“Keep doing what you’ve been doing and you will keep getting what you’ve been getting”
Earlier this week a group of labor unions, lead by the Teamsters and the Service Employees Union, decided to leave the AFL-CIO. Their primary complaint is that the AFL-CIO has failed to recruit new members, resulting in declining union membership. Their recommended remedy is to increase recruiting in the US.
Breaking up an old organization that is inadequately representing its constituents is a good idea, but the new group is just more of the same old thing. It is unfortunate, this is a great opportunity for unions to advocate for the American workers in a way they have not done in recent memory, it is an opportunity to reinvent organized labor as a partner for growth in the United States, instead of an impediment.
Labor unions are facing powerful economic and social forces that they don’t have the ability to stop.
Every year more people reach higher levels of education than the year before. This year 6.7 million people will graduate from Chinese and Indian universities, 1.6 million from US universities. As more people are educated, and as trade barriers are lowered, pay rates for educated labor will equalize. We already see some of this in the outsourcing of software and accounting work to India. If wages for educated workers stay under pressure, why would wages for uneducated workers with marginal skills increase?
Technology will continue to decrease the number of workers needed to produce the goods we need. Further automation and improvements mean that unless the economy grows faster than productivity, companies need fewer workers.
Even older technologies are working against organized labor. China, India, Mexico, Brazil and other developing nation are adopting modern farming technologies which drive rural farmers into urban areas, some people estimate that over 300 million Chinese peasants may move to the cities in the next decade. Many of these people will emigrate to more developed nations, which bodes poorly for the wages of unskilled and poorly educated American workers.
Further, the development of equity based compensation as well as generally higher levels of investment ownership have turned millions of workers into owners, with at least a small ownership stake in the companies they work for. This is a great development for workers, not a positive development for unions.
Labor unions need to recognize that they are providing a premium good. US workers cost more than workers in other nations, but are also more productive than competitors in other nations. Unions need to look at their product and their customers the same way luxury good providers like Nordstrom, Mercedes, or Lexus look at their products and customers. Unions need to not only provide a premium good, they need to provide premium service. Think about the difference between working with Nordstrom or Goldman Sachs and the experience of dealing with unions.
So, what should unions do in the 21st century? They should focus on three things: improving the quality of their workers, partnering with business for growth, and going international. Labor needs to make a transition to a client focus, and companies are the clients.
Think about investment banking. Goldman Sachs is successful because they bring companies quality ideas, not because of their capital. Labor should lead through ideas. A labor union that brought profitable project ideas to companies would be a real revolution. There is nothing management needs more than quality, innovative ideas that keep them one step ahead of their competition. A union that could show management how hiring more of their workers leads to more profits proved a real incentive to hire more of their workers. A union that understands business changes the game and puts unions in a position to innovate.
Unions must understand that management is their customer; they have to understand their customer. Managers need to generate profits and generate growth. If unions want to sell more labor, then they need to help their customers make money. For example: if a union could show SBC how hiring their workers to increase the pace of rolling out advanced services, grows net income for SBC, then SBC would hire more workers. If a union can’t show a company how to profitably hire its workers, then the union has identified the real problem, a problem that they must solve.
Think of the difference that perspective would make, think of all the great ideas profit, and customer focused unions would discover. Think of how seriously shareholders would take unions if their message was “management doesn’t do profitable projects” instead of “Benedict Arnold.”
Just like everyone else, the labor union has a better chance at success in the 21st century and beyond if Americans are exceptionally well educated. A premier education system produces the people a nation needs to innovate and grow.
The most advanced manufacturers encourage innovation from the factory floor, smart employees can propose solutions and improvements that even the best engineers may not. Just think if GM employees advocated for the same kind of continuous improvements and total quality management that happens on a Toyota or BMW assembly line.
Even people who don’t participate in innovation still benefit from it. Amgen hires people to build buildings and mow grass, not just develop new drugs.
In today’s economy, layoffs, downsizing, and flexible workforces are a reality. Many unemployed workers can’t even participate in government sponsored retraining programs because those workers don’t have enough education. A fifth grade reading level and poor grasp of math can’t be dealt with at age 40. Everyone has to understand this, and unions should take a leading role in communicating this to kids and workers.
The final step labor should take is going international. I don’t just mean naming your union “international”, I mean really going global. The leading brands of the 21st century are global brands. Organizations like unions should see the opening of borders as an opportunity, not a threat. Unions built their place in American history when employers were genuinely workers. While American workers are no longer in that position, workers in hundreds of other nations are. With established brands, and a real core competency in organization and negotiation, unions should expand into these markets.
By focusing on service, improving the quality of their product, and taking their brand and competencies global, unions could reinvent themselves as global capitalist innovators. Unfortunately, their leadership doesn’t have the vision to do it, instead they will engage in a long bruising battle to unionize places like Wal-Mart, after losing that battle they will face an even smaller union work force, and less clout, the time for innovation will have passed and the era of the big union will be over.Timothy Burger
