Union Blues

This week I want to make three points about labor unions, something I have mentioned only rarely in previous columns. First, I want to make clear that I am a big fan of labor unions. I believe they are absolutely essential to the effective functioning of a democracy, and they play a key role in tackling the income inequality that has plagued us for more than 40 years. Data from the New York Times shows that inequality bottomed out, relatively speaking, during the Carter administration, when the richest 1 percent of our population had just over 10 percent of U.S. income. Since 1980 that percentage has been rising to the point where in 2021 the top 1 percent controlled 19 percent of U.S. income. This is not as high as during the 1920s, but it’s getting close. Those who know their history know that that decade did not end well, and it is easy to make the case that much of the current pessimism and anger about the direction the United States is going is directly related to the inequality problem. By demanding better wages and benefits for workers, unions can reduce inequality and ease some of the political pressures we are experiencing.

Second, unions are not just having a moment—they’re having a decade or more, and we should get used to it. This has been a summer of strikes, or near strikes, and more are coming, most immediately the auto workers, who have threatened to walk off their jobs this week if there is no agreement on a new contract. It is becoming clear that the balance of power in the economy is shifting away from corporations and towards workers. I could do several columns on the reasons for that, which include a pro-worker administration (Biden really is the most pro-union president since Franklin Roosevelt); public exhaustion, with trickle-down economic policies that have not produced promised benefits to people lower on the income scale; and, probably the simplest explanation of all, changes in the supply of workers.

I have said on many occasions that demography rules, and our current economy proves that. Monthly statistics vary, but we consistently have around twice as many jobs vacant as we have people looking for work. So, even if we could match everyone up—which we can’t because not everyone has the requisite skills—we would still be short millions of workers. It should come as no surprise that when there is a labor shortage, wages go up as employers try to attract more workers, and unions have more leverage. The important point is that is not likely to change anytime soon, at least until we produce a better immigration policy that will let in more workers to compensate for what is rapidly becoming a serious baby shortage. So, in essence, the economic pendulum, which for the last 40 years has swung in the direction of corporations, is now swinging back towards workers, and it is likely to stay there for a long time.

Third, there is a real possibility the unions will miss their moment. Corporate executives will argue the unions are overreaching and demanding too much and will point to the United Auto Workers’ demands as an example, but I think there is a larger issue here. While big demands may look like offense, unions too often play defense. They are focused almost entirely on protecting existing jobs and the current workers who hold them instead of trying to grow and expand their leverage. Over the long term, this is not a successful strategy for two reasons, although it usually produces short-term results. First, union participation is shrinking. At the beginning of this year the Bureau of Labor Statistics reported that 10.1 percent of American wage and salary workers were union members in 2022. This was down from 10.3 percent in 2021, although the decline was largely due to an increase in the total workforce. More important, that number is the lowest on record and compares unfavorably to 1983, the first year comparable data was collected, when the union membership rate was 20.1 percent. The strength of unions lies in their numbers, and those numbers are shrinking in significant part because unions are focused on protecting what they have and are not paying enough attention or devoting sufficient resources to growing their membership.

Second, union demands sometimes remind me of the story about King Canute commanding the tide not to roll in. We all have to face the fact that there are large changes in the economy—technological improvements, changes in consumer taste, climate change currently—that force changes in plans whether we like it or not. In the auto case, the industry is converting to electric as a consequence of all three things I just listed. The union is worried, correctly, that since electric vehicles have fewer parts, both assembly and parts and components manufacture will require fewer workers. This is not, however, a sinister corporate plot to get rid of workers. It is a response to changed facts on the ground and denying them is reprising Canute. The United Auto Workers may well end up getting a good bit of what it wants, but it would be a bigger slice of a smaller pie. The better long-term strategy is making sure all the new jobs that will be created, primarily in battery manufacturing, will be union jobs.

William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.