The Case for More Union Power

By Liza Featherstone


It was surreal, last month, to see Citigroup organizing the business community against the Employee Free Choice Act [1], a bill that would make it easier for workers to join unions by forcing employers to recognize a union after a majority of workers have signed cards. Here is a company whose CEO, Vikram Pandit, still has a job despite repeated failures and rakes in $11 million a year [2] running a company that has received $45 billion in handout (sorry, bailout) checks from the taxpayers. Yet Citigroup [3] was hoping to keep millions of low-wage workers from organizing to achieve a tiny fraction of the job security and compensation that its leaders now enjoy at taxpayers’ expense. With enemies like this in the public-image battle, it might seem that EFCA barely needed friends. Yet despite the populist fervor in the land, anxiety about the economy is giving the bill’s opponents more traction than they might otherwise inspire.

Part of that comes from the reverse problem; with congressional friends like EFCA has, it hardly needs enemies. Sen. Arlen Specter, R-Pa., whom unions considered one of the few sympathetic Republicans, has announced he will not vote for EFCA. And so has Sen. Dianne Feinstein, D-Calif. Vehement opposition from business is probably the main reason for the defections, but since pandering to that community doesn’t look good these days, those opposing EFCA are blaming the economy. “The problems of the recession make this a particularly bad time to enact Employee Free Choice legislation. Employers understandably complain that adding a burden would result in further job losses,” Specter said. Feinstein, too, cited the “extraordinarily difficult economy.” Business is engaged in a massive lobbying and advertising campaign to reinforce such fears, with ads saying the bill would “hurt our already fragile economy.” (The anti-EFCA lobby has also profited from the fact that offering workers the option of bypassing the secret-ballot election strikes some as undemocratic.) A few companies recently announced that they are scaling back projects because of projected labor-cost increases if EFCA passes.

But is the economic equation really that simple? More unions = higher labor costs = less hiring = longer recession? Actually, no. To debate EFCA’s likely economic consequences is really to ask whether unions are good or bad for economic growth. The answer to that question depends on how broad and long term your view is.

On Feb. 25, 38 well-known economists, including notables like Jagdish Bhagwati and Robert Solow, announced their support for EFCA in an ad in the Washington Post, [4] pointing out that from 2000 to 2007, “virtually all of the nation’s economic growth went to a small number of wealthy Americans.” Part of the problem, they argue, is “the erosion of workers’ ability to form unions and bargain collectively.” It’s hard to disagree with that. (Indeed, a recent Gallup poll found that a majority of Americans do favor EFCA, though most aren’t following it closely [5].) It’s well-established that union members earn higher wages and that employers are ruthless in their willingness to break the law to bust unions; in a study of over 400 union elections, Cornell University’s Kate Bronfenbrenner found that one in four employers illegally fired workers for union activity [6]. But although the ad states that EFCA is “a critically important step to rebuilding our economy,” it doesn’t say why. So how do these economists respond to economic worries about EFCA?

Some of the ad’s signatories are annoyed by the question. “If we used as the single criterion to pass a law that all aspects of it had to be good for the economic recovery,” says economic sociologist Joseph Blasi, a professor at Rutgers University, “this would be a very destructive criterion as a basis for public policy.” Columbia University economics professor Jagdish Bhagwati is an ardent free-trader well-known for clashing with unions in his opposition to labor standards in trade agreements and his hostility to consumer campaigns against sweatshops. Yet he takes the view that “unionization should be thought of as a fundamental human right” and that we shouldn’t turn away from such a principle just because of financial and economic crisis.

Then again, Bhagwati, who elaborates on his public support of EFCA in the current New Republic [7], isn’t impressed with the economic arguments of EFCA’s opponents. “I think that the scare about unions adversely affecting our efficiency and even discouraging investment is really hard to condone,” says Bhagwati, a senior fellow in international economics at the Council on Foreign Relations. “There is surely no compelling evidence that [unionization] undermines efficiency at the level of the factory.”

Joseph Stiglitz, a Nobel laureate in economics, goes even further than his Columbia colleague in his dismissal of the projected EFCA woes imagined by business: “The likely impact on wages in the medium term is relatively small, and higher-wage workers are more productive, so the net impact on their costs is even smaller.” It is about control, he says: “Obviously—myopically—[employers] would like more bargaining power. But that’s short-sighted because unionized workers will perform better.” Indeed, a recent study [8] comparing UPS [9], the single largest employer of Teamsters, and FedEx [10], a harsh union-buster, found that UPS had performed much better financially, with a return on equity that rarely falls below 20 percent. (Of course, businesspeople are never placated by such arguments because they rightly figure that even though unionization can inspire workers to be productive, the anxiety of rampant job insecurity and dearth of good employment options can do the same.) And Harvard University economist Richard Freeman has found no relationship between unions and firm solvency [11]; thus there is no reason to fear that EFCA will put anyone out of business.

But surely the most compelling question for Americans at this moment is, What effect will EFCA have on the broader economy? Its opponents say it will prolong the depression—if some employers have to pay workers more, they’ll hire fewer people. Some unions counter that the bill should be seen as stimulus; when low-wage workers are in a position to bargain for higher wages, they’ll have more money to spend. There’s one problem with both scenarios: Organizing and bargaining for higher wages, even under a reformed system, will take a while. Stiglitz says EFCA will neither help nor hurt our present economy: “[T]he likely time for it to have an effect is too slow, so [EFCA] is not germane to the current situation.”

However, even though it isn’t stimulus, in the longer run, Stiglitz says, EFCA is “very important to a robust three-to-five year recovery.” One of the major causes of the current global financial crisis has been a “lack of aggregate demand” over time, he explains. Too many people lack spending power. Stiglitz isn’t alone in this opinion; plenty of other economists—including Berkeley’s Harley Shaiken [12], who was on Obama’s short list for labor secretary—agree on the big picture: If more Americans could join unions, they’d have more money to spend, and the economy would be healthier in the long run.

Of the organized opposition to EFCA—and the millions spent on advertising and lobbying—Stiglitz says: “I’m a little surprised at how adamant the business community has been. But they’re afraid of a new social compact. They think it is the opening salvo in a new war. So it’s really a form of class warfare.”


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