The Relevance of Organized Labor

Two statistics: Union membership in the United States, it was reported this week, is down to 6.6% of workers in private companies, the lowest level since World War II. The share of the national income going to workers is also at its lowest point since World War II.

Labor professor Gary Chaison told Bloomberg: “American workers feel as if the contract between them and their employers doesn’t work any more, but they’re not turning to unions.”

This is hardly a new phenomenon. More than 30 years ago, three prominent American labor leaders called on Peter Drucker for his counsel. One was president of a union of government employees, the second of a union in a primary industry, and the third of a mass-production union. “Each came with his own specific concerns,” Drucker recalled in The Frontiers of Management. “Yet each one asked—and fairly soon—whether the labor union still has a function in America or is becoming irrelevant.”

In Drucker’s view, the answer was not encouraging for his guests. The problem was not, in his opinion, union busters (though there were plenty of those out there—and still are). Instead, other factors were primarily at play.

Image source: SMU Central University Libraries
Image source: SMU Central University Libraries

One was that union members, by investing heavily in the stock market through their pension funds, were not merely employees but also owners, creating conflicts of interest. Another was that unions had managed to accomplish much of what they’d set out to do when the labor movement took off in the 1930s.

“The true strength of the labor movement in developed countries has been moral: its claim to be the political conscience of a modern secular society,” Drucker noted. But this was harder to be when organized labor became a powerful interest group and its members were relatively well paid.

Finally, Drucker argued, unions didn’t have many economic gains left to win. “Once 85 percent of national income goes to employees, the labor union has lost its original rationale: that of increasing the share of the national income that goes to the ‘wage fund.’” Drucker wrote in his 1980 book Managing in Turbulent Times. “All one labor union can do is increase the share of its members at the expense of other employees.”

Therefore, Drucker believed that unions needed to recast themselves as the entities that united the goals of the worker and the enterprise. Unions should be reestablished as “the embodiment of the ultimate identity of interest between employer and employee,” he wrote.

As things turned out, few unions took Drucker’s advice as fully as he’d have liked. But, as statistics show, Drucker also was writing at a time when wages were much more favorable for the worker.

What do you think? Do we need a revitalized labor movement if workers ever hope to see their wages rise significantly?