The United Auto Workers’ defeat, by a 712 to 626 vote, in its effort to organize Volkswagen’s Chattanooga assembly plant has been attributed to many causes: the South’s anti-union tradition; the outspoken opposition of some local, Republican officials, including Sen. Bob Corker, Chattanooga’s former mayor; and anti-union campaigns by conservative groups. But the deeper cause is simpler: Private-sector unions can no longer provide big benefits to members.
On paper, unions can deliver three things: higher wages and fringe benefits; greater job security; and better working conditions, including protection against arbitrary or unlawful management practices. In the 1950s and ’60s, unions could win these gains. Now, greater competition has eroded their leverage. Workers weighing the reduced advantages of being unionized must also consider the possibility that high-priced, rigid union labor might one day cost them their jobs. In Chattanooga, this calculus went against the UAW.
Unions’ eclipse has been stunning. At the end of World War II, roughly a third of private-sector jobs were unionized, especially in large firms. By 2013, the comparable figure was 6.7 percent, says the Bureau of Labor Statistics. (The rate of unionization for all workers was 11.3 percent, but that figure resulted only from greater unionization – 35.3 percent – among government workers. As late as 1983, the total unionization rate was 20 percent.)
What bolstered unions after World War II was the dominance of American business. Companies faced little or no competition. In autos, the Big Three (General Motors, Ford and Chrysler) had almost all the market. American Telephone & Telegraph enjoyed a near-monopoly of phone service. Government regulatory agencies restricted competition among airlines (the Civil Aeronautics Board) and truckers (the Interstate Commerce Commission) by limiting the number of companies that could provide service on any route.
Together, modest competition and technological superiority produced what economists call “rents”: excess returns that could go to shareholders (in higher profits), workers (in higher wages and fringes) and consumers (in lower prices or higher-quality goods and services). Labor-management bargaining determined how much of the rents workers would receive. Unions’ influence also extended to many nonunion firms – say, IBM – that imitated union benefits, at least in part, to avoid being organized.
But the system broke down in the 1970s and ’80s under pressure from nonunion domestic firms (Wal-Mart), foreign companies (Toyota) and new technologies (Microsoft). Government deregulation of airlines, trucks and telecommunications intensified competition. “Rents” – the system’s linchpin – faded and vanished. Prodded by Wall Street, companies increasingly focused on cost-cutting to protect profits. Business became more hostile toward unions. Older, heavily unionized firms grew slowly or not at all; unions had little success in organizing new high-technology sectors.
The upshot: Private-sector unions lost their power to protect jobs and raise incomes. Unions were caught in a vise. If they pressed for higher wages and fringe benefits, they risked destroying jobs. Companies might lose sales to lower-cost rivals; or they might move to anti-union states or low-wage countries. Even protecting existing compensation levels became hard because – in extremis – companies might fail. On the other hand, if unions abandoned traditional bargaining goals, they might infuriate rank-and-file members and be accused of “selling out.”
The UAW saw the Chattanooga vote as a chance to emphasize a more collaborative and less confrontational model, embracing the mantra that companies survive only by staying competitive. “With every company that we work with,” UAW President Bob King said, “we’re concerned about competitiveness.” By finding efficiencies, the idea is to “have higher wages and benefits” paid from the fruits of cooperation. Though Volkswagen was officially neutral in the vote, it seemed to support the UAW because it wants to establish a works council with workers to improve operations, as it has in Germany. Under U.S. law, a works council seems to require union representation; otherwise, it might be considered an illegal company union.
A works council may be worth trying, but whatever its virtues, they were overshadowed by the UAW’s past. Hardly anyone doubts that high labor costs and obsolete work rules contributed mightily to the crackup of the Big Three. VW’s workers recoiled; they kept the status quo. For the UAW, success in one era sowed failure in the next.