Obama and Big Labor

Today’s question: Will big labor help or hurt Obama in his first year in the White House? Previously, Weigel and Lilly discussed possible futures for Hillary Clinton and Arnold Schwarzenegger in the Obama administration, weighed potential Cabinet picks and debated Rahm Emanuel’s selection as chief of staff.

Big Labor expects a lot from Obama
Point: David Weigel

Scott,

After the 2004 election, the leaders of the MoveOn.org political action committee famously wrote that the Democratic Party was theirs: “We bought it, we own it, and we’re going to take it back.� The leaders of the labor movement could say the same thing this week, but they won’t because they’re a lot more clever and they have a lot more to lose from a failed Obama presidency than a few million armchair activists do.

It is hard to imagine Barack Obama powering past Hillary Clinton in the primaries without the well-timed endorsements of the Service Employees International Union and the Teamsters. It’s just as hard to imagine white union members in Ohio, Indiana and Pennsylvania breaking for a black candidate, whom their e-mail boxes informed them was a terrorist who majored in sharia law, if not for tens of thousands of AFL-CIO members walking door to door, telling them they could trust Obama.

So Obama owes the unions, and he’ll need them to get re-elected in 2012. There’s every reason to believe he’s going to start checking off their wish lists in January. Both Obama and Vice President-elect Joe Biden were co-sponsors of the Employee Free Choice Act, a revolutionary piece of legislation that holds as much import for the labor movement as a little golden idol holds for Indiana Jones. It would force workers to allow their employees to unionize by getting a majority to sign cards and turn them in to the National Labor Relations Board. Right now, employers don’t have to honor that form of organizing. Instead, they can demand that workers hold secret-ballot elections on whether to form a union -- elections whose results can be tied up for years by the labor board.

It’s been a terrible system for unions, whose membership nationwide has collapsed by two-thirds since President Reagan’s first term. It’s been a pretty good system for everyone else. According to James Hohman at the (conservative) Mackinac Center for Public Policy, job growth in states that prohibit unions and employers from agreeing to make employment conditioned on mandatory union membership has consistently outstripped growth in closed-shop states. That isn’t even including Michigan, which for a number of reasons is an economic basket case. One of those reasons? Yes, the boneheaded strategy and demands of unions that have never dealt with the decline of their industry.

The Employee Free Choice Act is just the most specific demand of labor unions. In other areas, I expect unions to yank Obama’s agenda to the left after 14 lean years spent without access to the levers of power. The teachers unions, for example, are going to demand across-the-board pay raises and an end to President Bush’s No Child Left Behind law. In the past, Obama has voiced support for charter schools and merit pay for teachers. But he could do this because he promised to increase spending on education even more than Hillary “It Takes a Village� Clinton, who was endorsed early on by the American Federation of Teachers.

How daring does Obama really want to be on education? Remember how quickly Obama punched back in the third presidential debate after John McCain suggested that by complimenting Washington schools Supt. Michelle Rhee, Obama was supporting vouchers. I took that as a sign that Obama isn’t going to pick a fight with teachers unions.

Obama won the election. He can define “change� however he sees fit. The unions that helped elect him hope he meant that “change� begins by rolling back the clock a few decades to when they rode higher in the saddle. That, in the long run, could hurt him.

David Weigel is an associate editor at Reason magazine, where he writes a column on national politics.

Wages aren’t keeping up with increased labor productivity
Counterpoint: Scott Lilly

David,

The lengths to which some conservatives go in trying to portray this nation’s labor movement as special pleaders on behalf of unwarranted benefits for unworthy workers is truly remarkable. The fact is that the root cause of the current economic crisis is the stagnation in wages that has occurred in this country over the past eight years and the unwillingness of employers to share the benefits of worker productivity growth. To prop up consumer demand in the face of stagnant wages, the Bush administration and the Federal Reserve opened the floodgates for cheap credit, only delaying the day of reckoning and making the economic shock far more severe when it did occur.

Here are the facts:

* Between 2000 and 2008, American worker productivity rose 20%.

* Rather than sharing the benefits of that growth evenly (as occurred throughout most of the post-World War II era), business allowed wages to rise in real terms by only 1% and kept the remainder as profits.

* While corporate profits normally grow at about the same pace as the overall economy, between 2000 and ‘06, they grew four times as fast.

* As employment growth during that period was slower than population growth, the average family actually had less real income in 2006 than they had 2000.

* For much of 2002, 2003 and 2004, the Federal Reserve Discount Rate was below the rate of inflation. To counter the effects of wage stagnation, the Federal Reserve was charging negative real interest rates, and the amount of consumer debt sky rocketed. Consumers used their homes as ATM machines and borrowed more than $1.7 trillion of equity to buy the goods that kept our stores in business and factories running, but did so with debt we couldn’t afford to repay.

As Henry Ford noted long ago, paying fair wages is good for business and workers. It expands the market for the products that business must sell. The wisdom of that advice is evident today in the sorry state of the stock market despite years of unprecedented profit growth.

Stagnant wages are in part the result of a broken system of labor laws. That system is supposed to ensure that workers can decide whether or not they wish to be represented by a union via a majority vote of those in the workplace who would be represented. But the system ceases to accomplish that because (as you point out) of the outrageous delays by the National Labor Relations Board in scheduling elections. Businesses frequently fire not only those employees who work on behalf of the organizing effort, but also those who simply support it. By the time the election is held, the remaining workers have been intimidated into voting no.

American wages now trail those of most of our trading partners. The problem with Michigan is not the labor movement, as you argue. Rather, it is car makers who have designed and sold gas guzzlers that don’t hold up as well as their foreign competitors and an economy that is coming apart at the seams. The average hourly cost of employing an auto worker in the U.S. is lower than it is in Japan and much lower than it is in Germany.

The Obama administration will work to see that American workers get a fairer share of the economic benefits that flow from their productivity. It will do that not only because it is the right thing to do, but because restoring the nation’s economic health depends on it.

Scott Lilly, a senior fellow at the Center for American Progress Action Fund, has served in numerous posts for members of Congress and the Democratic Party.