WASHINGTON, August 31, 2014 — Prior to the industrial revolution in the mid 1800’s virtually every worker was involved in agriculture or was employed in small shops. Those in agriculture produced enough to feed their families and perhaps had some extra to sell to neighbors. Those involved with small shops provided some basic services. For each group though, their productivity was relatively low and as a result their earned income was low. Then the industrial revolution came.
At that time machines were invented that, coupled with labor, could vastly increase worker output. Factories began to be built by those individuals who were able to accumulate capital. For early entrepreneurs, the incomes earned were very large which eventually led to more capital formation.
For workers who were anxious to leave the farm and seek a job in the new factories, there were relatively few opportunities since there were only a few factories. The result of a large supply of willing workers and a low demand for workers from the few factories was that wages were extremely low. Profit maximizing business people realized that they could offer very low wages and still attract a large number of workers who really had no options other than to return to the farm.
Eventually as the economy became more industrialized the demand for workers caught up to the supply and wages began to rise. In the late 1800’s and continuing into the early 1900’s workers realized that when they bargained for wages and working conditions they were at a distinct disadvantage. That was because they bargained as many individuals against a single employer. To strengthen their position they organized and could then bargain as a single unit. From the early to mid-1900’s, this collective bargaining produced positive results for the workers and, for the most part, led to a stable workforce which was a benefit to employers. Then in the 1960’s things began to change.
Organized labor realized that they now had power. They used this power when negotiating contracts and then used it for political gain. By 1980 labor began to demand and often times receive wages and benefit/pension packages that far exceeded the value of their output. This ultimately lead to the decline of many industries as foreign competition could produce as good or better products at significantly lower costs. This was true in the steel industry and the automobile industry, as examples.
Until recently, organized labor was able to command significantly higher wages than those bargaining individually. And since public employees can now bargain collectively their wages are significantly higher than comparable private sector workers. This has led to severe problems for the taxpayers who must pay the bill for those high wages and benefit/pension costs. The result in prior to the great recession of 2008-2009 was severe battles between organized workers and those who must pay their wages.
The public’s mood seems to be turning against organized labor. Less than 12% of all workers belong to a labor organization and many elected officials are taking actions to reduce public worker’s wages as well as benefits and pensions. In fact many states and some large cities are facing a crisis, because of declining revenues and large pension obligations. Can the labor movement be saved?
Yes it can and most believe it must. Labor organizations have many benefits not just for the workers but also for the economy as a whole. Poor working conditions and abuses by unscrupulous employers (yes there are some) are prevented because labor has the tools to prevent them. For that reason, labor organizations should exist. But with their numbers declining and with the general negative mood in the public, survival may be difficult, unless they change their thinking.
Instead of demanding wage increases based on an increase in the cost of living, they should demand wages increases because they have become more productive. They should enter negotiations by showing how they have helped the company or the government operate more efficiently. The key is that wage increases should be tied to increases in productivity and labor should be focused on increasing output.
Granted productivity is difficult to measure in some areas, but it is not impossible. Labor should concentrate on “mutually beneficial strategy” rather than taking an “us versus them” position. Their philosophy should be “we deserve more because we have produced more.” Management would be much more receptive with this view and labor organizations could continue to exist with a benefit to both them and their employers. This change in philosophy is needed to save the labor movement.