This Looks Like the Start of a Great Time for Unions

(Bloomberg Opinion) -- The tight labor market in the U.S. is leading to a shift in the balance of power between labor and capital, giving more leverage to workers. This manifests itself in a variety of ways.

For instance, workers are less reluctant to leave their jobs in search of better pay or working conditions. This is showing up in the rate of workers quitting their jobs at the highest level since 2001. It also gives unions the confidence to go on strike in hopes of getting a better deal, as we've seen with the United Auto Workers in its negotiations with General Motors Co.

In this environment, the rationale for joining a union hasn't looked this good in a very long time.

Unionized workers tend to receive higher wages and greater benefits than their non-unionized peers. Who wouldn't want that? There are, of course tradeoffs with being in a union: loss of flexibility, membership dues, contract negotiations with employers that can come up empty, and periods without work in fallow economic times or during strikes. But all else being equal, a good union job that lowers the risk of unemployment would be the best of both worlds for many workers.

Employers on the other side of the negotiating table are understandably less keen on offering more in wages and benefits if they don't have to. Every profit-seeking enterprise wants to keep costs as low as possible. And for most of the past 50 years, employers haven't had to worry very much about labor shortages. Although full employment is hard to define, at most we had only a brief period of it in the late 1990s and then again perhaps in the past year or so. With labor readily available whenever it was needed for the past five decades, employers sought to lessen their reliance on unions, and used the threat of hiring non-unionized workers as leverage to keep work stoppages and pay increases to a minimum.

But there are signs in the data that conditions have changed. Last year, more laborers were involved in work stoppages than any year since the mid-1980s. Through the middle of this year that trend had continued. A way to think about the scale of the UAW strike is that mass work stoppages in 2018 led to 2.8 million lost work days. With the UAW still needing to ratify its proposed deal, its 46,000 workers have already been out of work for more than a month, and by the end of the strike will have contributed to more than 1 million lost work days.

Employers now find themselves negotiating with emboldened unions, who have shown they're willing to strike and stay on the picket line for weeks. Further evidence: Industrial employers are choosing to cut hours rather than resort to layoffs amid a slowdown in demand for manufactured goods. They're worried they won't be able to find new workers if things pick up.

Public opinion on organized labor has improved alongside the tightening in the job market. Gallup's annual survey of confidence in institutions shows that organized labor's net approval is at its highest level in 15 years. Democratic presidential candidates have expressed support for striking workers, and even President Donald Trump, wanting to show solidarity with part of his coalition, has pushed for a deal between GM and the UAW rather than siding with big business.

The smartest thing to do for businesses worried about securing an adequate supply of labor is to embrace unions; part of unions' mandate is to ensure that there are enough workers to meet demand. A rise in unionized jobs would lead more workers to see the benefits of unions. And a greater number of workers in unions would increase their political clout, making it more difficult for politicians to cross them and neglect the interests of workers. Perhaps of less benefit would be the pressure -- on the margin -- on employers unable or unwilling to pay higher unionized wages or secure access to an adequate pool of labor. This would put non-unionized laborers at even more of a relative disadvantage in terms of pay and working conditions vis-à-vis unionized workers.

Although changes in the nature of the economy over the past several decades contributed to the decline in organized labor, some part of it was also because labor markets were often slack, giving employers a lot of leverage over workers. Those conditions, at least for now, have dissipated. As long as tight labor markets persist, work stoppages and pockets of labor shortages are going to continue. The rationale for unions has increased. The public, workers and employers should embrace it.

To contact the editor responsible for this story: James Greiff at jgreiff@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Conor Sen is a Bloomberg Opinion columnist. He is a portfolio manager for New River Investments in Atlanta and has been a contributor to the Atlantic and Business Insider.

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