Politicians have traditionally paid lip service to the plight of the worker, but with working class struggles at the top of the new administration’s fix-it list, we will likely hear them talking more than usual about the steps they will take to reduce income inequality or end three decades of wage stagnation.
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Some of them will go one step further and voice support for unions and collective bargaining, both of which have declined at the same time wages have stagnated.
They do so for good reason. Not only have American workers made it clear they are fed up with being left behind as the economy prospers, there is a growing body of evidence that union decline is one of the key causes of wage stagnation and income inequality.
The solution, however, isn’t to bring back the unions of yesterday. We need to create stronger business-labor partnerships for tomorrow.
Slide of union power
As far back at the mid-1980s, our research at MIT showed that collective bargaining was no longer capable of using the threat of strikes or other forms of pressure to get businesses to match negotiated wage increases.
Previously, strike threats and the fear of employees getting organized led companies to match wages negotiated in key bargains. For example, during the late 1940s, General Motors and the United Auto Workers negotiated a wage formula linking wage hikes to increases in productivity and the cost of living. Unionized businesses had to follow suit or risk a strike. Even companies without unions had to do the same if they wanted to avoid their workers organizing.
Recent research shows that the decline in union bargaining power observed in the 1980s has persisted and has now taken a big toll on union and nonunion workers alike. A report from liberal-leaning think tank the Economic Policy Institute, for example, estimates that the decline in unions—from 23 percent in 1979 to 11 percent in 2013—and their collective bargaining power has caused men in the private sector to earn $109 billion less every year, and women to earn $24 billion less.
Other recent research shows that the decline in wages has now spread to the public sector. Teachers have been especially hard hit. In 1979, teachers earned just 2 percent less than comparable college graduates. In 2015, the earnings gap had widened to 17 percent.
More than empty rhetoric?
Research like this has convinced more Democratic candidates to call for rebuilding labor unions. But is that possible, or is it just empty rhetoric? As I’ve argued before, I believe it is empty for two reasons.
First, since 1978 three major efforts to pass labor law reform to make it easier to form a union have been blocked in Congress—there is no reason to believe this will change.
Second, even if unions started growing again, they would not be able to rely on their past sources of power to drive up wages. There is just too much domestic and international competition, and it is too easy to move capital and jobs to lower-wage countries. That makes it much harder to use strike or unionizing threats to get businesses to lift wages or match negotiated increases.
So what else can be done? Elsewhere I’ve made the case for a new labor policy that not only supports unions but also promotes labor management partnerships. I’ve also suggested extending protection against employer retaliation to more workers, such as fast-food employees fighting for a $15 minimum wage or independent contractors like Uber or Lyft drivers. These changes would help reframe labor policy to fit the modern economy.
But labor policy can no longer stand alone. A more complete strategy is needed that integrates a revised labor policy with something known as a “high road” economic strategy.
At MIT, my colleagues and I teach this approach to our MBA students in executive education classes and in our public online courses. We tell current and future business executives that they have a choice about how they compete in the marketplace: They can minimize labor costs and fight to keep unions out of their organizations, or they can invest in their workers, drawing on their knowledge, skills, and motivation to achieve high levels of productivity and customer service. And then reward those employees with their fair share of the profits they help produce.
During the past two decades, researchers have discovered how companies employing this “high-road” approach—such as retailers like Costco or Market Basket, airlines like Southwest, or healthcare providers like Kaiser Permanente—do just as well or even better on long-term financial returns, customer service, and wages than “low-road” competitors, such as Walmart or Spirit Airlines.
The task ahead
How can we encourage more companies to move in this direction?
As educators, we have an important role to play, but our efforts need to be matched by a well-coordinated effort that cuts across the federal government and business to realize the benefits of a high-road policy. One example is repairing America’s decaying infrastructure through public-private partnerships, which some business and labor leaders have already committed to.
The same deal needs to be struck in implementing a new manufacturing policy. We are not likely to bring back many of the jobs lost to China and other lower-wage countries. The best way for government to help rebuild our manufacturing base is to support investments in next-generation technologies, such as light metals, photonics, robotics, and wearable fibers that will generate energy and cool our bodies. But it’s also important to insist the businesses getting federal funding commit to making their products here and investing in their workforces.
I believe our lawmakers need to go beyond the empty rhetoric of the past and commit to doing the hard work of recasting labor policy in ways it might be possible to enact. And then they should follow up with the comprehensive and disciplined administrative actions needed to realize a high-road strategy that puts the economy on a course that will truly work for all.
This article was originally published on The Conversation. Read the original article.
Comments
Interesting points but academia does not have viable solutions
Professorr Thomas:
You raise some interesting points. Here are some counter points.
1) The real minimum wage in this country is ZERO. Most who earn minimum wage cannot afford to pay the average rent or average premium on an Obamacare policy which is why Obamacare needs to be eradicated.
2) Labor, for the most part has been transferred overseas. Apple computer is repeatedly awarded and lauded but they have made BILLIONS on the backs of children. Just think of what USA Labor Productivity numbers would be like in the USA if every single i-phone in use had been made by the competent hands of non-union assembly workers in the USA instead of children in Asian countries.
3) Labor has been mostly stepped on in the timeframes and years you cite. Big bonus packages and executive compensation - not even hinted at in your writing has ballooned to out of control levels where some CEOs make 400x the lowest paid worker in their organization.
Has the law of supply & demand been repealed?
I work in the manufacturing sector. The "high-road" approach is a longer term strategy that works well, but many companies are still focused on quarterly results. More and more companies are coming around to this longer term line of thinking but it will take some time. I applaud this approach.
As for wages, I see wages rise when workers are in short supply. When local unemployment increases, wages tend to stagnate or decline. Worker productivity has some influence, but the supply/demand environment is the primary driver of wages.
It would seem that the economic principles surrounding the price of bread also apply to the price of labor. If the goal is to increase wages, it would seem that increasing demand for workers would be a reasonable approach. This situation is best fostered by a growing economy.
So the question is: How to foster a growing economy to create more demand for workers.
The government has a horrible track record for private sector job creation, innovation, and efficiency. Taking more money out of the private sector – that is pretty good at these things – and giving it to government bureaucrats doesn't seem like a path to success. The government is much better at hindering growth through taxation, regulation, and general interference in the market to favor certain industries or companies.
Therefore, it would seem that LESS government involvement would be preferable to more government involvement – at least in my experience.
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