Musk shows why the US labour push faces odds

LOW unemployment has been good not only for American workers but also for American labour unions, who’ve taken advantage of robust demand to win historic contracts in industries ranging from ports to railroads to aviation to auto manufacturing.

Paired with a spurt of organising activity at companies such as Starbucks and a White House that proclaims itself, accurately, as the most pro-union in history, there’s been a surge of optimism about a broad revival of union power in the United States.

For better or worse, Elon Musk showed last week why that’s unlikely.

The ferociously anti-union chief executive responded to a surge in organising activity at Tesla Inc factories by announcing pre-emptive wage increases – essentially giving his non-union workers the vast majority of what they could have won with a union contract.

That’s a classic move in industries with competition between union and non-union firms.

When a union drive becomes plausible, the non-union companies respond with a mix of carrots and sticks.

To workers, a company in Tesla’s position can argue that you can get union wages without needing to pay union dues.

To shareholders, it can say that while the wage increases will cost money, the company is retaining valuable flexibility to deal with labour issues.

Right now, business conditions are good for automakers.

But there will be a downturn eventually, and when it comes, Tesla can eliminate jobs or cut wages or do almost anything else it wants – while the Big Three are constrained by union contracts.

These very constraints, of course, can help workers see unionisation as having benefits beyond short-term pay increases:

It can also offer long-term job stability.

But in practice, the short term matters a lot, and the ability of non-union companies to do these kind of pre-emptive raises is one of many challenges to organising drives.

Meanwhile, precisely because a non-union company can more easily lay people off during downturns, it can generally be bolder about adding employees during expansions.

This – much more than the shifting political winds in the White House – explains the decades-long decline of the share of union workers in the US private sector.

In industries with a mix of union and non-union workers, union activities generate wage externalities that benefit the workers at the non-union companies.

That’s nice for those workers, but it undermines the rationale for any given company’s workers to unionise.

Meanwhile, the decreased flexibility inherent in a collective bargaining agreement means the unionised companies are likely to grow employment more slowly than the non-union ones.

Union membership in the United States has been in decline for four decades, especially in the private sector.

There is an entirely different bargaining paradigm in much of Western Europe.

Here, generally union contracts cover entire sectors of the economy.

This approach eliminates the externalities issue present in the American model, and ensures that all workers who benefit from union activity are formally covered by the collective bargaining deal.

Something like this exists in pockets of the US economy.

One such example is Hollywood, where the Writers Guild of America bargains with all movie studios simultaneously.

As a result, new entrants to the industry such as Netflix need to come to the table and participate in the union process.

But these kind of industry-wide bargaining situations are rare.

Of course, unions do more than bargain over wages and working conditions at specific companies.

In the United States and elsewhere, labour unions give working-class people a chance to have a voice in the political process that’s comparable to the access that corporate executives and major donors naturally enjoy.

As an element of interest-group pluralism, organised labour was an anchor of America’s relatively egalitarian political economy in the middle of the 20th century.

Its waning power – including within the Democratic Party – helps explain some of the broad rise in economic inequality over the past two generations.

This is also why, despite the impediments, union organising success stories are clearly visible in sectors such as digital media, nonprofits and academia.

Here, the workforce tends to be politically progressive and believes in the value of unions as an abstract ideological commitment.

At Starbucks, organising has been led by “salts,” ideologically motivated organisers who deliberately seek employment at targeted firms in order to launch organising drives.

The point is not that political ideology has no role to play.

Labour organising wouldn’t work without some level of ideological motivation; someone has to do the initial work for reasons broader than personal self-interest.

The risk is that the more political the labour movement becomes, the more difficult it is for unions to perform their core functions.

The nascent Starbucks union, for example, courted controversy with an Oct 9 social media post proclaiming “Solidarity With Palestine!” – a sentiment that reflects organisers’ progressive politics but almost certainly doesn’t command consensus among all potential members.

American unions have long walked the line between broad left-coalition politics and the representation of narrow member interests.

The more unionisation becomes a project by ideologues, however, the more it becomes a project of ideologues.

That reduces its potential appeal and strengthens the hands of anti-union managers.

More important, when left-wing unions tackle non-economic issues, they endanger their main role in the political economy.

The American political system does not lack for voices focused on the hyper-polarised ideological controversies of the day.

What it needs is more advocacy for the everyday economic interests of middle-class workers.

That’s what unions should do. —Bloomberg

Matthew Yglesias is a Bloomberg Opinion columnist. The views expressed here are the writer’s own.