The Big Mistake that Unions Are Making

Accepting wage and benefit cuts to preserve jobs is bad for unions, and it’s bad for the rest of us.
by | April 5, 2012

As I watch the ongoing conflicts over collective bargaining and organized labor amid the fiscal distress faced by so many governments, such as the situation now unfolding in Detroit, I cringe every time I see unions make concessions on wages and benefits to avoid layoffs. It is the wrong choice for them, and it is the wrong choice for the rest of us.

It is the wrong choice for them because job losses are an inevitable part of a capitalist economy, in which innovation and changes in markets that take jobs away also create new jobs. At best, choosing to circle the wagons in a fiscal crisis may temporarily protect a few (typically older) workers. But protecting current workers from being let go in response to changing conditions by reducing compensation renders the union less attractive to new workers. And if the employing organization keeps positions it doesn't need or can't afford, then it is less economically sustainable, less productive and less able to compete.

Unions should adapt by constantly seeking competitive advantages for their existing members, even at the expense of losing some jobs, and by recruiting new members for the new jobs created by innovation, advances in technology and changes in market conditions.

When union officials choose to keep existing jobs and give up benefits, it is bad for the rest of us because it hurts the attractiveness of the union to newer, younger employees and leads to the decline of organized labor, a vital element of a democratic society.

In an influential recent article in Foreign Affairs, Francis Fukuyama writes that stagnating wages and growing inequality soon will threaten the stability of liberal democracies. He argues that democracy cannot survive the decline of the middle class, which he sees as threatened by the inexorable forces of technology and globalization.

I believe, however, that the disruptions caused by these forces today are no greater than those that occurred during the Industrial Revolution. What matters is how societies respond. The response to the Industrial Revolution was the rise of organized labor, which in turn was a major factor in the rise of the middle class. Because of the asymmetrical power relationship between the individual worker and the organization, the middle class cannot exist without organized labor.

But the organization — whether it is public or private — must compete in the marketplace, and the union must work with management to enhance the organization's competitive advantage. Unions should continue to protect workers from firings or changes in workload and working conditions that are arbitrary or capricious, but they should not prevent organizations from adjusting their complements of workers in response to market conditions.

Ever-increasing productivity is essential and is the result of capital applied to labor. Because of the productivity imperative, the successful organization will have fewer employees — better trained, better equipped, better managed and better paid. In this month's issue of Governing, Donald F. Kettl provides an excellent real-world example of this principle when he writes about Master Lock's unionized plant in Milwaukee, which is running at full capacity for the first time in 15 years. The Master Lock plan, Kett contends, represents the model for the future of American manufacturing: "fewer workers in more sophisticated factories, doing more highly skilled jobs at good pay."

Fewer workers is the result of technology. Good pay is the result of organized labor. We're all better off with unions that adapt and survive in a capitalist economy and a world of ever-changing technology and globalization. And we're better off with government leaders who recognize the vital role of organized labor in maintaining safe, sane and stable societies.

Mark Funkhouser  |  Director, GOVERNING Institute
mfunkhouser@governing.com

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