nonunion companies now dominate the auto, steel, trucking and construction industries — former union strongholds — because they offer consumers better value.
By making these concessions, the UAW has finally acknowledged something that big labor has always been reluctant to: Past practices were driving employers into bankruptcy. Labor cannot simply demand higher wages without providing greater productivity and expect the firm to survive.
One could envision a future of the labor movement that builds off this agreement and fundamentally alters the relationship between workers and companies. In their landmark book “What Do Unions Do?” first published in 1984, Harvard economists Richard Freeman and James Medoff envisioned a union that could be a net positive for a firm if it worked to maximize what the authors called the “union voice” effect.
If workers get together and figure out changes that can be made to improve operating practices, and then voice these observations to employers, then the union could in theory help the employer become more competitive.
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