Labor Unions

A primary benefit of capitalism is that goods and services are provided at lower cost because of competition among firms for market share. During the early stages of capitalism, when there were few laws or regulations regarding these new capitalistic firms, owners of firms sought to reduce their costs by paying labor as little as possible and only supplied what was absolutely necessary to produce the product or service, with little regard to the satisfaction, health, and safety of the workers. As individuals, workers could do little to improve their lot, since the owners owned all of the factors of production except for the workers' labor. However, even if a worker quit, the owners could quickly find a replacement. Because workers only had their time and skills to offer, they would have more power if they negotiated for better wages and conditions as a group, since no business can be run without employees. Hence, beginning in the late 1700s, workers started to organize into labor unions so that they could bargain collectively with their employers.

Labor unions are associations of laborers who organize to have greater bargaining power with their employers, to increase their wages or to improve working conditions. Over the years, both labor unions and firms have developed strategies to achieve their own objectives or to thwart the efforts of the other side.

History of Labor Unions

In the early 1800s, owners of textile firms introduced a new type of machine called a white frame, which could produce cloth faster and cheaper than previous manual methods and greatly reduced the demand for textile workers. To try to prevent the loss of their jobs, some of the textile workers organized to destroy the machines and even burned some of the homes of the mill workers. They were called Luddites, named after Ned Ludd, who, 30 years earlier, attacked stocking frames because those machines were replacing workers in the manufacture of stockings. However, the British government ended the revolt by making it a capital crime to destroy machinery and by hanging 17 of the textile workers in 1813. To this day, the term Luddite refers to people who oppose the introduction of new technology.

The Luddites were trying to keep their jobs — they were not trying to increase their wages or improve their working conditions. Their resort to violence underscored the utter dependence of employees on their employers for their livelihood, since they had few alternatives for making a living. Hence, employers could exploit the workers to lower their costs. To make matters worse, the law was frequently on the employers' side, since they were wealthy and could influence legislators to pass laws in their favor. As industrialization proceeded, and more people became employees, more people started to suffer from the exploitation, so they started to seek solutions to their plight. The solution that became obvious to most people is that although employers did not need a particular individual for a job, they did need someone. Hence, workers started organizing into unions who could bargain collectively with employers.

Before the 1920s, people did not have the right to organize into unions nor were they permitted to strike. Early in the 20th century, unions started using strikes as a means to obtain higher wages, which often lead to violence. This turned the public against unions, until the Great Depression, when the need for unions became clear and more desirable. Various laws were enacted to permit unions and some of their activities. In 1935, as part of the New Deal legislation, the National Labor Relations Act, also known as the Wagner Act, was passed that guaranteed workers the right to form unions, to strike, and to engage in collective bargaining. The National Labor Relations Board was also created by this act. The NLRB can investigate unfair labor practices and order them stopped, and it runs certification elections for workers who successfully petition for a union.

However, because of increasing opposition from businesses, the government passed the Labor-Management Relations Act 1947, also known as the Taft-Hartley Act, which restricted union activities. States were permitted to pass right-to-work laws which forbid unions from requiring that workers must belong to a union before working at a unionized firm. The act also allowed union shops, where all workers at a firm must join the union after an initial probationary phase. However, unions cannot form a closed shop, where the union controls hiring by allowing only union members to work at the firm. The Taft-Hartley Act also outlawed secondary boycotts, where the union tries to get other unions who are not members of the firm or even in the industry to boycott the products produced by the firm.

How Labor Unions Work

The success of unions depends on the economy, what is legally permissible, the ability of the union organizers, and how much competition there is for the products or services produced by the business.

Union organizers attempt to organize workers by pointing out the benefits of the union and teaching them how to go about forming one. The union organizers typically get the workers to sign a petition for a certification election. If at least 30% of the workers approve of the petition, then a certification election is held by the National Labor Relations Board, where workers can vote on whether the union should be their collective bargaining agent. If the union wins a simple majority of the votes, then the firm is legally obligated to deal with the union in good faith. If the workers become dissatisfied with the union, then they can also petition for a decertification election.

When the union is formed, they seek to reach a collective bargaining agreement with the employer, which stipulates wages, fringe benefits, and improved working conditions. The collective bargaining agreement covers a specific time period, after which, the contract expires. The union will try to negotiate a contract before the expiration of the current contract, but if negotiations are not successful, then the union can vote for a strike, where the workers will refuse to work until the collective bargaining agreement is signed. Some firms retaliate by instituting a lockout, which legally prevents any worker from entering the firm's premises. Lockouts give the firm negotiating power, especially if they hire replacement labor, which they are legally permitted to do.

1903 Puck illustration showing that the employer's right to lockout unionized workers is as valid as the worker's right to strike.

1903 Puck illustration showing a larger-than-life-size man, the representative for the "Employers Union", who gestures toward a sign on a wall around a construction site, the sign states "Notice - The right to lock out is as absolute as the right to strike - Employer's Union"; a labor union "Walking Delegate" is standing with two laborers, they are shocked at being locked-out and unable to work.

How Labor Unions Are Organized

Craft unions were one of the first types of unions, since, as Samuel Gompers, the first president of the AFL, argued, trying to unionize workers of all skill levels would probably be unsuccessful. By unionizing people of a particular skill, it would be more difficult for firms to find replacement workers.

Craft unions serve as the collective bargaining agent for workers in the same occupation or craft, regardless of where they actually work. The first craft unions in the United States was formed before 1800 and represented printers and shoemakers. The American Federation of Labor (AFL) is the major Federation of craft unions. However, enterprises were becoming ever larger, especially in the auto, steel, and mining industries, so during the 1930s, there was increased effort, especially by John L. Lewis, to unionize these major industries.

Industrial unions organize all workers in a particular industry, regardless of the type of work that they do, such as the United Steelworkers of America and the United Mine Workers of America. Industrial unions first organized under the AFL, but were subsequently expelled in 1938. As an independent organization, it called itself the Congress of Industrial Organizations (CIO), which became the first federation of industrial unions in the United States. The split occurred because the AFL claimed exclusive jurisdiction over everyone practicing a particular craft, including those working in industries that were organized under industrial unions. However, the 2 federations merged in 1955 as the AFL-CIO.

Most national unions have local affiliates that represent workers in a particular city or firm. These locals, as they are called, follow the general policies of the national union. Locals may also have a regional council that represents a larger geographical area. Generally, the locals of a craft union represent all the workers practicing in particular craft within a municipality, such as a city. The locals of industrial unions usually represent all the workers at a particular firm or a particular site.

There is at least one union member, called a shop steward or union delegate, at each work site that handles grievances and other day-to-day matters that relate to union members.

It was also becoming apparent that union leaders were often enriching themselves at the expense of their own members, since they collected hefty union fees but did not have to account for how the money was used. Moreover, when union leaders were elected, there was little that the workers could do if they became dissatisfied with the leadership. Hence, the Labor-Management Reporting and Disclosure Act of 1959, also known as the Landrum-Griffin Act, was passed that required the complete disclosure of union finances and required that the unions hold regularly scheduled elections to make union leaders more accountable to the workers.

Future of Labor Unions

Labor laws have reduced the need for unions. In most advanced economies, there are laws that set minimum wages, the maximum number of hours that can be worked for regular pay, and how much, as a percentage of base pay, must be paid in overtime. Additionally, governments also provide unemployment compensation, disability insurance, and pensions.

Additional laws were required for protection against discrimination, especially since unions often did not protect employees from discrimination, especially in the early years. Employers often discriminated against workers because of their own prejudices. Employers in years past tended to be white males, many of whom discriminated against females or people who were not white. Governments have attempted to minimize this unfairness by passing laws against discrimination based on obvious traits that are easily observable but that have no effect on the person's ability to do the work, such as discrimination based on age, race, ethnicity, religion, or disabilities. Governments also passed laws to try to prevent hostile work environments, such as the laws against sexual harassment or discrimination.

More general laws were also passed, such as the comparable worth laws, which mandate that people doing comparable work should be paid comparable wages. Of course, defining what is comparable is problematic, at best.

The main problem with laws is that remedies can take a long time and cost a lot of money, especially if a lawsuit has to be filed. Unions can effect solutions and address grievances faster.

Firms can reduce the power of unions by moving factories to localities that do not allow unions or have right-to-work laws. This transfer of union jobs to nonunion workers is sometimes referred to as a runaway shop. Firms can also lower labor costs by outsourcing the work to other countries with lower labor costs, particularly for work that can be shipped or transferred cheaply.

Unions grew steadily until the 1980s, when they started to decline. Most of the decline in union membership can be attributed to increasing global competition, especially for manufacturing industries. Firms couldn't pay union wages or benefits when they had to compete with firms in other countries that have access to low-cost labor or who are not subjected to expensive regulations. Hence, unions have focused on organizing employees that have a monopoly product or service, such as public service employees. Since most governments are a monopoly of sorts, unions can successfully organize the employees to increase their wages and especially their pensions at the expense of the taxpayer.