Sunday, January 15, 2017

Labor Unions Have More Younger Members Than They Think, And Why This is Important

With Donald Trump joining a Republican-majority Congress in office this week, the U.S. labor movement is braced for adversity. Who knows what lies ahead. At a minimum, labor will face a less sympathetic legal system when the composition of the National Labor Relations Board (NLRB) and judiciary reflect Trump appointees. Bigger changes at the federal level could include a de-funded NLRB and a national right-to-work law, while in the public sector a new Friedrichs case could result in a national public sector right-to-work mandate to go along with continued state-level legislative efforts to weaken public sector unions.

Undoubtedly, labor union strategies to survive and even revitalize in this era will need to be multi-pronged. Any strategy, however, is likely to have limited success if it fails to consider how to represent workers throughout the job switches and other major changes that occur over the full life cycle of workers in the new world of work, organizations, and employment. In many countries, from Asia to Europe to North and South America, workers are most likely to be unionized in their forties. In the United States, there are more than twice as many union members in their forties than in their twenties. Union leaders that want to be responsive to the majority of their rank and file members consequently negotiate seniority rights, seniority-based wage schedules, and health and retirement benefits that benefit middle-aged and older workers more than younger workers. Those interested in the future of collective voice and union representation should be asking whether this middle-aged and older worker bias has
contributed to the decline of unions by ignoring how workers experience unionism over their life cycles.

Taking seriously the role of younger workers in union revitalization efforts requires recognizing when workers are first unionized and how these early experiences affect later attitudes toward labor unions. In contrast to conventional wisdom that associates unionization with middle-age, my research using the National Longitudinal Survey of Youth 1979 has shown that the average age when workers begin their very first unionized job is 23 years old. Among those who had been represented by a union by the time they were around 40 years old, more than 85 percent were first represented before they were 30 years old. By age 25, nearly 50 percent of the entire sample had held at least one unionized job, and by age 40, nearly 65 percent was unionized in at least one of their jobs, and ex-unionized workers outnumbered currently-represented workers by three to one.

I think this bears repeating. By age 25, nearly 50 percent of a nationally-representative of workers that I analyzed had held at least one unionized job, and among the nearly 65 percent (yes, 65 percent) who had been represented by a union by the time they were around 40 years old, over half were first represented before age 23, and more than 85 percent were first represented before they were 30 years old. Any direct experiences that workers have with unions presumably shape their lasting attitudes towards unions, positively or negatively. So if younger workers are being neglected by their unions, unions run the risk of alienating a larger number of workers than previously expected. Labor unions should therefore adopt a life-cycle rather than job-centric representation strategy. Tom Kochan  has explained how this can work:

Once recruited, the relationship with members could be maintained for life by providing the labor market and educational services and benefits individuals and families need as they move through different stages of their careers and family lives. Consistent with the history of the way many unions began, these types of organizations might serve as mutual benefit societies by providing workers with health insurance, savings programs that build retirement security, life-long education, work-family supports, and the social networks and information needed to find jobs when required. They would also provide quick and effective advice and representation to solve problems and if necessary represent workers in trouble, individually and collectively. (Restoring the American Dream: A Working Families’ Agenda for America, MIT Press, p. 151).

My research on first union experiences reveals that U.S. labor unions have an important, and probably overlooked, opportunity to develop a supportive, firsthand relationship with quite a large fraction of the U.S. workforce. Admittedly, the labor movement faces significant complexities in fully embracing young workers with the goal of developing lifetime support. Workers who first encounter unionization as teenagers do so disproportionately in wholesale and retail trade which means that specific unions might bear the burden of devoting resources specifically to younger workers. Even when these unions realize the importance of workers’ first unionized experiences, high turnover of younger workers can make it difficult to build strong connections. U.S. labor law also favors a job-centric membership model.

Nevertheless, the labor movement and other interested parties should understand when and how workers first experience unionization, and construct representation strategies that fit with the life cycle realities of today’s workers. Given what’s likely to be a hostile legislative and judicial environment for U.S. labor unions in the coming months and years, this is probably more important than ever for the future of the U.S. labor movement.

Additional reading: John W. Budd (2010) "When Do U.S. Workers First Experience Unionization? Implications for Revitalizing the Labor Movement," Industrial Relations, vol. 49, no. 2 (April), pp. 209-225

Monday, December 19, 2016

Financialization, Not Globalization, Driving Carrier's Movement of Jobs

President-elect Donald Trump’s apparent success in getting Carrier to partially reverse its decision to shift jobs from Indiana to Mexico has rightfully received a lot of attention. This certainly isn’t the first time a politician has used a bully pulpit to pressure private corporations on labor issues. But to do so using Twitter, and more substantially, to get a major corporation to keep (at least some) jobs in the US is perhaps unprecedented, at least in recent decades. And at least some who decidedly do not share Trump’s perspective on many issues are applauding this move because too many politicians have sat silent while American corporations have moved thousands (millions) of jobs out of the country, even while benefiting from subsidies, tax breaks, government contracts, and other supports. Others have criticized this deal as interfering with free markets, or as furthering corporate subsidies (Carrier received $7 million in tax breaks).

Not debated is that Carrier workers in Indiana make $22 per hour; in Mexico Carrier can pay $3 per hour ($6 including benefits). So Carrier can save $65 million per year by shifting production to Mexico, or a host of other countries with similar labor costs and lax labor protections. So this is universally seen as illustrative of the pressures of globalization. What else could it be? That’s not a rhetorical question. Because this isn’t just a story of globalization, it’s a story of financialization. Financialization is when financial markets, motives, results, and institutions become more important than the production and delivery of goods and services.

Carrier is profitable in Indiana, and its parent United Technologies made billions—yes, billions—in profits last year. So this isn’t a struggling company moving in order to eke out a modest profit to stay in business. Rather, it’s a very profitable company seeking to make even greater profits. Why? Because of pressure from Wall Street. Investors have become insatiable in their demands for higher and higher financial returns all in the name of maximizing shareholder value. Workers thus face demands for wage and benefit concessions, layoffs, and stressful restructurings, all while being asked to invest more of themselves (but denied a role in corporate governance) in order to cut costs, increase short-term profitability, and drive up stock prices.

These issues are magnified by stock repurchases. Rather than retaining and reinvesting cost savings and earnings back into the business as was the norm before the shareholder-value movement, cost savings and earnings are increasingly being used to repurchase shares of the company’s stock. This “downsize and distribute” strategy drives up the stock price which not only benefits investors, but also top executives because of their sizable stock options. This is not globalization; this is financialization.

The shareholder-value movement is one element of financialization. A second dimension of financialization is an increased emphasis on pursuing profits through financial transactions rather than the production and delivery of goods and services. This has two facets.  One facet is the increasing importance of the financial sector. Deregulation of the financial sector allowed commercial banks to becomes more like investment banks and led to industry consolidation so that the small number of key financial firms are “too big to fail.” Moreover, information technology has allowed sophisticated financial investments to be priced and traded.  This has created a concentration of wealth in the financial sector, widens inequalities between Wall Street and Main Street, and further reinforces the primacy of financial investment over productive investment. The other facet of this dimension of financialization is the increased importance of financial activities of nonfinancial firms, such as the Ford Credit arm of Ford, which is forecast to earn pre-tax profits of $1.5 billion in 2017.

Perhaps the most visible and aggressive examples of wringing profits out of companies is the third dimension of financialization—private equity funds that use leveraged buyouts to take over companies that are seen as financially underperforming, install their own cost-cutting leadership teams, strip off assets, and then sell the pieces at a significant profit. This pushes the shareholder value ethos to the extreme by seeing companies solely as assets to be traded for maximum profit, and the private equity structure allows private equity firms to do this using financial engineering strategies that are much riskier and involve a lot more debt than public corporations are able to do, or find it prudent to do. Some private equity interventions create jobs, some destroy them. On net, the evidence seems to suggest that more jobs are lost than created. 

Financialization affects public sector workers, too. For example, efforts to restrain or remove bargaining rights for public sector workers in Wisconsin, Ohio, and elsewhere have consistently been justified by citing the need for budget austerity, including Wisconsin’s “Budget Repair Bill.” This can be seen as an extension of financialization because fiscal concerns are prioritized over service delivery, and because budget deficits and public sector pension shortfalls were at least partly a result of the financial crisis. Internationally, countries with high levels of public debt (e.g., Greece) have had to lower public sector wages in order to meet the bailout provisions of financial institutions like the International Monetary Fund (IMF) and the European Central Bank.

In sum, money is no longer simply a medium of exchange, and financial institutions are no longer simply neutral sources of financing. Rather, the rise of financialization means that financial motives and institutions have become active players that strongly influence corporate decision-making and challenge governmental sovereignty, and thereby affect workers and their communities. Yes, financialization is like globalization in that they both consist of a bundle of  interrelated structural changes in the economy, and they both affect economic and political power. But it’s important to recognize the importance of financialization in today’s economy rather than seeing everything through a globalization lens.

Why does this matter? Partly to have a deeper understanding of key trends that affect the economy, workers, and their communities. But to recognize the importance of financialization also brings the issues back home. Rather than blaming low-cost foreign competition, recognizing the importance of financialization draws attention to Wall Street, investors (which includes people who have retirement investments), the incentives that executives face for buying back stock rather than investing in the production and delivery of valuable goods and services, and the rhetoric around public sector austerity. Financialization isn’t a problem any easier to solve than globalization, but it will never be addressed if we don’t recognize these forces. 

Monday, November 7, 2016

Industrial Relations Sadly Chuckles on the Eve of the Election

It’s hard to find many people happy with the choices in tomorrow’s U.S. presidential election. Setting aside the troubling personal qualities that have been so apparent, it’s difficult not to be leery (at best) of Trump’s populism-at-its-worst and Clinton’s elitist-insider-insularity. If only both sides had paid more attention to industrial relations values and institutions over the past several decades rather than actively destroying them (Reagan, Thatcher, Walker, etc.) or just giving them lip service (Clinton, Obama, etc.), then maybe we wouldn’t be in this mess.

Industrial relations values embrace the sanctity of human dignity for all workers and their communities, and respect the needs of stakeholders with distinct interests and unequal power. This means that markets—whether labor, financial, or otherwise—don’t work for everyone, and the sanctity of free markets should be rejected. Industrial relations institutions therefore seek to bring a greater balance to the marketplace to help them work better for all by balancing efficiency, equity, and voice, often in collective rather than atomistic ways. The classic example is collective bargaining which (ideally) brings solidarity to the workforce and empowers them with a voice, but requires bargaining, often at a local level, in which a business’s needs can be addressed and balanced with workers’ interests.  

But for whatever set of complicated reasons, these industrial relations values and institutions have been weakened over the past several decades, and the academic field of industrial relations has shrunken as well. Instead, individualism, personal responsibility, and free market thinking dominate. Workers were assured that the benefits of free trade, deregulation, and increased financialization would trickle down and lift all boats, and that everyone would have the opportunity to work with purpose and meaning if they adopted the right mindset.

Instead, many have been left behind as illustrated by the sharp increase in inequality since the 1980s, and we live in polarized and polarizing times. Economic insecurity seems to frequently bring out the worst in people. And thus we have a distasteful form of populism that seeks to blame other workers and shut others out rather than building solidarity, respect, and inclusion. And we have anti-elitism which becomes anti-intellectualism and contempt towards science, education, and the arts as well as towards good government. Again, rather than bringing society together, fault lines emerge.

At a fundamental level, this disaffection is what industrial relations seeks to avoid. The construction and maintenance of institutions that provide checks and balances would have provided greater equity so people don’t feel left out, and greater voice so that people feel more on equal footing with the elites. But this would have required an embrace of industrial values around solidarity, inclusion, voice, pluralism, and compromise rather than individualism, self-interest, and free markets driven by insider elites.

Perhaps the consequences of the marginalization of industrial relations are now coming home to roost. On the Republican side of the aisle, the threat to the Republican establishment presented by the popularity of Trump has arisen out of disaffection with the Republican Party’s inability or unwillingness to replace the earlier industrial relations system with something that provides equity and voice instead of just individualism and free markets. On the Democratic side of the aisle, the skepticism towards another Washington insider is similarly rooted in policy making that has been top down rather than inclusive, and seemingly benefiting financial interests more than worker and community interests. Indeed, were the seeds of each's side demise planted, at least partly, by their own marginalization of industrial relations? 

Those who embrace the industrial relations ethos are probably thinking “I told you so.” But it’s a sad chuckle indeed.