by Alec Ross
So far, we have focused almost exclusively on relationships between companies and workers in the United States and Europe. The dynamic is very different in the developing world, as we will discuss later in the book. However, it merits mention here.
While globalization contributed to driving away union jobs in Western countries over the last thirty years, it brought substantial economic opportunity to workers in Asia, Latin America, and Africa. Western multinationals and new local companies created jobs and economic growth in parts of the developing world that had missed out on earlier waves of industrialization. Wages rose and billions of people were lifted out of poverty. We tend to see labor movements take root when the prevailing economic system breaks down, but for the last few decades, the system has worked out comparatively well for a majority of workers in the developing world—if you’re willing to take a cold-blooded, purely analytic look at the data. It is also the case that the governments in many of these countries would respond to worker mobilization with violent crackdowns.
As long as wages continue to rise and the economy continues to grow, there will be comparatively few worker movements. However, once growth stalls, you start to see unrest. Authoritarian countries may be able to quell these populist movements, but in democratic countries they are harder to suppress.
THE MAKEUP OF A 21ST-CENTURY LABOR MOVEMENT
The private sector is not going to adopt codetermination or most other forms of stakeholder capitalism of its own accord. A handful of firms may reinvent their business models to become more eco-friendly and more generous to their employees, and some others will make tweaks around the edges. But changing the priorities of business at the scale of a national economy will require intervention. Despite their best intentions, shareholders and executives will be reluctant to give up the power, freedom, and remuneration they enjoy under the current system.
Even if you were to concede every point about the value and virtue of giving labor a stake in governance, the data shows that American and British companies are better for shareholders, and central and northern European countries are better for stakeholders, and as long as we are optimizing for shareholders, labor will be locked out of governance.
“I see very little evidence that absent either effective internal negotiation or external pressure, companies are moving towards a fairer and more equitable distribution of profits,” said Douglas Alexander.
It is worth both doing the hard-charging internal negotiation and applying external pressure to fight for a more equitable distribution of profits in the form of wages. Another important opportunity that may be even more achievable is to fight for a more equitable distribution of equity. As big as is the gap in wages between executives and workers, the far greater gap and source of rising inequality is in capital, in equity. Rich people don’t tend to grow richer because the paycheck they get every two weeks is getting bigger. It is because of the increasing value of their capital—their ownership of things from stocks to homes to any other asset of appreciating value.
The wealthiest people I know, those worth billions and billions of dollars, pay less in taxes, as a percentage of earnings, than I do. That is because in most cases they may draw some salary, but the way they make their real money is through the appreciation of their assets. I, in turn, probably pay a smaller percentage of what I earn over the course of a year than the twenty-something-year-old researchers who worked for me in the writing of this book. I’m no billionaire, but what I earn is a mixture of wages and capital appreciation, and that mix makes my tax rate lower than the young people at the beginning of their careers who earn only what they make in wages.
It is ridiculous that I pay more in taxes as a percentage of my earnings than the billionaires, and it is ridiculous that I pay less than the researchers for this book. As we will read in the next chapter, we need to massively rewire our system of taxation. It is not in need of tweaks or reforms. It is in need of a complete overhaul. Above and beyond that, though, we need to make sure that a much larger percentage of workers themselves benefit from capital accumulation and appreciation. That has historically come in the form of homeownership. Owning your home became foundational to the American dream and to the growth in wealth of middle classes in Europe and Asia in the 20th century. In the United States, we put a thumb on the tax scale to enable this by making the interest on mortgages tax deductible.
This began with retirement savings accounts like 401(k)s and should just be the beginning. Silicon Valley became Silicon Valley in significant part because one thing that drove talent from other places and industries, like finance and consulting, was employee ownership in the form of stock options. Labor unions ought to recognize that wages are not the only thing worth fighting for. Think about how much better off Uber drivers would have been if they were real beneficiaries of its IPO. And there is nothing keeping employees outside of tech and in established companies from being paid in stock. It’s not all tech start-ups.
Basing compensation in part on equity in addition to wages is not zero risk, but it is surprisingly low risk. Stocks recovered much faster than home values after the 2008 financial crisis. Stock markets recovered with stunning speed amid the COVID-19 pandemic and rose to record highs while the pandemic was still surging.
Equity-based compensation for workers can also be a partial antidote to stock buybacks, the dumbest and least effective attribute of shareholder capitalism. Better the stock live inside the portfolios of workers than reside inanimately on corporate balance sheets.
Labor movements played an indispensable role in writing the 20th-century social contract. Again, the list runs from the establishment of a minimum wage to unemployment insurance, the forty-hour workweek, sick leave, antidiscrimination laws, child labor laws, pensions, and even weekends off.
They should play an equally important role in rewriting that contract for the 21st century.
In the United States, United Kingdom, and Mediterranean Europe, the vast majority of the labor unions are past their prime. The organizations have grown too big and their membership too small.
To be successful, the labor movements of the 2020s and beyond must be agile. They need the ability to mobilize a dispersed workforce and quickly move resources to the places where they are most needed. Technology can enable both these things, but it is not a magic bullet. Social media and organizing apps may enable grassroots organizations like Rideshare Drivers United to punch above their weight, but building an effective labor movement requires money, manpower, and, above all, motivation. Many grassroots groups that tried organizing through tech in the 2000s have fizzled out, said Richard Freeman. “I would hope we can get more out of the technology, but that so far has not really blossomed.”
While the organizational structure of unions must change, their most powerful tool will still be collective action.
“Workers have to act collectively, they have to act together, they have to be in organizations that are expansive enough to give them true leverage,” said Georgetown’s Joseph McCartin. Though strikes fell out of favor after the 1980s, they are beginning to make a comeback.
Just as the GM sit-down strike kicked off a wave of labor organizing in the 1930s, a single instance of collective action could catch fire today, according to Richard Freeman. Workers are more likely to mobilize when the economy is hurting, he added. “Historically, that’s where a lot of the unions in the West developed strength. Workers lose faith in the rest of the system.”
As new worker movements emerge, they will need a different set of demands. They must fight for a system of portable benefits, like those pioneered by the Freelancers Union. But on top of that, they will need to fight for workers’ place in the 21st-century economy. Instead of opposing technological progress and globalization, they need to position workers to embrace the change.
“It would seem to me the best kind of workers movement would be one that negotiates in a way that moves along with change rather than without it,” said political scientist
Fareed Zakaria. “If companies have come up with an amazing machine that can do the work of four people, the answer is not to hold on to those four people’s jobs forever. The answer is to negotiate the best retraining and severance package for those workers … so that you make sure that these people have another twenty or twenty-five years ahead of them at work. The answer is to say, ‘what can you have this talented human being who works hard and is disciplined, what can we do with them?’ The best workers movement, it seems to me, would try to do the most to enhance that person’s employability over the course of his lifetime.”
In addition to companies and unions, the federal government could play a role in funding these retraining efforts, Zakaria added. He thinks we should look back to the GI Bill as a model.
“The GI Bill was so successful because it was so universal, it was so simple,” he said. “You could come up with something like that, and think of it as a kind of triangle—the local industries identify the needs for the future; local community colleges and educational institutions provide that training; and the federal government pays the bills. I think the biggest problem in doing this is actually just the money. We have a good community college system that could be revived and reinvigorated with more resources. Industry has already tried to do some of this, and they could easily be made to do much more of it. The issue is just that it would be very expensive.”
What Zakaria describes is not a hypothetical based on a theoretical based on a maybe. What he describes exists through much of central and northern Europe. It is expensive, but no more expensive than paying for the alternative in the forms of unemployment, public housing, health care for the uninsured, and the costs that come with the increased likelihood of being in the criminal justice system. There are more than two million people incarcerated in the United States. That is not a coincidence given our thin safety net and few pathways to economic well-being for non–college goers. The more than $32,000 spent per person for one year in prison and the more than $80 billion spent a year to keep these two million–plus people in jail would pay for all the skills training the American labor market could absorb.
It is also the case that in addition to advocating for higher wages, compensation in the form of equity, portable benefits, and training opportunities, organized labor needs to more effectively engage on matters of corporate and public governance. Tomorrow’s labor leaders must have greater say in how capital is redistributed, not just to workers but also across the entire economy. That means influencing decisions in corporate boardrooms as well as the halls of government.
“You can’t separate the issues of labor rights and workers’ inequality and democracy—they’re totally intertwined,” said Stephen Lerner, the organizer and Georgetown fellow. Lerner’s statement reminded me of something the AFL-CIO’s Richard Trumka said to me. Trumka pointed to a study by political scientists Yascha Mounk and Roberto Stefan Foa and told me,
They asked millennials how important it is to live in a democracy. Thirty percent of millennials said it’s important to live in a democracy in the US. Seventy percent said it’s not and 24 percent said it’s bad to live in a democracy. I was startled when I heard those results, I wondered, “Where, where, where are they coming from?” And then I looked at it. It’s the first generation to live their entire life under the rules of globalization. They’ve seen their parents’ wages drop, they’ve seen health care taken away, they’ve seen their pensions taken away, they’ve seen record corporate profits, and yet their parents’ wages are flat for four decades. They’ve probably even seen their families lose a home. And then they’re told, “It’s okay. Go to college, get a good job.” So they do. They come out with a mountain of debt, and have three or four or five employers in the same week and can’t make it. So they’re starting to equate capitalism and democracy with insecurity and poverty.
The findings from Mounk and Foa were all but unbelievable to me, but the data don’t lie. They also show that attitudes toward democracy among those in my Generation X and older are vastly different from attitudes toward democracy among millennials.
Lerner reinforced this, telling me “a labor movement that primarily sees its mission as raising wages and winning benefits and being focused on what happens only at work is on its face going to be unsuccessful in developing the kind of society that allows for people to live full lives. The labor movement of the future needs to focus on not just the question of what happens at work, but the question of democracy, the question of inequality and economic concentration.”
This hearkens back to the earlier ambitions of the labor movement. The labor leaders of the early 20th century wanted workers to have a say in how companies operated. Back then, the idea was known as industrial democracy. While labor movements in northern and central Europe achieved a form of industrial democracy through work councils and codetermination, their American counterparts did not. Again, the turning point came during a strike against General Motors.
In 1945, members of the United Auto Workers went on strike demanding that GM increase their wages and benefits without raising the price of its cars. They also wanted the company to open its books so the union could prove the company would still turn a profit if workers’ demands were met. In other words, UAW wanted a say in how GM interacted with both workers and customers. The company resisted the union’s demands, and after striking on and off for five years, the two sides reached an agreement: workers secured regular increases in wages and benefits, and management was guaranteed the exclusive right to run the company. The agreement, later dubbed the “Treaty of Detroit,” set the dynamic for labor relations in the United States for decades to come.
“Both public and private sector unions … settled into a relationship with employers that ceded to employers the big questions of how enterprises were run, and that focused unions only on maintaining workers’ wages and benefits,” said Georgetown professor Joseph McCartin. “The union movement of the early 20th century had a much grander vision. In the early 20th century, the union movement used to speak a lot about industrial democracy as their goal. What they wanted was not just better wages, but a real say in how their businesses were organized. They thought workers should be part of the decision-making and that corporations not respond solely to stockholders but also their stakeholders.”
Today, McCartin and Stephen Lerner are trying to bring back that grand vision. They and other activists have launched an organization called Bargaining for the Common Good, an affiliation of unions and community groups that work to coordinate their actions to secure broader social change. In December 2019, the organization published a list of more than 130 specific demands that unions across the country had adopted to address issues like racial justice, climate change, financial reform, educational inequality, and access to public services. The group is also helping labor leaders coordinate contract negotiations and organizing campaigns through online tools. In other words, it is enabling disparate labor groups to come together and build their collective power.
To achieve real change in the 2020s and beyond, new labor movements must think beyond their own members. They must bargain on behalf of all workers across all communities. Otherwise they may achieve a few one-off wins, but in the long run the economic forces that undermined organized labor in the late 20th century will take them down too. If workers fight for short-term gains while ignoring systemic issues that exacerbate inequality, they are effectively engaging in “assisted suicide,” Lerner said.
“We need a much more expansive view of our mission, what we’re trying to do and how we’re trying to influence how the economy and the country function,” Lerner told me. “I think if unions only focus on raising wages, then not only will they fail, but they actually become complicit in the very things that are undermining democracy.”
It’s easy to think about the state of democracy and the widening gyre of inequality and want to curl up in the fetal position, but only optimists change the world. I’m struck by the fact that Richard
Trumka has taken a beating for forty years as a union leader but his focus and optimism are undiminished, even as he concedes the beatings. When I asked whether change is even possible, he told me in his gruff coal miner’s voice that “for years we’ve been told that the economy’s like the weather, there’s nothing you can do about it. The economy isn’t like the weather. The economy’s nothing but a set of rules. Those rules have been made by the men and women that we elect. Those rules decide the winners and losers. And for four or five decades those rules by both Democrats and Republicans have been made so that the elite wins, and we lose.”
Having taken the beatings for going on half a century and noting repeatedly all the opportunities for “implosion” if things don’t get better, he then said something that cut across the grain of all our discussions. “I’ve never been more optimistic in the last four or five decades,” he said, than he is now. He’s seen new strikes in recent years that outscale anything he’s been involved with for decades. He’s seen new efforts at organizing and a whole new generation come along and start demanding change. Even if they’re organizing in different ways than he ever has, it gives him hope. “And it’s pretty exciting.”
4
TAXES AND THE WORMHOLE IN THE GLOBAL ECONOMY