There is no way around it: The labor movement suffered a huge defeat last Tuesday when Wisconsin voters rejected the union sponsored recall of Gov. Scott Walker. Walker’s reforms were designed to weaken Big Labor’s business model and they succeeded.
Government union membership in Wisconsin has fallen by more than half since Walker’s new law gave workers a choice about whether or not union bosses could take dues directly from their paychecks. If this were to happen in every state, the Democratic Party as we know it today would be finished.
Liberal reactions to Walker’s victory fall into two basic categories: 1) whining about “the end of democracy” and the need for new campaign finance regulations; and 2) honest introspection about the decline of labor unions. This column is for liberals who find themselves in the second column.
In 1945, union membership reached a peak of 35.5 percent. At that point, virtually every American was either in a union, or knew someone who was. Since that time, however, unions have slowly lost their grip on economic life in the United States. Last year union membership reached an all time low of 11.8 percent.
What happened?
One clue lies in the fact that, until Wisconsin, not all unions have been losing members. Since their creation in Wisconsin in 1958, government unions have been growing fast. In 1973, there were less than 4 million government union members nationwide, and they only made up 17 percent of all union members. But by 2011, there were 7.5 million government union members and they were a majority (51 percent) of the labor movement.
Why have government unions thrived while private-sector unions perished? Because, under current law, American unions are only capable of redistributing wealth, not creating it.
The Service Employees International Union claims union workers earn $10,400 a year more than their nonunion counterparts. But where does that $10,400 a year come from? If we’re talking about a private company, that $10,000 per worker premium comes directly out of profits.
Less profits means less resources to reinvest back into the company. Research shows that unionized firms spend 15 percent less on research and development and 6 percent less on capital investments than nonunionized firms.
Firms that can’t reinvest profits back into the company because they pay a union wage premium can’t compete against nonunion firms. Between 1977 and 2008 unionized manufacturing jobs fell by 75 percent. But nonunion manufacturing employment actually increased by 6 percent over that same time.
Since governments don’t go out of business, government unions don’t have the exact same problem, but they do have a different one. Generous union contracts can be paid for through higher taxes. At least until taxpayers revolt, as they did in Wisconsin.
So if private-sector union membership is already in a death spiral, and taxpayers are beginning to say ‘no’ to government unions too, what should the labor movement do?
They should stop trying to amass political power through Democratic Party so they can better redistribute wealth and start working with employers so they can better create it.
Just look at Fortune magazine’s top 10 best companies to work for. Not a single one of them is unionized. Think of all the new and exciting companies creating wealth in the United States: Google, Apple, Facebook. None of them are unionized.
The “one-size fits all” adversarial approach may have worked in the 20th century. But it is a failing model in the 21st century.
In other nations, employers are allowed to work with employee groups to improve productivity and working conditions. But not in the United States. Section 8(a)(2) of the NLRA prohibits employer-dominated “labor organizations.” Any form of two-way discussions between workers and management outside of the collective bargaining process is illegal.
If unions want to turn their fate around, they should spend less time trying to recall governors and more time trying to change that.
