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UAW VW defeat: Sign of what’s in store for labour?

Volkswagen Vote is Defeat for Labor in South
Steven Greenhouse, The New York Times February 14, 2014

That looks comfy, no?

Major defeat for decimated US labor union

On Valentine’s Day, the rejection by the Chattanooga, TN Volkswagen workers surely was a heart-breaker for the United Auto Workers (UAW). Not only did the employer remain impartial, but VW actually wanted the workers unionised.

The UAW had been trying to organise the VW plant for two years.  In the US Midwest and Northeast, home to what’s left of major domestic automakers’ US operations, UAW membership had plummeted. In 1979, the union claimed 1,530,000 members; in 2010 they counted just 355,000. It was desperate for a foothold in the South, where Japanese and German automakers have located their (to date) non-unionised US operations.

The UAW drop in membership accelerated following the Great Recession. Interest in membership further eroded as the union threw young members and future workers under the bus during auto sector bailout negotiations. As The New York Times succinctly put it in the wake of the recent debacle, Sweetheart Deals Hurt Labor.

Works Councils and European history

As the lead NYT article notes, VW was “eager to create a German-style works council“. Apparently US labour laws don’t permit such arrangements unless they are initiated by formal labour organisations. The US National Labour Relations Board (NLRB) considers works councils to be company unions – which to a degree they are. VW prefers works councils as they facilitate administration.

The history of work councils in Germany in particular (and Western Europe in general) traces back to the 19th century European ‘revolutions’. While the social and democratic movements of the period did not endure, they did change European politics, creating / strengthening socialist and democratic federations and political parties.

The European political climate, along with greater efforts at cooperation following the upheaval of two World Wars, saw major European economies endorse what have since come to be formalised  European Works Councils.

A request by 100 employees from two countries or an initiative by the employer triggers the process of creating a new European Works Council.
Employee Involvement & European Works Councils, The European Commission (EC)

As the EC emphasises, a works council can be initiated by an employer, as it’s often more convenient for the purpose of administration.

Last point worth mentioning: European labour unions, including the German union representing VW workers, IG Mettal, can represent both white and blue-collar workers on works councils.

Self-defeating policies

The UAW concessions made in the wake of the US auto sector bailout underscore an unfortunately well-deserved labour union stereotype: Much like the corporate executives they supposedly negotiate against, union leadership is dominated by white, middle-aged men.

Therein lies the self-defeat: In perpetually protecting senior members’ tenure, pay and benefits at the expense of younger workers, and historically under-representing both young and racialised minority (incl. immigrant) workers, US (and Canadian) unions have effectively undermined the labour movement’s future.

Anti-poverty rhetoric

Intent on changing the narrative to emphasise the positive, unions have recently taken to touting their ‘anti-poverty’ impact. While it may once have been significant, the union wage / benefit advantage has eroded over the past three decades, along with union bargaining power and membership.

As recently posted on the Progressive Economics Forum (PEF), Collective Bargaining and Poverty Reduction: OECD Data, Unifor economist Jim Stanford correlates a measure of income inequality, the Low-income Measure (LIM), with estimates of collective bargaining (CB) coverage provided in an OECD report to conclude that a negative correlation suggests more unions = less poverty.

Unfortunately, on closer inspection it’s less than convincing. A few issues:

The LIM is a pretty crude tool, to put it kindly. The LIM ‘poverty line’ is basically 50% of median income adjusted for family size. In addition to the regular argument (income vs wealth), there’s the question of which income is being measured: market, total before-tax or total after-tax income. Which measure is used can have a significant impact on the rate. Different countries’ taxation policies – for example, on capital gains that largely accrue to the few attop the income distribution (‘the 1%’) – can influence the median and LIM figures, and by extension the share of population falling below them. The PEF post uses after-tax income, so that would be a factor.

While the collective bargaining coverage rates presented are those found in the cited 2013 OECD report, they do not correspond with ones available on OECD.Stat. Of the two extremes on the chart, Mexico has barely 7% coverage, while Austria has nearly 100%. The OECD.Stat data indicates 67% of Mexico’s civilian employees had coverage, while 84% of Austria’s civilian employees did. Perhaps the 2013 report uses a different concept. Using the OECD.Stat figures, which show a more central tendency for CB coverage, would flatten the drawn line.

As noted above, European Works Councils are quite common as they’re an administrative convenience for employers, and can actually be initiated by the employer with little effort. That so many of the countries with high CB coverage also happen to be European suggests it has more to do with the legal framework that sees many workers falling under these councils by default, not some hard-won benefit fought for by unions.

Using CB coverage also masks the fact union membership has dropped across the OECD, even in those European countries with high CB coverage. Apparently workers don’t see the benefit of membership if coverage is simply a convenience for the unions and employers.

Even if it was done differently, a simple bivariate correlation proves little. As the old saying goes, correlation is not causation.

Going forward, little ‘union advantage’

While unions may once have played an important role in advancing social and economic equality, their influence has waned as their membership has declined in receny years. Union coverage, increasingly an administrative convenience for governments and large organisations, will continue to be touted by unions putting a brave face on their continued demise.

Regardless of how well or poorly unions have represented their members in the past, going forward globalisation and technological advancement will be the key determinants of both national wealth as well as individual social and economic well-being.

As a 2012 OECD report summed it up

During the past three decades, the share of national income represented by wages, salaries and benefits – the labour share – has declined in nearly all OECD countries. The chapter examines the drivers of this decline, stressing the role played by factors such as increased productivity and capital-deepening, increased domestic and international competition, the reduction of workers’ bargaining power and the evolution of collective bargaining institutions. The decline of the labour share went hand-in-hand with greater inequality in the distribution of market income, which might endanger social cohesion and slow down the current recovery. Enhanced investment in education and use of the tax and transfer system can effectively reduce these risks.
Chapter 3 Labour Losing to Capital: What Explains the Declining Labour Share, OECD Employment Outlook 2012

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