Who Will Represent Labor Now?

A popular theory, advanced by many who write about business today, proclaims that the age of the adversarial trade union is past and the age of the flexible, responsive corporation is upon us. As reasons for the change, analysts point to the shift of jobs from manufacturing to services, the globalization of production, and the increased need of firms to adapt quickly and easily to changing markets and technology. Some business analysts celebrate the trend as a happy and necessary turn. Unions are shrinking, they say, not because companies are suppressing them, but because collective bargaining no longer fits the conditions of the economy or the needs of workers.

No one doubts that deep economic trends are shaking the foundations of unionism as well as causing major shifts in corporate structure. Conflicts between employees and management, however, have scarcely disappeared; if anything, serious new problems have emerged. In recent years, for example, leveraged buyouts and other financial reorganizations have plundered pension funds and jeopardized the stability of firms and security of jobs. With the advent of new technologies have come new risks to worker health and safety and, in some cases, sharp limits on employee autonomy. Drug testing pits the employer's interest in safety, cost control, and corporate image against employees' concerns about accuracy and privacy. And many employees, men and women, want changes in their work and workplace to accommodate the demands of new family relationships.

Beneath all these issues lurks the same question: At a time when unions have seen their role diminish, who will represent the employees? Among the many contenders for that role are lawyers bringing suits on behalf of individual workers, public officials carrying out legal regulation of private firms, personnel managers devising human resource policies in the executive suites, unions seeking to forge a new role for collective bargaining, or even the employees themselves, participating directly in the management of the workplace. Each alternative promises in a different way to close what I call the "representation gap" in the American workplace.

Political debate in the United States has largely ignored these issues. The discussion of work in the 1988 presidential campaign, for example, barely went beyond the level of slogan: the Democratic call for "good jobs at good wages" versus the Republican celebration of "the great American jobs machine." Yet both management and labor would agree that the present systems of employment and industrial relations have major flaws as means of advancing the interests of either American industry or American workers.

The Decline of Unionism
A half century ago, the last time the American workplace faced fundamental transformation, the National Labor Relations Act (also known as the Wagner Act after its chief sponsor, Senator Robert F. Wagner) sought to guarantee workers the right to be represented by independent unions of their own choosing. For two decades this New Deal labor policy of fostering collective bargaining was remarkably successful. In the early 1930s, shortly before the Wagner Act, roughly 15 percent of U.S. private sector employees were covered by collective agreements. Under the Wagner Act, private sector union representation soared to nearly 40 percent by the mid-fifties. But then a steady and steep decline began. Today, once again, less than 15 percent of the employees of American business belong to labor unions.

Whatever the pros and cons of collective bargaining, the overwhelming majority of American workers are now outside its framework. Nor is the current low of 15 percent the end of the decline. Projecting from current trends, Richard Freeman estimates that private sector union membership will drop below 10 percent by the year 2000 and will not stabilize until it reaches a point somewhere under 5 percent by the year 2015.

The trend lines themselves cannot answer the more interesting question of why unionism is declining. Is it a lack of demand for collective bargaining on the part of American workers, or is it a lack of available supply, due to escalating resistance by employers?

Many people think that collective bargaining primarily suits male, blue-collar production workers in goods-producing industries and is of little interest to female, white-collar knowledge workers in the service industries -- the prototype of the post-industrial labor force. However, the current scholarly consensus, based on a growing body of empirical research, finds this benign explanation for the decline of unionism to be far from the whole story. Any such demographic account is belied by the fact that in the last thirty years American schoolteachers -- the quintessential female, white-collar knowledge workers in the service sector -- have become the most highly unionized occupation in the country.

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Unhappily, the decline in private sector unionism also reflects intensifying resistance by American employers, often in violation of the labor laws. Consider just a single statistic: back in the mid-fifties, when far more organizing was taking place, the National Labor Relations Board (NLRB) annually secured a right of reinstatement for nearly 1,000 workers who had been illegally fired for supporting a union and its activities. In the eighties, with far less organizing and a less sympathetic labor board, that rate hit 10,000 cases a year.

Though American business grudgingly tolerated unions for a quarter century after World War 11, a large majority of American firms now make it a basic aim of corporate strategy to remain union-free in their domestic, if not foreign, operations. This strategy influences their patterns of investment, their location decisions, the design of their employment package, even the types of employees that they interview and hire. Success at union avoidance has been greatly enhanced by the illegal activities of too many employers, which are only mildly penalized by the NLRB, whether under Republican or Democratic control. Every union undergoes natural attrition, as members retire, organized firms go out of business, plants are relocated, or markets shrink due to competition and changing consumer tastes. So simply to stay the same size, let alone to grow in tandem with rising employment, a union must establish footholds in hundreds or even thousands of new firms every year. For the past three decades American private sector unions have not been able to make successful use of the national labor laws for that purpose.

Is Collective Bargaining Worth Saving?
To its proponents, collective bargaining serves two vital functions as a mode of employee representation. It provides workers protection against substandard wages and benefits and against arbitrary, unfair treatment on the job. In addition, collective bargaining is meant to afford workers considerable workplace participation throughout the representation cycle. That cycle extends from the initial decision to unionize through the election of union officers, the formation of a bargaining agenda, the decision whether to accept a contract proposal or to go on strike, and the settlement of grievances during the life of a contract.

But to contemporary critics, this glowing image of collective bargaining faded long ago. North American unions are now typically portrayed as large, remote bureaucracies. When we think of "union," the image that comes to mind is not an activity engaged in by members, but rather an external entity run by distant officials. The prevailing model of collective bargaining inevitably reduces direct participation by employees and tends to restrict the bargaining agenda to a limited range of employee concerns. Union contracts have always concentrated on protecting employees from harmful things that a firm might do to them, rather than enlisting employees in a positive contribution to the success of the enterprise. This orientation no longer fits the aspirations and self-conception of many employees today, especially the growing corps of professional or knowledge workers.

Of course, many other workers still feel a need for protection from arbitrary management actions. These employees accept some reduction in personal voice and contact in exchange for the ability to draw on the power and resources that a large union can deploy to obtain the guarantees of a labor contract. However, for many of these workers, unions are losing their ability to deliver security, representation, and economic benefits. And for most employers, this kind of protective union power is precisely the problem. As the American economy undergoes profound changes in its labor force, technology, and capital and product markets, firms need to make continual adjustments to survive. In this new climate, business executives lament that too many union leaders stick rigidly to contracts sometimes running 500 pages and containing provisions that are as outmoded as the production technology in use when the terms were first negotiated. Even those executives who accept a union presence now regularly adopt hard-nosed strategies to force contract concessions. And more executives now follow the example of Frank Lorenzo, unscrupulously using bargaining disputes to rid themselves of a union entirely.

A number of scholars sympathetic to unions, such as Thomas Kochan and Charles Heckscher, argue convincingly that if unions are to revive for the next century they must make sweeping changes in their internal organization and bargaining policies. These scholars suggest that unions need to devolve greater authority to local units and make more constructive responses to the new workplace and new marketplace. Of course, it is easier to diagnose defects in contemporary unionism than to design a more effective version. Too often the pet prescriptions of outside experts are contradictory: they exhort union leaders both to open up participation to the rank-and-file and to be more accommodating to employers, without appreciating that local employees are often the least willing to make contract concessions. Understandably, the more threatening the industrial transition and the weaker the labor movement, the more workers cling to the rigid protections they now have.

If the collective bargaining model of the Wagner Act is flawed, what will take its place? The two current front-runners are government regulation, aimed at protecting individual employee rights, and management-sponsored employee involvement programs, which focus on the workers' quest for participation in the enterprise. While unions have been in decline, these other forms of representation have been on the rise.

Government Regulation
During the past 25 years the relations between employer and worker in the United States have come under increasing public control. Civil rights laws were the first wave of this new employment regulation. Congress and some of the states then began introducing legal protections governing occupational health and safety, pension plans, and other aspects of the employment relationship. In recent years, the courts have also expanded employee rights by creating new grounds for litigation over wrongful dismissal. In wrongful dismissal cases, lawyers representing individual employees ask a judge and jury to scrutinize some aspect of the employer's personnel practices, such as mandatory drug testing, that may have been the basis for a firing. Employers whose practices are found wanting face the penalty of large damage awards.

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Compared to collective bargaining, government regulation and judicial supervision of employment practices appear to have some significant advantages. The rules and rulings respond to specific issues and cases on their intrinsic merits, instead of allowing many questions of individual rights to be buried beneath the pressing "bread and butter" concerns that predominate at the bargaining table. The legislatures and courts define rights and obligations as a matter of moral and legal principle applying to every employment relationship, rather than allowing duties and entitlements to turn on relative bargaining power. Government gives to individual workers the personal right to (hire a lawyer to) enforce the employer's obligation, instead of leaving employees dependent on the good will and resources of a union bargaining agent.

Despite these apparent virtues, however, government regulation provides only a limited answer to the employee need for representation. The most vociferous critic of government intervention, of course, is the business community, which complains about erratic, expensive jury verdicts and the inflexibility and cost of regulatory directives. That business dislikes legal restraints on its prerogatives is hardly a decisive argument. Regulatory programs are adopted in the first place because of popular sentiment that business is not providing sufficient safety, security, and fair treatment to its employees. A more telling critique of the regulatory model, however, is that the burden on employers is frequently not matched by corresponding benefits for employees. Research on occupational safety and health rules, for example, shows only marginal reductions in workplace injuries, while the capital expenditures needed for compliance are often substantial. And even where new legal protections produce appreciable gains for employees, too often the gains are distributed primarily to the more educated, highly paid workers. Those best equipped to hire lawyers take most advantage of the new legal rights, such as rights against wrongful dismissal. Even among ordinary plant and office workers, those who can call upon a union representative generally get the best protection. If our initial aim was to have the government provide legal protection to employees who lack the personal, market, or union resources to look after themselves, we have not succeeded.

Employee Involvement
Relying on lawyers or government officials to represent workers also ignores the potential for active employee participation in the affairs of the workplace. Participation is what employee involvement (EI) programs claim to achieve. These programs include a variety of initiatives, ranging from modest schemes for job rotation and job enrichment to more extensive efforts to improve the quality of working life, and from autonomous production teams to significant employee stock ownership plans (ESOPs).

The assumption of the EI movement is that employees want more than just financial and personal protection on the job. They also want the satisfaction of having a voice in their work and in the design of their workplace environment. Advocates of this new style of human resource management say firms will compete more effectively by eliciting greater employee commitment and tapping the insights and ingenuity that experienced workers can contribute. The result, they say, will be more efficient, higher quality production and a more dedicated, creative workforce.

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Skeptics, on the other hand, see EI as no more than a tarted-up version of the old company union. They object that even though EI programs provide nonunion workers with some degree of participation, the employees lack any real power, nowhere more clearly demonstrated than when a new management decides to abandon or cut back the firm's EI program.

Tellingly, my colleagues at Harvard Business School call employee involvement "participatory management." The tacit assumption of EI is that the personnel department, often sporting the fancy new designation of Human Resources Division, will now assume the job of representing the interests of the employees and thereby replace the "outside," adversarial trade union.

To my mind, sophisticated, benevolent forms of participatory management have secured real benefits for employees in their day-to-day relations with managers. Yet such a system of worker representation has inherent limits. It is problematic to ask employees to entrust their destinies to people who belong to a unified management team that is ultimately accountable only to the shareholders and their board of directors. That constituency has interests of its own which regularly conflict, sometimes seriously, with those of the employees. In recent years the limits of participatory management have become vividly apparent in friendly mergers, hostile takeovers, and leveraged buyouts. Firms engaged in such major "restructuring" often increase the value of the shareholders' equity at considerable cost to the stake that the employees have built up. When put to the test in these cases, even the most open, participatory style of management has been of little help in defending vital employee interests.

Thus neither government regulation nor participatory management has been able to satisfy employee needs for effective protection and constructive participation. They each display the same characteristic failing -- the absence of any independent and cohesive worker base inside the firm that affords individual employees a chance to take full advantage of either the new legal rights or on the job involvement.

An apt illustration is the new plant closing law, the Workers' Adjustment and Retraining Notification Act. WARNA's mandatory 60-day notice of a large-scale layoff will alert individual nonunion workers to start looking seriously for another job. But unorganized employees will hardly be able to devise and press for more constructive responses, such as work sharing, job banks, retraining opportunities, or employee buyouts of endangered establishments.

Reviving Collective Bargaining
Despite its numerous inadequacies, collective bargaining still provides representation of worker interests through a body selected by and accountable to the employees themselves. That is why the union enables employees to take better advantage of legal regulation and the more active participation offered by EI programs.

Though our collective bargaining model must be renovated and modernized, we need to ensure that employees genuinely enjoy the right to organize a union. Elsewhere I have offered specific suggestions for reforming the National Labor Relations Act, drawing on my personal experience with Canadian laws that have helped keep union representation near the 40 percent mark in Canada while it was falling to near 15 percent here. For example, sharply restricting the length of election campaigns would reduce the time and the temptation for employers to use illegitimate tactics to intimidate their employees. We must also prohibit employers from permanently replacing strikers, a tactic that was most often used against fledgling units trying to win a first contract but is now increasingly used by employers as a way of aborting long-established bargaining relationships.

Another proposal, as American as apple pie, would give the victims of company reprisals access to the ordinary courts, where juries could decide what damages are appropriate for often flagrantly illegal actions by employers. Weak remedies for unfair labor practices are the most evident deficiency of current labor law. The National Labor Relations Board responds to employer violations far too slowly and too modestly to provide either meaningful redress or deterrence. For example, an employer willing to invest in lawyers' fees can readily postpone for a thousand days or more the first enforceable order to reinstate an illegally fired union supporter. In such cases, the monetary awards issued by the board now average a mere $2,000 apiece.

Faster relief, perhaps through federal court injunctions, would be more likely to make the statute effective and the victims whole. Yet even such an expedited procedure would face real difficulties in returning a fired employee safely to his old job, let alone installing a union as bargaining agent for an ever-changing unit of employees in an anti-union firm. But one thing American law can do well is to force a guilty party to pay damages. Consequently, we should also enable wrongfully dismissed union supporters to bring suit in state courts. Instead of the severely limited back pay awards available from the NLRB, a fired union supporter could collect not only lost back pay, but also compensation for future earnings losses and for consequential economic and emotional harms. Punitive damages might be available as well in egregious cases. A few skilled plaintiff's attorneys, winning six or seven-figure jury verdicts, would rather quickly get employers to sit up and take more seriously their labor law obligations.

Courts in almost every state already give nonunion workers the right to sue if they are fired for reasons that flout any of a host of public policies. Ironically, current victims of unfair labor practices prohibited by the Wagner Act receive far less effective protection. It is time that we opened up state courthouse doors to the equally deserving victims of retaliatory discharges during union campaigns.

Beyond Labor Law Reform
All this said, labor law reform presents a difficult politics and an incomplete solution to the new problems of the modern workplace. In 1978 a more liberal Congress and friendlier administration narrowly failed to win enactment of rather modest labor reform legislation. Moreover, even if all of these proposed reforms were passed by Congress, they would not close the representation gap.

Here again, Canada offers cogent lessons about the limits as well as the possibilities of labor law reform. Due to the different political climate, governments in Canada were able to expand the basic Wagner Act model to improve access to collective bargaining. These legal measures aided the growth of unions, which still cover nearly 40 percent of Canadian workers. Even so, union representation in Canada's private sector has recently receded to somewhere under 30 percent. Moreover, among private service workers in finance and retail, two of the fastest growing sectors of employment, union coverage is under 15 percent.

The Canadian-U.S. comparison highlights more clearly the common features of the North American pattern of labor relations. In both countries, organizing a union is arduous, complex, and time-consuming. Almost every nonunion employer is appalled at the prospect of having to deal with a union and will deploy a variety of tactics designed to head it off. Even in the more benign Canadian legal setting there likely will be sustained employer efforts at persuasion and obstruction; only too often in the United States there will be coercion and suppression.

To establish initial employee interest and cohesion and to overcome sustained management resistance, a union campaign must be spearheaded by a large existing union. Only an established union is likely to possess the necessary resources, yet it suffers for the same reasons: it seems distant and bureaucratic. Rightly or wrongly, large numbers of North American workers would rather not be part of such an organization. As a consequence, some fraction of nonunion employees are quite satisfied with the representation of their interests provided by benevolent human resource management. Others rely on their individual job mobility to better themselves. But there is a third group who are dissatisfied with the status quo but feel locked into their present jobs -- yet are unwilling to join the kind of big union or undertake the traumatic organizing effort to bargain collectively for improved conditions.

The sources of worker discontent, however, do not just go away Employee concerns find expression through the political process, producing a burgeoning array of regulatory measures. But the regulatory option often delivers no more than unfulfilled legal promises to workers who lack the indigenous base of representation necessary to make the law effective in their workplace.

Thus, even as we seek to give unions strengthened organizing rights, we need to consider a more profound change in the North American model of corporate governance and employee representation. Employee participation and representation are valuable in both protecting the tangible interests of employees and realizing the broader aspiration to democratize the workplace. Not very many employers are likely to share any authority over the workplace voluntarily But the law could establish a minimum form of employee participation, whether or not firms are unionized.

Employee Councils
West German "works councils" offer a workable and attractive alternative model. They have legal responsibility not just for carrying out collective bargaining agreements and enforcing employment regulation. The councils also influence, even codetermine, a host of personnel policies of German enterprises that have flourished in the international market. A North American counterpart could require that every workplace above a certain size (say 25 employees) have an employee participation committee (EPC). The committee's members would be rank-and-file employees elected by a secret ballot of their fellow workers. EPCs would deal with a broad expanse of employment issues, such as wages, benefits, hiring and training, and work organization, including technological and organizational innovation. They would be entitled to be consulted before management could make changes in such workplace conditions. In addition, the committees would play the front-line role in administering the health and safety rules and other regulatory programs.

Much of this involvement could benefit the firm as well as the employees. For example, where the worker councils were empowered to monitor safety standards, outside bureaucratic monitoring could be relaxed. The EPC idea would, therefore, introduce greater local flexibility into our rigid regulatory regime, a considerable attraction to management.

Every EPC would be entitled to the extensive information necessary for performing its worker representation role, just as management must now give data to the board of directors representing the shareholders. The committee would also be entitled to certain financial resources contributed jointly by the firm and the employees, according to a statutory per capita formula. Those funds would allow the EPCs to secure advice from financial and technical experts in relevant subjects. A prominent source of such assistance would likely be trade unions; others might be women's action committees, injured worker groups, and the like. Where a union already enjoyed bargaining rights in a workplace, the local union would function as EPC, assuming the same responsibility and resources to represent the interests of the unit members.

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This proposal calls for employee participation in the office or on the plant floor, not in the corporate boardroom. In the past few years, many people have called for employee representation on boards of directors or for even greater employee control through the ownership of the enterprise via ESOPs. This movement has both virtues and risks. The bare insertion of a few employee directors on a corporate board, however, is likely to make little difference in employees' lives unless there is a base of organization in offices and shops. In allocating scarce political resources, we should give priority to workplace participation. For one thing, that is where direct contact can be made with the employees themselves. For another, employee councils at that level could provide meaningful accountability for those who do act as representatives of nonunion workers in the loftier realms of corporate decision making.

Even so, effective representation in offices and shops will inevitably require employee committees and unions to become knowledgeable about traditionally protected "management prerogatives," such as capital investment plans and marketing decisions. In that sense, even a "shop-floor" model of worker representation requires far greater worker knowledge of what goes on in boardrooms. Employee participation committees could also help make ESOPs and other forms of partial worker ownership more meaningful. In practice, ESOPs have been used mainly as tools of corporate finance and more recently as anti-takeover buffers to protect entrenched management. Codetermination through employee participation committees could be the vehicle by which workers could, in effect, vote their ESOP shares to press for changes in corporate strategy.

Practical Codetermination
Is any of this politically feasible? Wouldn't this model threaten managers and trade unionists alike? Consider managers first. To many managers, an EPC is simply a disguised version of compulsory unionism. But an employee participation committee is not like the large national unions engaged in full-fledged collective bargaining and operating far beyond the confines of any single company. An EPC is no more than an indigenous representative council, built into the structure of every sizable firm.

Moreover, the immense vogue of participatory management, the interest in lessons from Germany and Japan, and the widely accepted need to upgrade productivity all make this approach far more thinkable to managers today than it was a decade ago. Despite the declining political influence of unions, there are also ample windows of legislative opportunity, as American business comes to legislatures seeking everything from protection against hostile takeovers to reform of pension laws and assorted tax benefits. If liberals and their trade union allies made a home-grown form of codetermination a political priority, there are plenty of occasions to seek legislative quid pro quos. In particular, if managers want government-sponsored shelter from the usual form of accountability -- brutal retribution by market forces, via hostile takeovers -- it is only fair to insist on more accountability to employees. A firm's workers, after all, have a far greater stake in its long-term well-being than a temporary shareholder whose only interest is immediate financial gain.

At first blush the concept of an employee participation committee strikes some trade unionists as merely a modern version of the old "company union": a program designed to give employees the impression that they are participating, yet leaving them without power or influence. Worse, it is feared, this kind of in-house representation is likely to distract the nonunion work force from joining a large independent union with the strength and resources to make management take serious notice of the employees. I have two responses. First, codetermination offers tangible participation to the 85 percent of workers who are now entirely unrepresented. And, second, the employee participation committees should not deter unionization at all. Some may develop in the direction of unions (though not necessarily the kind we have today); others may draw on unions for support.

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Health and safety regulation offers a good parallel. Organized workers take far more advantage of these programs because their union is a major source of expertise, resources, and collective memory. For an indigenous EPC to be fully effective, the employees will need to draw on external assistance. Unions will stand ready to support them. In short, I propose not to replace labor unions and labor laws, but rather to expand the range of options made available to American workers.

Most unions, in fact, are far more amenable to this approach than they were before the current wave of industrial change and the parallel assault on collective bargaining. Several of the most influential unions and their leaders view codetermination as a path for revitalizing the union movement. A number of leading unions are experimenting with greater employee involvement on the plant floor and in the boardroom. The problem is that meaningful codetermination is difficult to initiate one employer at a time, in the absence of a new legal mandate and framework.

In unionized firms, codetermination would help revive the union local by making it a far more dynamic and participatory institution. In nonunion firms, employee councils would accustom workers to operating collectively and expecting to participate in policy. Most important, codetermination offers the promise of genuine positive sum gains, where both workers and firms truly benefit.

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