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August 23, 2014, 5:25 am

Future of trade unions in doubt

Despite recent demonization by GOP, others, Mayor Michael Nutter reiterates labor groups' importance


In the late 1700s, when this country was practically in its infancy, carpenters, shoemakers and printers formed what is considered by many the first trade union movement right here in Philadelphia.

It took well over 140 years for unions to gain significant steam in this country; but many are questioning their relevance as they come under fire in the midst of today’s economy. Bear in mind, unions gave this country the 40-hour work week, Social Security, Medicare, child labor laws, healthcare and weekends off.

“I feel that unions are still necessary to the American worker,” said Andre Jones, executive vice president of the Transportation Workers Union, Local 234. “We have always been the voice of the common man. When one person is affected — a person steps up and says ‘we’re not going to stand for this.’ And when it’s 5,000 people, it really shows support, which is what our workers need, even today. We still need someone to fight for us. That’s what we’re here for.”

From small towns to major cities, unions at one time were a major force in this country. They helped elect presidents, governors and mayors. And by the mid-1950s, unions represented 36 percent of private-sector workers.

“A key reason that American working men and women have a solid standard of living and benefits is the hard work of union members over the years. And that is especially true here in Philadelphia where the labor movement played a significant role in the economic development of our city,” said Mayor Michael A. Nutter. “Good paying jobs are the foundation of a strong, healthy economy and of thriving families. The labor movement in Philadelphia can rightly claim a leading role in building that foundation.”

But for decades now the American labor movement has been in decline; public-sector unions were one of its few remaining bastions. Today, they too are in trouble as states and localities face long-term budget squeezes. Labor costs represent roughly half of their spending, notes the Cato Institute’s Chris Edwards.

Pension and retiree health benefits are underfunded. Teachers unions are being pressed to weed out poor performers, which has put all these unions on the defensive. Critics are less often Republicans than taxpayers and parents.

Needless to say, most major industries were organized: railroads, coal, steel, auto, telephone, tires, airline, trucking. Strikes in crucial industries could potentially bring the economy to a halt. They forced companies to take notice as they stockpiled steel and coal in advance of contract expirations, and Congress cut short railroad strikes. But today, with Wisconsin being a perfect example, the head of labor unions throughout the country believe they are losing the support that made them the force they once were.

“I believe the support is there,” said Jones. “But I think sometimes politicians give support when it is convenient. When they’re running for office, they’re quick to say ‘we got you.’ But when we’re on strike, you can’t find them. Keep in mind, no one likes to strike, because that’s money lost that you will never see again.” 

At one time the value of unions in Philadelphia and abroad, were invaluable as wages rose annually, reflecting inflation plus a bit more; fringe benefits (pensions, health insurance, vacations) expanded; seniority prevailed in wages to minimize arbitrary favoritism. They created job security.

But the fall and onslaught against labor unions has been stunning. In 2010, unions represented 6.9 percent of private-sector workers. That’s lower than the 12 percent in 1929, before passage of the 1935 Wagner Act — the National Labor Relations Act — which gave workers the right to organize and required employers to recognize unions that won a secret ballot.

“Mayors, governors and politicians are taking advantage of the situation,” said Pete Matthews from District Council 33, the Philadelphia City Workers Union. “We formed the middle class with unions. I think its overkill. We’re still fighting for a contract. And no matter how people try to work with organizations — they still want more. Take what’s going on with the city…we haven’t seen a wage increase in four years. The Mayor has already saved over 200 million dollars.”

And while Philadelphia remains a strong union town, this is not the case for a lot of cities as industry continues to make its way overseas. There are many theories that explain such a collapse: greater management pushback and intimidation; business expansion in anti-union regions, the South and West; more white-collar office workers and fewer blue-collar factory workers. All these theories contain some truth, but unions’ downfall mainly reflected their inability to adapt to change.

To their credit, unions have continued to win higher wages and fringe benefits for its members. But some believe that while they have won their fare-share of battles, in the long run they could have actually lost the war.

In 2006, union wages in the private sector were about 19 percent higher than those in comparable nonunion firms, estimates economist Barry Hirsch of Georgia State University to The Washington Post. The wage premium can endure if higher productivity justifies higher wages or if companies can pass along costs to customers.

The productivity advantages of unionized firms are scant, Hirsch said. The formula worked, because many heavily unionized industries were dominated by a few large firms with similar labor costs. These could be recovered in higher prices.

That changed in the 1970s and 1980s. Imports and “transplant” factories created new competition in steel and autos. Airlines, trucking and communications (telephones) were deregulated, allowing new low-cost rivals into the market. Digital technology and the Internet transformed communications and threatened many industries, including traditional phone companies and newspapers.

For unions, this pitted present members’ expectations — for high wages, generous fringe benefits — against companies’ needs to lower costs and, thereby, protect future jobs. By and large, union concessions were too little, too late.

Corporate managers, their business models besieged, were also slow. Both executives and union leaders underestimated the vulnerability of once impregnable market positions. The downfall of the “Big Three” automakers epitomized this disastrous cycle. Non-union firms gained market share; union membership fell. Unions also had a harder time organizing other companies, because both managers and workers feared job loss.

Public-sector unions now face a similar predicament. Among government workers, 36.2 percent are unionized. Their growth partially offset the erosion of private-sector unions (the combined unionization rate for private and public workers: 11.9 percent). Traditionally, public-worker unions flourished in an alliance with liberal Democrats. But the huge loss of state and local government revenue has — like new competitors for firms — transformed the economic and political climate. Labor costs put upward pressure on taxes and downward pressure on public services.

Nutter, even with all the problems brought on by the fall 2008 crash, said organized labor is still needed.

“City employees and their municipal unions are vital partners with the City in making government work efficiently for taxpayers, residents and businesses,” said Nutter. “From Day One, I’ve said that I want labor contracts that are fair both to those who pay taxes and to our hard-working employees. But we as a City also must have reform in the areas of pensions, healthcare and work rules in order to protect the future health of our city.”


The Washington Post contributed to this report.