The Waning Influence of US Labor Unions

By Samuelson, Robert J. | American Banker, July 3, 1985 | Go to article overview

The Waning Influence of US Labor Unions


Samuelson, Robert J., American Banker


WE ARE WITNESSING what increasingly looks like the twilight of the American labor movement. Just last week, the Supreme Court delivered another blow -- a decision limiting unions' ability to discipline their members.

The setback is only the latest in a long string of defeats. Economic, political, and social tides are all running strongly against unions. By the 21st century, they could dwindle to insignificance.

There are those who will applaud labor's decline. They are wrong. In our pluralistic society, checks and balances are as important for the economy as for the government. Business executives who salivate at the thought of vansihing unions are almost certainly short-sighted. Without effective unions, widespread worker grievances may ultimately lead to inflexible responses -- rigid court decisions and bureaucratic regulations.

But the labor movement's shrinkage is mostly self-induced. Unions haven't adapted to a work force that is increasingly white collar, female, and professional. They haven't developed a convincing social and economic role for office, instead of factory, work. Meanwhile, they have abused their economic powers in industries that were umionized in the 1930s and 1940s. The result has been a steady drop in the unionized share of the nonfarm labor force, from a peak of 35.5% in 1945 to 17.9% in 1982.

A few years ago, two Harvard economists -- Richard Freeman and James Medoff -- suggestd a useful distinction between unions' good and ill effects. On the one hand, unions can raise wages through a monopoly control over labor, enforced by strikes. In 1980, union wages were roughly 30% higher than comparable nonunion wages. This power benefits some workers, but it hurts society. Excessively high labor costs can bankrupt companies, put entire industries at a competitive disadvantage, or cause firms -- as a way of surviving -- to substitute machinery for people.

The healthier form of union influence is what Freeman and Medoff call "voice": the ability to affect working conditions and protect workers against arbitrary employer demands or dismissal. At its best, the unions' "voice" role can improve worker morale, while making companies more competitive -- and profitable -- through superior working practices and management. Stronger firms can, in turn, pay higher wages and provide better job security.

If unions are to survive, they will have to develop new ways of exercising this role. Workers want to be heard, but they increasingly fear theat excessive wage and fringe benefit demands will jeopardize their jobs. Recent polls show that majorities of nonunion workers believe that unions both "increase the risk that comapnies will go out of business" and "stifle individual initiative."

There are some signs of change. companies and unions are increasingly sharing information about plant and competitive conditions. A recent study by Audrey Freedman of the Conference Board, a business research group, found that firms with these agreements report better worker morale and production results. …

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