Big business v big labour

ASKED WHAT labour wanted, Samuel Gompers, founding president of the American Federation of Labour in the late 1800s, is often quoted as responding: “more”. Surprisingly, his actual answer was quite lyrical. “More schools and fewer jails…more learning…more vice…more leisure…more opportunities to cultivate our best natures.” His ability of linking loftiness with pragmatic demands for better wages made the labour movement a popular and powerful force.

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After years in decline, big labour is regaining both power and popularity. Joe Biden, whose political career began in the union-friendly 1960s, has vowed to be the most pro-union president in history. Feeling newly empowered, workers have staged 241 big strikes this year, 58 of them in November alone. Unexpected places are seeing unions pop up. The Museum of Fine Arts in Boston, which set up a union last year, took down all catalogues for one day. On December 3rd Liz Shuler, new head of the AFLCIO, the successor umbrella group to Gompers’s organisation, said big tech is the next frontier to be organised. Alphabet workers and Kickstarter workers have formed unions. Amazon is currently in the middle of a long-running conflict at an Alabama warehouse. This is all going down well among Americans. Public support for unions has reached 68%, according to polling by Gallup, a level not seen in half a century.

That presents a pickle for businesses. They are already facing a tight labour market. The president and consumers may be offended by the idea of unions being imposed. Companies must be careful to balance these competing goals.

These days the first-order answer to the Gompers question given by both the Biden administration and big labour is “more trade unions”–or, as the labour movement and its supporters put it, an increase in the “density” of union representation. The reasoning is that only then will there be better working conditions, pay, and benefits. This was the primary goal. Minutes after his oath of office in January Mr Biden dismissed the general counsel of the National Labour Relations Board (NLRB), who acts as the de facto government prosecutor in labour-management disputes. Since then, the general counsel’s office reversed procedures that were adopted by Mr Biden’s pro-business Republican predecessor, Donald Trump. They also pushed for the repeal of older rules dating back to Harry Truman’s time. The NLRB void the result of Amazon’s Alabama warehouse unionisation vote. It was carried by more than two-to-one. On December 7, it permitted vote-tallying to continue at three Starbucks cafes.

More densification efforts are afoot. Given the slim majority of Democrats in Congress, two bills that directly expand labour power are unlikely to be passed. However, other legislation has included worker-friendly provisions. The bipartisan infrastructure bill directs funding to projects that employ union labor. The $2trn Social- and Climate-Spending Bill, introduced by Mr Biden, has been passed by the House. It includes tax deductions for dues and tax credits to electric cars manufactured by unionized workers, as well as severe penalties for labour-law violations. A report of a “whole-of-government” task-force set up by the White House to come up with pro-labour policies that could be advanced without new laws is due out any day. It has received more than 400 suggestions.

This revival of organised labour could yet turn out to be a blip. Previous ones petered out; a series of strikes in 1945-46, accompanied by rising inflation, soured the public mood and led to the passage of the more restrictive legislation that remains in force to this day. Since the 1970s, unionization rates have declined across the West. This is not only true in America. Companies aren’t taking chances. Two main strategies are being pursued by companies.

The first one is to keep quiet. Companies are not going to speak out against the new labour rules. They operate through large business groups like the National Association of Manufacturers or the US Chamber of Commerce. They have both been working tirelessly to block any pro-labor provisions being considered in Congress.

If firms have no choice but to respond directly, as when facing a unionisation drive, they also proceed discreetly. Most CEO s do not make public statements about such matters. According to a labour lawyer, their comments can be used as evidence for unfair labour practices, or cause a backlash from customers. They don’t usually speak out, except in a sarcastic manner, such as praise for the “direct relationship” between employees and employers, as Starbucks’s boss Kevin Johnson did this week. Third-party consultants and specialised law firms are also used by businesses to conduct surveys and gauge dissatisfaction among workers. This can lead to disputes and eventually union drives.

Fruits to their labour

The second strategy involves being very loud indeed. Companies are promoting higher wages and better benefits. Starbucks announced in October its third increase in wages and benefits in less than a year. It will pay baristas at least $15 an hour by 2023, more than twice the federal minimum wage. Amazon has set a floor at $18 for new employees, plus signing bonuses and other perks. Others will follow their lead. The Bureau of Labour Statistics reports that compensation for private-sector non-union employees increased by 1.4% in third quarter compared to second quarter. This is the largest jump in a decade. The Conference Board, a business-research outfit, finds that companies expect to raise pay by 3.9% in 2022 on average, the most since 2008. This is largely due to a shortage of workers. It is a positive side effect that it helps to pre-empt union demands. One thing is certain. It is the moment of labour, organised or not. #

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Read more from Schumpeter, our columnist on global business:

Can Johnson & Johnson put the taint of scandal behind it? (Dec 4th 2021)

Decoupling is the last thing on business leaders’ minds (Nov 27th 2021)

Walmart gets its bite back (Nov 20th 2021)

This article appeared in the Business section of the print edition under the headline “Big labour v big business”, The Economist
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