Business and Economics

The rise and fall (and rise?) of unions 11-17-18

Source - Economist, November 17, 2018: "Workers of the world, log on!"     

Examination of popular theories for the rise and fall of labor unions. Best evidence points to technology. Unions thrive when capital-intensive industries bring workers together and create choke-points where organized labor can shut down the expensive machines. As developed countries have shifted to a less capital-intensive service economy, the potential for powerful unions has declined.

Union membership

Industrialization, beginning in the 18th Century, took isolated workers and brought them together under one factory roof. This proximity allowed for close contact and coordination. In 1910, 10% of US workers were unionized. By 1950, that had risen to 30% - but that number has fallen again, to about 10% of all US workers belonging to unions today. This is mirrored in the developed world. The median OECD union membership rate is 18% today down from 50% in 1980. What has caused the decline?

A popular theory is that law has caused the change. Union membership was low at the turn of the last century when US law considered most unions to be "criminal conspiracies". When those laws were changed in the 1930's, union membership increased. In the1980's, as restrictions on unions began again to increase, union membership declined. The Janus case would be an example of an anti-union law. However, there is no empirical evidence linking the legal environment to changes in union members.

Another theory (also with no empirical evidence) is that governments have taken the place of unions. Governments, not unions, now set minimum wages and minimum safety standards therefore unions are no longer truly needed.

The best explanation involves technology. Early industry was capital-intensive (factories, coal mining) and labor and capital were placed together in close proximity. This created choke-points where a few organized workers could go on strike and render the expensive machines worthless. Tim Mitchell takes this point of view in his book "Carbon Democracy".

As technology has changed and the developed word has moved away from manufacturing and towards service and software, the amount of capital stock as a percent of GDP has fallen (see chart) and so has union membership. The technology and capital stock theory regarding the rise and fall of union membership has empirical evidence to back it up.    

Unions and capital

New technology is making it easier for workers to connect. Take the 2018 West Virginia teacher's strike as an example. The teachers organized themselves using Facebook. Out of 35,000 West Virginia teachers, 70% of them joined the Facebook group where they shared advice and decided on actions.

From the article:" was long an isolated example. Recently similar services have flourished by mimicking the startup approach and “unbundling” the roles of official unions. These startups are parcelling the various functions of unions into a series of discrete digital alternatives. In this way a new breed of activists is changing the way that workers can organise. Some startups aim to fulfil the role of informing workers and recruiting members. Two years ago OUR launched WorkIT, a smartphone app for Walmart workers. After signing up, users are presented with a simple chat interface where they can ask questions about the retail chain’s complex workplace regulations. Volunteers, often Walmart employees themselves, answer."

From the article: "For now, unions still look weak. Membership continues to decline. But their history shows that the relative power of labour and capital is constantly in flux. Recent decades have been tough on labour, largely as a consequence of technological change. But technology may also be the thing that helps turn their fortunes around."