Greg Ip

Articles by The Economist’s U.S. Economics Editor

Obama and the unions: Love of Labour

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Oct 29th 2009 | WASHINGTON, DC
From The Economist print edition

Unions are winning again in Washington, but the big fights are still ahead

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[Greg Ip] THREE years ago, when negotiations with the union representing air-traffic controllers reached an impasse, the administration of George Bush simply imposed a deal that froze salaries, slashed entry-level pay and even set a dress code. Barack Obama, then a senator, sponsored a bill to send the parties to arbitration, without success at the time. As president, Mr Obama ordered talks to resume. In late September, with the help of the arbitrators, the union got its new contract: 3% annual pay increases, higher starting pay and the right, once again, to wear jeans.

 
 

Ronald Reagan’s mass firing of illegally striking controllers in 1981 came to signify a turning-point in the fortunes of organised labour, whose share of private-sector workers has fallen to a new low of 7.3% so far this year (see chart). It is tempting to see the controllers’ new deal as marking a turning-point in the other direction.

Mr Obama is the most pro-union president since Jimmy Carter at least. His address to the AFL-CIO, the unions’ umbrella group, in September had the energy of an election rally. Since becoming president he has signed orders that discouraged federal contractors from using non-union labour, elevated workers’ claims in the bankruptcies of General Motors and Chrysler, and imposed tariffs on imports of Chinese tyres at a union’s request. But these pale beside other issues the labour movement is pursuing.

The unions’ main priority is the Employee Free Choice Act, also known as card check. It would enable workers to form unions without a secret ballot, provided that at least 50% of eligible workers had signed a union card. It would also speed up the process by which a new union gets its first contract and would impose tougher penalties for violation of workers’ rights.

Unions have pursued card check since the 1970s, and Mr Obama has long backed them. But the bill does not yet have the 60 votes needed to secure passage in the Senate. Getting there depends on winning over moderate Democratic senators, especially Arlen Specter of Pennsylvania (a former Republican). He thinks that instead of replacing the secret ballot, elections should be speeded up. Unions are wary.

After card check, which may simply be too hard for the Democrats to deliver, the most important battles revolve around Mr Obama’s nominees to key labour positions. In April Mr Obama named Craig Becker, a law professor and lawyer for the Service Employees International Union, to one of three vacancies on the five-member National Labour Relations Board (NLRB), whose decisions weigh heavily on the balance of power between unions and management. Business groups are furious. In a joint letter sent to Congress on October 20th, they protested that Mr Becker’s views are “well outside the mainstream and would disrupt years of established precedent and the delicate balance in current labour law.” On October 21st John McCain, a Republican senator, blocked the nomination on a procedural move, demanding Mr Becker appear before a Senate committee before a confirmation vote.

Mr Becker’s decisions on the NLRB would probably be far less radical than business groups charge; nonetheless, his presence could improve the ability of unions to organise. Mr Bush’s appointees to the NLRB systematically voted against labour. Indeed, unions have had their greatest organising successes when the NLRB is not a factor, says Patrick Szymanski, a lawyer with Change to Win, a union group. These would include deals made with state and local governments.

In a report, the US Chamber of Commerce says Mr Obama’s appointees could reverse more than 50 decisions from the Bush era. It also claims that, even without card check, the NLRB could achieve many of its aims, such as speeding up elections. If card check passes, then it will be the board that decides how it is implemented.

After declining steadily since the 1970s, unionisation rates stabilised briefly from 2006 to 2008, then plunged again this year, according to figures complied by Barry Hirsch of Georgia State University. The reasons for this decline are much debated. Unions have retreated in almost all countries, in part because heavily unionised sectors like manufacturing have declined. But unionisation has also shrunk within most sectors and occupations, apart from in the public sector. Some economists attribute this to a more hostile institutional and legal climate, which Reagan helped create with his firing of the air-traffic controllers. A poll in 2006 sponsored by the AFL-CIO found that a majority of workers would join a union, but hesitate in part because their bosses are opposed.

Mr Hirsch, however, attributes the decline in unionisation to economic, not legal, factors. As the economy has become more competitive, unionised companies have lost market share or gone bankrupt because of their higher costs. Unions have not succeeded in replenishing their ranks from within new companies. And firms are more resistant to unions because the stakes are higher. A recent study by David Lee and Alexandre Mas of Princeton University found that a company’s stockmarket value falls by at least $40,500 for each unionised worker.

This suggests that even if Mr Obama enacts everything unions want, membership may rise only slightly. A real revival would require a return to the less competitive, less globalised economy of the 1950s and 1960s. Even with the recent rise in protectionism, that is not on the cards.

 

The original article is linked here.

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Written by gregip

October 29, 2009 at 4:00 pm

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