roundtable programs
Labor Unions: A Corporatist Institution in a Competitive World Michael L. Wachter University of Pennsylvania Law School
Labor Law 11 november 2005
Welcome Michael A. Fitts Bernard G. Segal Professor of Law Dean, University of Pennsylvania Law School
Afternoon Session Panel Discussion on Bargaining Before Recognition in a Global Market: How Much Will It Cost?
Morning Session Decline of Labor Unions in the United States Michael L. Wachter William B. Johnson Professor of Law and Economics University of Pennsylvania Law School
As mergers and acquisitions have become increasingly international, a set of critical issues arise when foreign companies acquire U.S. businesses with unionized complements of employees, or when U.S. firms acquire foreign businesses with unionized complements of employees. A number of legal issues recur: allegedly unlawful prehire agreements in the form of contracts or “understandings” regarding terms of employment; the lawfulness or enforceability of neutrality agreements and agreements to extend recognition based upon union authorization cards; the applicability or propriety of “afteracquired” clauses or recognition agreements; and company favoritism or support for a particular union.
Commentators Charles I. Cohen Partner, Labor and Employment Morgan, Lewis & Bockius LLP Cynthia Estlund Isidor and Seville Sulzbacher Professor of Law Columbia Law School
A Reduction in the Disadvantages of British Unionism? John T. Addison Hugh C. Lane Professor of Economic Theory Moore School of Business, University of South Carolina and Universidade de Coimbra, Portugal Commentators Paul Davies Cassel Professor of Commercial Law London School of Economics John Wilhelm President, Hotel Division UNITE HERE
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Moderators Marshall B. Babson Hughes Hubbard & Reed LLP Edward B. Rock Saul A. Fox Distinguished Professor of Business Law University of Pennsylvania Law School Panelists James A. Gross Professor of Labor Policy & Labor Arbitration School of Industrial and Labor Relations, Cornell University Jonathan P. Hiatt General Counsel AFL-CIO Peter Hurtgen Morgan, Lewis & Bockius LLP (former chairman, National Labor Relations Board) Hon. Wilma Liebman Member, National Labor Relations Board
This paper presents an alternative explanation that the fortune of unions depends on a political decision as to how the economy is best organized. Labor unions became a strong force in the United States with the New Deal and the decision of the Roosevelt administration to adopt a corporatist policy. Corporatism views free competition as a destructive force that has to be both controlled and channeled through institutions that practice “fair” competition under the mediating power of the government. Corporatist policies were in effect not only during the 1930s but also during World War II and the Korean War. The United States’ experiment with corporatism offered a coherent theory. Labor, antitrust and corporate laws were all to pull in the same direction. Fair union wages were favored, which meant that wages were to be above competitive levels. Fair wages were to be paid out of fair prices. Key industries were regulated and prices were set above competitive levels, enabling industries to pay high union wages. Directors of corporations would be asked to consider the interest of stakeholders such as workers, in addition to shareholders. The decline of unions began with the end of the Korean War as the United States adopted a policy of free competition. The decline has taken this long because the legacies of the corporatist past were only gradually replaced. Many of the major changes occurred in the late 1970s and early 1980s. Key industries were deregulated and prices fell to competitive levels. Corporate law clarified that the goal of directors was to maximize the value of the corporation and thus shareholders’ residual share. In this environment, the goal of unions—to take wages out of competition— became less and less in touch with the structure of the economy.
British Evidence on Unionism and Firm Performance John T. Addison University of South Carolina and Universidade de Coimbra (Portugal) In 1979, after a period of substantial growth, there were 13.2 million unionized workers in Britain, representing 53 percent of all workers. Today, there are 7.4 million unionized workers representing 28 percent of all workers. Correspondingly, there has also been a sharp fall in the share of employees whose wages are set by collective bargaining. The effects of this change have been profound, including a diminution of union effects on wages, financial performance of firms and productivity through time. Specifically, the ability of unions to push up wages has all but disappeared, except in those few sectors where unions have remained strong. As a result there has been an improvement in the profitability of firms, with the gains tied to union derecognition, the decrease in the number of establishments recognizing unions, and the trend away from joint to separate bargaining at the industry level. According to Addison, the degree of efficiency improvement stemming from these changes cannot be quantified. Arguably the economic effects have been small, Addison says, but he inclines to the view that more than redistribution from workers to firms has been involved. However, certain unfavorable effects of unions persist— for example, slower employment growth. Overall Addision concludes that there has been a reduction in the economic disadvantages of unions rather than a reversal. Finally, he has found little direct support for the revisionist notion that the reduction in union power is responsible for worse labor market outcomes. He finds that it is “pushing things too far” to argue that unions have to be strong to be an effective vehicle of pro-productive voice and to act as an authoritative agent.