Estimated reading time: 4 minutes, 50 seconds

The State of the (Labor) Union

The subject of labor unions and their implications for the U.S. economy is generating considerably more buzz than it has in a long time.

If anything, organized labor has been on a steady decline since President Reagan effectively busted the air traffic controllers union early in his first term (and even prior to that). Concurrently, the income gap between the top-earning Americans and the middle and working classes has grown to its widest chasm since perhaps the Gilded Age of the late 19th century.

With the Great Recession slowly making its way into the rearview mirror, labor unions seem to be getting a second look. And, somewhat surprisingly, it’s the youngest entrants into the work force who are helping to lead that charge.

At the same time, the battle lines for the 2016 presidential election are being drawn, and the opposing sides are being driven into polar-opposite camps by acknowledged political outliers. One would-be forerunner for the Republican nomination thought at the outset to be a party favorite, Governor Scott Walker of Wisconsin, compared his readiness to take on the radical Islamic State in the Middle East to his successful assault on collective bargaining in his home state.

Governor Walker survived a rare recall election and referendum on his signature issue, but was one of the first contenders to drop out of the presidential race. It seems the American public may not have an appetite for further assault on labor, with “income inequality” on virtually every candidate’s lips.

Some See a Strong Case for Organized Labor…

An article in Business Insider from this past June makes a compelling case for expanding the reach of unions in American companies, while taking into account concerns on the corporate side. Citing a ratio of CEO compensation to the pay of average workers that mushroomed from about 50:1 in 1983 to 331:1 in 2013, the author charts the sharp rise in the share of income going to the top 10% of earners concurrent with a marked decline in union membership.

One effective way to combat income inequality, she argues, is for workers to organize and form unions – much as they did in the aftermath of the Great Depression and at other pivotal times in American history. It may not be the only solution, or indeed a perfect one, she concedes: unions tend to make the workforce more bureaucratic and can cut deeply into corporate revenues while fomenting an “us vs. them” mentality between labor and management.

At the same time, unions are increasingly popular among Millennials, which recently overtook Generation X as the largest demographic group in today’s labor force. Perhaps it’s because these younger workers came of age during a severe economic downturn and take a pragmatic approach to ensuring their own job security and welfare – especially after starting out their careers, in many cases, deep into college-tuition debt.

As evidence of a resurgence in organized labor, the article points to the Web-based news organization Gawker Media, and its journalists’ recent decision to join the Writers Guild of America. It also quotes a leading Wall Street strategist who recognizes that stagnant wages ultimately can only hurt our consumer-based economy; the implication being that, if unions can help reverse that trend, everyone wins.

…While Others Want to Reign Unions In

Not everyone in the business community thinks that more powerful unions are necessarily the cure for America’s economic ills. A U.S. News & World Report blog from last January takes organized labor to task for attempting to increase its national ranks at the expense of corporate franchisees.

At issue is a purported effort by the Service Employees International Union (SEIU) to restrict the ability of franchise operators to make hiring, firing and other employment decisions in favor of their corporate franchise owners. According to the blogger, the thinking is that, by effectively fusing the corporate franchiser and the entrepreneurial franchisee into one business owner, the union will find it easier to organize franchise employees around the country.

In effect, many franchisees could have their wings clipped and lose a fair amount of autonomy over their staffs and operations. It’s hardly a coincidence, the author points out, that only about 6% of private-sector workers currently belong to a union, down sharply from about 20% three decades ago.

With a nationwide clamor for higher wages, especially in lower-paying industries like food services (which are often franchised), the unions may see an opening to boost their sagging fortunes. The author’s view is that the SEIU makes it seem like greedy corporations are the enemy in this scenario.

However, the irony is that a large share of franchises (about 20%) in the U.S. are minority-owned, compared to around 14% of non-franchise businesses. While hardly innocent of ever violating labor laws, individual franchise operators tend to be entrepreneurial, and it would be these business owners and their employees who stand to lose the most if the National Labor Relations Board (NLRB) sides with the SEIU and corporate franchisers. The blogger feels the NLRB seems to be leaning toward support for the union position.

So the upshot is that we’re in an interesting juncture for organized labor. Now that the U.S. economy’s doing better than it has since before the recession, more attention is being focused on underpaid members of the workforce and on stagnant wages – which have been concerns among some economists for decades.

Income inequality will likely have its day in Washington – even if only for the duration of the election cycle. Still, with traditional business models being turned upside-down by the rise of Uber and other app-based companies in an increasingly “on-demand” economy, is there an opening once again for labor unions to be a major force in corporate America? Or will organized labor be further relegated to the dustbins of 20th-century history?

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