The recent decision to end multi-employer bargaining in the steel industry and the decline in “pattern bargaining” in other industries emphasize that workers’ wages are starting to play a more critical role in competition among corporations.
Hardest hit by these changes will be America’s workers as companies intensify their “cutthroat” competition nationally and internationally, using wage freezes or cuts as weapons.
During the two recent recessions, unions were forced to make many contract concessions. But, even as the nation recovers, more companies are saying they expect to fight harder than ever to keep labor costs down to more effectively compete.
Audrey Freedman, a senior research associate of the Conference Board, a business-sponsored research organization in New York, says in a new report that U.S. companies are “increasingly basing wage decisions on their own productivity and labor cost trends, and not on industrywide patterns.”
Increasing competitive pressures and the recent recessions “have caused a fundamental shift in U.S. wage determination,” she says.
Since unions were first formed in this country in the early 1800s, one of their primary goals has been to try to get industries whenever possible to adopt uniform wage and fringe benefits so that they cannot be used as a device to help companies get an edge on competitors.
In those early days before antitrust laws, when unions sought to get uniform wages even within a single company, they were often found guilty in court of “conspiring to raise wages.”
Under the Sherman Antitrust Act, passed in 1890, unions could be prosecuted for “fixing wages.” The accusations were based on the contention that workers were a “commodity” and that fixing wages under union contracts was illegal, just as it was illegal for companies to join together to “fix” prices without regard to the forces of the marketplace.
In 1914, however, the Clayton Antitrust Act declared that “the labor of a human being is not a commodity or an article of commerce” and that, as a result, unions could not be taken to court for restraint of trade when they sought uniform wages.
Samuel Gompers, founder of the old American Federation of Labor, called the Clayton Act “labor’s Magna Carta.”
From then on, unions were allowed to press their argument that companies should compete with one another on the basis of product quality, costs of materials and efficiency of operations, rather than on their ability to get “cheap” labor.
Gradually, the unions managed to achieve the goal of uniform wages in many industries--such as steel, rubber, glass and autos.
Wage uniformity began to give way in the construction industry nearly a decade ago with the growth of non-union construction companies. Unionized contractors argued that wages had to be kept down to help them compete.
Similar demands became common in other industries as more companies sought to break out of industrywide bargaining or to deviate from contracts that were negotiated with one company and expected to be used as a pattern.
Daniel Mitchell, head of UCLA’s Institute of Industrial Relations, notes that unions have frequently agreed to deviations based on such factors as variations in living costs from one part of the country to another.
Mitchell notes that, while the use of industrywide bargaining and pattern bargaining has diminished, there is “constant pressure from unions and even other companies” to revive the idea.
The Conference Board’s Freedman argues that the new trend in labor relations could help workers as well as corporations.
She reasons that high wages have meant the loss of jobs to other countries or to non-union companies. Reduced wages, she says, will allow U.S. firms to be more competitive and to create more jobs.
Sadly, such a theory ignores the immediate economic effects on millions of workers who suffer when wages and benefits are reduced.
British Unions Face Key Votes
British union members are starting to vote on a proposal shrewdly designed by Conservative Prime Minister Margaret Thatcher’s government to weaken both unions and the Labor Party, the major opposition to the Conservatives.
If Thatcher’s plan works, the Labor Party could lose all, or at least a significant part, of its total budget, 80% of which now comes from British unions.
Under the Thatcher proposal, which was made part of the Trade Union Act last year, each of Britain’s unions must hold separate elections to decide whether a majority of members want to stop contributing to the Labor Party.
A recent opinion poll showed that only 37% of the nation’s union members would vote to continue their political contributions to the Labor Party. However, the poll also showed that an overwhelming majority said their unions should still be allowed to engage in political campaigns.
In other words, the poll indicated that British unionists want to break their formal links with the Labor Party but not drop out of political battles.
Thus, the British unionists could, in effect, adopt the system long practiced in the United States, where unions are generally aligned with the Democratic Party and support Democratic candidates but have no formal ties.
The British poll was taken before voting started and before unions began mounting their own massive campaign to retain the present symbiotic relationship, so the outcome is uncertain. The voting must be completed by year-end.
Leonard Freedman, dean of UCLA Extension and a professor of political science who follows British politics closely, says the results could have a profound political effect. If a substantial number of unions vote to break their ties to the Laborites, “it would weaken an already severely weakened party that is still trying to pull itself together after a period of bitter internal strife and two disastrous defeats at the polls.”
He noted that the internal Labor Party strife reached one turning point three years ago when a faction broke away to form the Social Democratic Party. Other struggles are ongoing.
While the short-run loss to the Labor Party could be dramatic, Freedman said there could be a long-term gain.
“Unions in Britain are even more unpopular than they are in the United States and so are felt by many to be an electoral liability to the Labor Party,” he said. “This means that, if union funds are cut off, it could force the party to find more varied sources of support, be less obviously tied to one major special interest and therefore become more vital and politically attractive.”
But, while there might be a long-term positive side to a break between unions and the Labor Party, Freedman believes that such a break could, for many years to come, “be an extraordinarily devastating blow to the already impoverished party.”
Not only do British unions contribute 80% of the party’s budget, but they also “sponsor” nearly half of the Labor Party’s 209 members of Parliament. Union members are also voting on whether to retain that system.
For instance, APEX (which stands for the Assn. of Professional, Executive, Clerical and Computer Staff) sponsors four MPs, all longstanding union members who not only get direct help for their campaigns but also get APEX money for their staffs and as a supplement to their salaries.
In addition, 17 other Labor MPs are APEX members, as are four members of the House of Lords. Together, the 25 make up APEX’s “parliamentary group,” which coordinates its votes with union policies and also works in concert with similar groups from other unions.
The Thatcher concept of asking union members to vote on the ties with the Labor Party is democratic, and so was a difficult one for the unions to oppose in Parliament.
But they are waging a major campaign to get their members to vote against the proposal. For example, APEX recently warned that the Thatcher plan is a “political threat that must be fought at all costs.”
"(It) is an attempt to destroy the democratic rights of freedom of expression and representation in Parliament which APEX has had for over 75 years. It is blatantly one-sided because no such restrictions exist, or are proposed, on the amounts of money that companies can spend on political activities.” Corporations are allowed to tap company coffers to contribute to political parties or individual candidates.
The Thatcher government has already imposed other restrictions on British unions such as requiring more membership votes on everything from strikes to the election of union officers.
Thatcher has made no secret of her attempts to erode the power of British unions, and her efforts, along with a 13% unemployment rate, have combined to reduce union membership substantially.
When she came to office in 1979, union members made up about 53% of the work force, compared to about 40% today.
Labor’s unpopularity in Britain was increased by the recent strike of the National Union of Mine Workers, whose president, Arthur Scargill, called the walkout without a membership vote after the miners had voted three times against striking.
Several British labor observers said a fourth vote would have given membership authority for the strike.
But the fact that none was taken created more opposition to leadership in other unions, too, and so may help Thatcher in her effort to reduce if not eliminate union funds for the Labor Party.