Labor Unions in the U.S - Case Study Example

The Impact of Labor Unions Labor Unions in the U.S. began as a response to unfair practices by employers. Prior to the mid-1930’s and the somewhat labor-friendly policies of the President Franklin Roosevelt era, unions were essentially on their own, literally fighting for reasonable wages and safe working conditions. In the early part of the 1900’s, companies hired ‘union busters’ to physically intimidate workers who enlisted assistance from organized crime out of necessity. The turbulent clashes between bosses and workers along with propaganda put out by companies contributed to the unions garnering a tarnished image of violence and ungratefulness. In spite of this, the growing political influence of labor unions ended child labor in the U.S., helped to create the Occupational Safety and Health Administration (OSHA) and introduced the concept of a minimum wage. Following WWII, unions became increasingly accepted as a viable and essential element of the employment landscape. Today, only about 15 percent of American workers are unionized, a drastic reduction from the 1950’s but the union’s collective influence continues to make great strides for all workers whether organized or not. This discussion first briefly examines how the New Deal instigated the union’s rise to prominence following the war then describes the inner-workings of organized labor in an effort to illustrate labor’s affect in the workplace. It also addresses the economics concerning higher wages and the increased benefits advocated by unions while providing explanations regarding why unions are still relevant and useful to both workers and employers even today. The New Deal era in America had its beginnings in the 1920’s and officially spanned from 1933 until well into the 1960’s. The First New Deal (1933 to1934) decidedly orientated governmental policies toward big business.  The Second New Deal which began in 1935 was less pro-business in position, but in practice continued to support top-down economic growth.  Later in this stage of reform, the government increased its focus on antitrust enforcement and stronger regulations on business regulation. Rather than attempt to regulate businesses, New Deal advocates wanted to greatly increase the size and control of the government so that it could act as a counterbalance to private sector industries (Yantek, n.d.). As greedy corporations sought to impede the growing influence of labor unions, it was thwarted by the increasing involvement of the government into labor relations. The economic conditions of the time demanded that the solutions foster relations between the oppressive capitalist class and the working class. New Deal advocates and labor unions viewed the citizen’s right to welfare and access to health care a matter of class equality. Labor unions lobbied for employers’ liability laws, social reformers worked for maximum hours for women workers, minimum wages, factory inspections, child-labor laws, and anti-sweatshop laws” (Baker, 2003). Backed by the ‘New Dealers,’ these issues were addressed on the federal level. Unions originated in response to unscrupulous actions from employers’ repressive tactics such as substandard pay practices and allowing hazardous working conditions. Unions provide a place for employees to receive better pay and health benefits as well as guaranteed safety regulations. Following the war, union membership grew as did their organizational structure. They also diversified into more specific areas of work and offered accredited trade school programs for apprenticeships. Craft Unions, one of many types of unions, consist of members with one specific skill such as carpentry or an electrical worker. Craft unions train their members through apprenticeship programs then find employment for their members. The employees are directly represented while at work by the member-elected shop steward who relays their concerns to the employer. “Issues include complaints of work rules being violated or workers being treated unfairly in particular situations. A formal grievance procedure is typically used to resolve these issues” (Noe, Hollenbeck, Gerhart & Wright, 2004 p. 18). The management at the union hall conducts labor relations which include many different types of activities on many levels of involvement within the labor-management relationship. One of the most important responsibilities of union management is contract negotiations which involves decisions regarding pay structures, employment security, workplace regulations, safety and numerous other concerns. Decisions made during contract negotiations affect the employee/employer relationship for the duration of the agreement. Union representatives hold ‘organizing campaigns’ in an attempt to recruit workers in a particular industry or corporation. They explain to employees the benefits of union membership which include higher pay, increased health and retirement benefits and wide-ranging working conditions. The union may begin the process of unionizing an organization if 30 percent of the particular workforce signs an authorization card. When 50 percent or more of workers sign up, the union then requests the employer to voluntarily acknowledge that their workers are unionized. However, employers may continue to resist unionization and initiate measures such as pay raises and other incentives in an effort to counteract the union offers. If a company does not recognize the worker’s desire to organize, the union then convenes a secret election. If the majority votes for a union, the union representatives begin collective bargaining negotiations with the employer. “Collective bargaining is when the union and the management representative negotiate terms for an employment contract. This contract consists of pay, benefits, work regulations and how workers will resolve grievances” (Noe, Hollenbeck, Gerhart & Wright, 2004 p. 19). Reaching an agreement on a contract is essential for the employer/employee relationship to operate effectively. Both employer and union representative must prepare for collective agreements. Union representatives should be aware of precisely what the employees need and want in their particular workplace situation and must know what concessions can be made during negotiations. Following unionization, employees that believe the employer has in some way violated the union contract first speaks with their manager then, if necessary, the union steward. The steward will submit the complaint in writing to the appropriate level of management then meets with company representatives in an effort to resolve the matter. The outcome of this meeting is also put in writing.  If the union and company representatives cannot reach an agreement, the membership may resort to a work stoppage, going ‘on strike,’ and begin gathering in front of their place of employment with their grievances spelled out on signs, ‘picketing.’ However, it is in neither the union members’ nor the corporate management’s best interest to stop production because both sides lose money. Therefore, each side generally makes attempts to settle an issue before it reaches this point. Strikes are the only recourse of a union but this tactic is rarely utilized today though there are significant exceptions. For example in 2005 the New York City transit unions, which represents more than 33,000 members, threatened to strike the bus subway lines (“NYC”, 2005). Prior to a strike’s official beginning, independent arbitration is often used to settle the differences between the union and company. The arbitrator is a third party that hears the arguments from both sides and decides on a resolution that is legally binding to both parties. A mediator may also be used by the parties prior to arbitration. Though it is not binding, the results of the mediation may help further the negotiations. Those opposed to the unionization of workplaces maintain that while they were once relevant, they are now an ineffective relic of the past. Since unions were first formed to force employers to provide fair pay and safe working conditions, they reason that laws today enforce safe working conditions and a minimum wage requirement which negates the usefulness of unions. Though they admit unions have improved safety and pay for workers worldwide in the past, they state that today’s competitive marketplace will not allow unions to regain the size or power they once enjoyed. The presence of unions, it is feared, could cause a slow growth in employment and smaller corporate profits because of inflated labor costs. “The existing literature suggests that union wage premiums are large, and that unions have significant effects on profitability” (Ruback & Zimmerman, 1984). Another and maybe the most prominent reason employers oppose unions is that they must relinquish the total control over the workplace to an outside group (Clark, 2003). In spite of employer fears, proponents of unions argue that businesses are not more susceptible to failure and point out that there is little evidence to indicate anything other than modest wage increases related with newly unionized workplaces. Furthermore, raising the standard of living ultimately stimulates the economy which serves to pump money back into businesses (Freeman & Kleiner, 1990). In addition, a union provides a kind of checks and balance system restraining somewhat the total authority of big business, a function that is proving increasingly important following the recent revelations of abuses of power by many large firms such as WorldCom and Enron (Clark, 2003). The issue of employee productivity has also been greatly debated by both sides of unionization. “On one hand union employees have workload limits that they abide by as well as unionized strikes which can completely shut down organizations. On the other hand, unions can reduce turnover by allowing the employee-employer relationship to grow by being an outlet for both sides” (Noe, Hollenbeck, Gerhart & Wright, 2004 p. 35). Unions have largely influenced the mindset of organizations. Employee concerns are an important focal point along with the bottom line. Employers that wish to avoid unionization are ensuring that safe working conditions and fair pay are offered. Through direct or indirect means, unions have secured enhanced working environments in businesses all over the U.S. (Noe, Hollenbeck, Gerhart & Wright, 2004 p. 37).  Still today, unions play a vital role in the economy and in society as a whole. Their impact has continued to extend well past those dues paying members. This has occurred because non-union employers have been passively forced to improve pay and benefits, job security and working conditions to levels close to union members in a similar industry. The ‘union threat effect’ is the name economists have tagged such an occurrence. Though only about 15 percent of Americans are union members today, the continued union influence serves to impact more than the pay and working conditions of nonunion employees. “While 31.5 percent of workers were union members in 1950 and 33.2 percent were in unions in 1955, that percentage fell to 31.4 in 1960, 28.4 in 1965 and 27.3 percent in 1970. Union participation has continued to fall since then. Thus, although unions have had an important impact on the American economy, an increasingly smaller percentage of American workers have been part of this impact since the late 1950s” (Labor Unions, 2007). Many receive health insurance, sick leave, paid vacations and pensions not because of their employer’s generosity but because unions successfully negotiated these things for its members. If unions did not exist today, no other employer would likely offer benefits or compensation at present levels as there would be no need to remain competitive with a unionized competitor. The labor movement remains an important facet of society but not simply to ensure equity and fairness in all workplaces, union or not. Today, when revelations of corporate crime are a seemingly a part of everyday life and the Bush administration seems to be enabling rather than regulating white collar crime on the grandest of scales, the role of the union movement as an overseer makes its current relevance undeniable. Unions have been and are still the grass roots influence behind the minimum wage law in the U.S. Many leading economists support the minimum wage as a viable part of a sound economic policy. A group of 526 economists including four Nobel Prize recipients signed a statement in 2004 that stated, in part, “a modest increase in the minimum wage would improve the well-being of low-wage workers and would not have the adverse effect that critics have claimed” (Aaron et al, 2004). Less than 30 years ago, almost all economists thought that a rise in the minimum wage would cause proportionate unemployment of low-wage workers. This view changed dramatically in the 1990’s however. During that time, some states, including New Jersey, increased the mandatory minimum wage in excess of the federal mandate. Two Princeton economists published a study in 1995 regarding unemployment figures of various fast-food establishments in New Jersey and in Pennsylvania which did not raise its minimum wage. The study showed that employment figures climbed in New Jersey but not in Pennsylvania. This evidence was in contrast to the popularly held belief. This and similar studies caused a mass reversal in the opinion of economists that higher wages equals higher unemployment. Explanations for the phenomenon include “cost savings from reduced job turnover, increased productivity as a result of better worker morale and the attraction of higher-quality employees through higher wages” (Chipman, 2006). The experiences of those states that raised their minimum wage over the 1990’s have provided researchers an exceptional and wide-ranging case study with irrefutable empirical economic evidence. Researchers have had the ability to make numerous state-by-state comparisons which overwhelmingly show that wage increases, in many cases lowers the unemployment rate. No evidence has shown a perceptible increase in unemployment figures following a wage increase. A study conducted by the Fiscal Policy Institute discovered that “between 1998 and 2004, the job growth for small businesses in states with a minimum wage higher than the federal level was 6.2 percent compared to a 4.1 percent growth rate in states where the federal level prevailed” (Parrott & Kramer, 2006). Another study conducted in 2003 by the Center for Urban Economic Development examined the economic impact following the raise of the minimum wage in Illinois. No correlation could be found between the minimum wage increase and the growth of employment (Baiman et al, 2003). Unions started as vigilante groups then gained respectability as a result of Roosevelt’s policies which allowed them to grow exponentially following WWII. Their impact on the U.S. includes establishing child labor laws and unemployment insurance, ensuring fair wages and safe working conditions for all American workers, not just union members. The contributions unions have made are vast and have been proven not only good for employees but employers and the economy as a whole too. Though the membership has fallen dramatically since its highest point in the 1950’s and 1960’s, unions still play an important role in workers rights. Works Cited Aaron, Henry; Arrow, Kevin; Blank, Rebecca. “Hundreds of Economists Say: Raise the Minimum Wage.” Economists Statement. Economic Policy Institute, 2004. Baker, Dorie. “Yale Professor Writes Book on American ‘Security’ System.” Yale News Release. Yale University, July 25, 2003. Baiman, Ron; Doussard, Marc; Mastracci, Sharon; Persky, Joe; & Theodore, Nik. “Illinois Minimum Wage Study.” Chicago, IL: Center for Urban Economic Development, University of Illinois at Chicago, (March, 2003). October 30, 2007 Chipman, Kim. “Higher Minimum Wage no Longer Regarded in US as Sure-Fire Job Killer.” Bloomberg, August 7, 2006. Clark, Paul F. “Look for the Union Influence.” Post Gazette. Pittsburgh, PN: August 31, 2003. October 30, 2007 Freeman, Richard B. & Kleiner, Morris M. “Do Unions Make Enterprises Insolvent?” Industrial and Labor Relations Review. Vol. 52, No. 4, (July 1999), pp. 507- 524. “Labor Unions.” History Central. (July 25, 2007). October 30, 2007 “NYC Official Transit Workers Rejected Final Offer.” MSNBC. (2005). October 30, 2007 Noe R, Hollenbeck J, Gerhart B, & Wright P. Fundamentals of Human Resource Management. New York: McGrawHill, (2004). Parrott, James & Kramer, Brent. “States with Minimum Wages Above the Federal Level Have had Faster Small Business and Retail Job Growth.” Fiscal Policy Institute, (March, 2006). October 30, 2007 Ruback, Richard & Zimmerman, Martin. “Unionization and Profitability: Evidence from the Capital Market.” Journal of Political Economy. Vol. 92, (1984), pp. 1134-1157. Yantek, Tom. “The New Deal: Capitalism Loses its Hat.” Kent State University. (n.d.). Read More