Labor Day once again and, for the first time in a decade, a revival of union power is being widely predicted.
Unemployment is at its lowest point in the 1980s, and labor shortages loom in the 1990s. Wages, meanwhile, continue a decline that began in 1973.
According to the Bureau of Labor Statistics, the average hourly wage, adjusted for inflation, is $4.85, down from $5.42 in '73, the year of the oil embargo. Inflation and then recession are mainly responsible for that decline, but important, too, was the shift in the economy that pared union wage rates and reduced their impact.
A wage agreement in Detroit or Pittsburgh used to set the tone for the whole country, but does so no longer. A strike in automobiles or steel once devastated the economy, but there is little fear this year, even though General Motors and Ford are in labor negotiations.
Yet there is uneasiness, as if business management, after trampling unions for nearly a decade, now fears their resurgence. Business publications warn of wage hikes fueling inflation and of labor organizing whole industries the way it did in the 1930s.
But if labor comes back, that's not how it's likely to happen.
John Zalusky, economist for the American Federation of Labor, thinks that union membership has stopped declining--stabilizing at 17.5%, or fewer than 20 million of the 112 million working Americans. But he doubts a return to yesteryear. "Unions won't go back to the traditional approaches," Zalusky says, but will concentrate on the non-traditional--such as "using the equity market to achieve collective bargaining goals."
The equity market? Zalusky is referring to the fact that unionized employees have hired Wall Street investment bankers and offered to buy the company in order to preserve jobs or pay scales. TWA employees did so two years ago to prevent management from selling the airline; United Airlines' pilots have an offer pending.
More Union Business
And employees of the Southern Pacific Railroad are trying to come up with a plan in response to parent company Santa Fe Industries' announcement Friday that it would consider an employee buyout as an option for divesting the railroad. Southern's employees are anxious to buy because they fear that otherwise the railroad will be sold one route at a time--at perhaps maximum profit but with the loss of maximum jobs. The employees will pay to keep their jobs.
Such a move worked at Weirton Steel, the West Virginia steel mill bought by employees in 1983 with the aid of Lazard Freres, the investment bankers. Lazard also helped employees of bankrupt LTV and Wheeling Pittsburgh Steel protect pension rights.
Now, Drexel Burnham, Goldman Sachs and other Wall Street firms see increasing business from unions. One result of the United Auto Workers negotiations with GM, for example, could be employee ownership in GM auto parts plants.
But the benefits of employee ownership, an idea that has kicked around this country since Emerson and Thoreau discussed it in the 1830s, should not be overstated. Hyatt Clark Industries, a GM roller bearing plant in New Jersey that became employee-owned with GM's help in 1981, failed because more than equity was needed to cope with global competition. Eastern Airlines employees got 25% of the stock in return for concessions, but couldn't halt Eastern's decline or prevent its sale.
Equity ownership is not ideal, says Brian Freeman, an investment banker for unions who has formed a venture with Goldman Sachs. Traditional collective bargaining is a much better arrangement, Freeman says, because there is more balance in it. "Management and capital take the long view, and the employees then can tend to their more immediate concerns."
But that thought seems almost poignant now, as corporate managements struggle to respond to capital market demands for shareholder value.
It would be hard to find many people who believe that management these days thinks primarily of the long term--or of the employees. So it's no surprise that employees are thinking of protecting themselves. It may be a "non-traditional" approach by labor, but it is a rational one.