Thursday, March 10, 2011

How Unions Make a Nation Competitive


Note: welcome to readers of

Like Rodney Dangerfield, unions in America have long struggled to gain respect, especially since 1980. I've long been amazed at all the workers I've talked to over the years who are reluctant to support the union movement.

"Maybe unions were needed back in the 19th century era of Robber Barons," union foes argue. "But these days, unions are a dinosaur. They're no longer needed."

I've heard variants of the above argument repeatedly over the years, from both Republicans and even some Democrats. Of course, it makes no sense. It's like saying, "We already have Free Speech in America, so we no longer need the First Amendment."

Indeed, unions tend to get blamed for all kinds of ills facing present-day America. After all, wasn't it "greedy, overpaid" union members that resulted in America losing its manufacturing base?

That seems to be the Conventional Wisdom these days.

But there's only one problem. It's not only bullsh*t---it's the total opposite of the truth.

Unions, in fact, help make a nation more competitive.

Don't believe me?

Take a look at two of the most heavily unionized nations in the world: Germany and Japan. Both nations are thriving and have jobless rates far below the U.S. rate. Both nations still have large manufacturing sectors, which are heavily unionized. And both nations are exporting more than ever---even to low-wage nations like China. (Japan, for example, is one of the few nations on earth that has enjoyed a trade surplus with China much of the time in recent years).

In short, Germany and Japan are the polar opposite of the U.S. these days. While the U.S. continues to rack up record trade deficits, both Japan and Germany enjoy vast trade surpluses.

Not only are Germany and Japan heavily unionized, both nations have strong pro-worker laws that back up their labor movements. In both nations, for example, it's virtually impossible to fire full-time workers. Mass layoffs are very rare in both nations.

Every worker in Germany enjoys a minimum of six weeks' paid vacation per year. In fact the average is two months. And even in Japan these days, employees work fewer hours on average than Americans (who work the longest hours of any developed nation).

According to the International Labor Organization, "Americans work 137 more hours per year than Japanese workers, 260 more hours per year than British workers, and 499 more hours per year than French workers."

Americans, in fact, are the most overworked people in the First World.

We're the only industrialized nation without a national paid parental leave benefit. We're the only nation without a legally mandated annual leave. We're the only First World nation with no required paid sick days.

All of this, of course, is due to the fact that organized labor in the U.S. is much weaker than other industrialized nations. In fact, unions having been going downhill since Ronald Reagan declared war on them in the 1980s.

But getting back to the original point of this article. One might ask: what does all this have to do with America's competitiveness?

A lot, actually.

It's clear that unions haven't been a hindrance to the economies of nations like Japan and Germany. In fact, it's clear that organized labor has been a key part of both those nations' success in growing their high-tech manufacturing export powerhouse economies.

If this sounds counterintuitive, consider the following question. Why has the U.S. consistently had a difficult time competing in high-tech manufacturing in recent decades? It's clear that a good part of the reason is that (unlike their counterparts in Germany and Japan), U.S. corporations have long been short-sighted.

While German and Japanese corporations typically plan decades ahead, U.S. corporations look no further ahead than the next fiscal quarter. In short, U.S. corporations have sacrificed their long-term health in return for short-term profit.

Which raises a question: why, exactly, have German and Japanese corporations consistently always planned way ahead? For example, why are both nations now working hard on industries of the future---industries that may take decades to reap financial rewards (think high-speed trains, advanced wind power, solar power and other green technologies).

The answer to this question is the fact that both nations have strong unions and pro-worker laws.

The fact that it is very difficult to fire workers in both nations seems like a recipe for economic decline. The reality is the total opposite. Japanese and German corporations plan very far ahead because they are forced to.

When it is extremely difficult to lay off staff, corporations find that they must take a very long-term view. It isn't sufficient (as is the case with U.S. corporations) to simply plan ahead for the next fiscal quarter. Instead, Japanese and German corporations must plan ahead at least a decade. And the lack of mass layoffs in both nations---which helps social harmony---is a bonus of the system.

Another advantage that unions bring the Japanese and Germans is the very fact that they work to bring generous benefits and pay to workers in those nations. When workers enjoy 6 weeks paid vacation, as the Germans do, you tend to have a workforce that isn't chronically burned out.

If you've ever driven a top-of-the-line Porsche, an Audi, a BMW, or a Mercedes, you know that the Germans make some of the highest quality products on earth. You don't get high-quality, top-of-the-line manufactured products when your nation's workforce is burned out (as most American workers are these days).

Another advantage: workforce stability, which encourages corporations to spend heavily on worker training. (U.S. corporations spend much less on training workers than Japanese and German corporations do).

True, the Japanese have a reputation for being an overworked people. But this is (at least compared to overworked American employees) an increasingly outdated stereotype. As I mentioned previously, Japanese workers these days actually work less hours than do Americans. And the laws preventing layoffs in Japan are even stronger than those in Germany.

In short, one could say that strong unions have the effect of "disciplining" corporations into taking the long-term view. Since organized labor in the U.S. is very weak, American corporations are under little pressure to look far ahead. Hence the short-sighted U.S. CEOs who only work to ensure that the next fiscal quarter is as profitable as possible.

Such short-sightedness has long been a disaster for U.S. industry. For example, Detroit's short-sighted policies have transformed U.S. automakers from a formerly world-beating industry into one that is currently only a pale shadow of its former self. Detroit's short-sightedness for example, was a disaster in the 1970s when U.S. automakers were cranking out gas-guzzling monsters that rapidly fell out of favor with consumers after the 1973 oil shocks. Detroit never really recovered.

True, there are other factors behind the strong high-tech manufacturing prowess of Germany and Japan. These include strong secondary public education, patient capital, and smart industrial and trade policies. But it's clear that unions and strong pro-labor laws play a key role, as well.


Jack Jodell said...

Congratulations on a most well-reasoned, thoughtful, and wholly ACCURATE post!

Your point is very well taken: unions are by no means obsolete and are in fact sorely needed today, even more so than at any time since the 1930s. Your illustration of what they do for the workers and socities of Germany and Japan is an incredibly vital lesson this country must heed. Since 1981, when our horrible uni8on decline started, this country has gone into an economic tailspin. Real disposable income has declined. So have jobs, with many being shipped out of the country by misguided "free market" criminals. Our standard of living is dropping like a rock - for all but a select, tiny few at the very top of the income scale.

Those in that category (and many on the right) love to blame labor for America's woes. They conveniently overlook the fact that it wasn't labor who nearly destroyed mortgage banking. It wasn't labor thatpushed for deregulation which led to reckless speculation which has driven up prices across the board, with nearly all the profit going only to the top, or which has led to an increase in unsafe food and water. It wasn't labor who pushed for tax cuts for billionaires which have contributed heavily to our deficit. It wasn't labor which has transformed us from the world's greatest lender nation to the world's greatest debtor nation in only 30 years time.

America's top 2% are the greediest and most short-sighted people on earth, and in all of history as well. It is their unconcern and out and out GREED which is destroying this country and to a lesser extent the world. Their prized economic model, whereby all income flows to the top of the chain, is a failure which is leading to economic slavery and disparity in the United States.

And these bastards have the audacity to blame unions for the economic mess we're in. It is truly unbelievable that they can get away with such an outrageous lie, even as their exploitative policies are washing us straight down a cesspool!

Question: if it so bad for the working people to make a good and livable wage due to union influence, why is it so good for those at the top to continually make more and more, without sharing any of it? Isn;t the idea for a civilized society to ensure that ALL prosper and not just a tiny few?

Batocchio said...

Good summary! I'm always disappointed when I hear people bashing unions, railing about firing teachers, and so on - especially because they're almost always unthinkingly parroting some right-wing BS they've heard.

Marc McDonald said...

Hi Jack, thanks for your comment. You make a lot of good points, in fact your comment is worthy of a post itself!

>>America's top 2% are the
>>greediest and most short-sighted
>>people on earth

Yes, and the Top One-Tenth-of-One-Percent are even greedier and more short-sighted.

Michael Moore recently noted that the top 400 Americans have a net worth that is more than the bottom half of all Americans, COMBINED! (That's over 155 million people).

It's insane, it's Third World-like, and it is clearly unsustainable.

Marc McDonald said...

Hi Batocchio, thanks for stopping by and for your comment.

>>I'm always disappointed when I
>>hear people bashing unions

Yes, there is an enormous amount of misinformation out there about unions. And not all of it comes from Fox and HateWing radio...I've heard a lot of BS about unions from the likes of the "liberal" NYT.

I've always found it amazing that, even with all this misinformation out there, polls show that 70 percent of all workers would STILL like to join a union, if they had a chance.

Personally, I believe that having the option of joining a union should be a basic human right. Sadly, though, in present-day America it is perfectly legal for companies to harass and fire workers for even being suspected of union activity (even if they do it on their own time and not on company property). I found this out myself the hard way. Although technically there are a few laws on the books that purport to protect worker's rights, these laws are full of loopholes and, in any case, are rarely, if ever, enforced.

martin-s said...

Well done! I always tell people I wish America focused on trying to be Germany instead of China. Germany exports more than China and has a slim fraction of the population; their people are well-educated and happy. Instead of making plastic crap for Walmart or increasingly crappy tech components, Germans make the highest quality products in the world.

If you read business journals like McKinsey that are all about real business issues and not the Randian nonsense of the Wall Street Journal op ed pages, it becomes clear that Americans are not only the most overworked but also the most productive workers on Earth, the envy of all other economies. Our problems are usually the result of crappy management - greedy management - and we don't share in the fruits of that productivity.

Marc McDonald said...

Hi Martin, thanks for your comment.

>> Instead of making plastic crap
>> for Walmart

Yes, I've long believed that the real manufacturing jobs we should worry about losing aren't the low-tech Wal-Mart/plastic crap that is being outsourced to low-wage nations like China.
What we should focus on (and be worried about) are the high-tech manufacturing jobs---ALL of which are going to high-wage, highly unionized nations like Japan and Germany.
Aerospace is the ONLY high-tech manufacturing field America has left---and we're even losing that. Airbus has taken the lead in airliner market share. And meanwhile, Boeing's new 787 is so heavily outsourced that it is questionable whether it can be considered an "American" product. (The extremely advanced high-tech composite wings, for example, are made in Japan).

Jay Diamond said...

Hi Mark,

Of course you are correct in contrasting the motives and goals of American and other developed countries.

And of course what the Europeans and Japanese do makes eminently more sense than what the money dictatorship does here.

But, I think you may be assuming that the goal everywhere is to do what makes the best sense for all the inhabitants of these nations. And while that is very much indeed the goal in those other countries, here, however, the goal is not at all about what works best for the country, because here there is a vested interest in the ideology of a particularly myopic and shallow interpretation of property rights, that is the obsession of the dictatorship of money in the United States.

And these individuals are hell bent on scratching their ideological itch, to the detriment of the society as a whole, which concept of society is anathema to them anyway.

Marc McDonald said...

Hi Jay, thanks for your comment

>> money dictatorship does here.

Great description of what we have here in the U.S. I think the "Citizens United" ruling pretty much confirmed that we are indeed living in a money dictatorship.
I'd suspect that a ruling like that would have led to fierce street protests with hundreds of thousands of people in Europe. Here, it barely caused a ripple. Most people remained ignorant of its implications and simply went back to watching the latest episode of "American Idol."

Anonymous said...

Couldn't agree more. We're the only 1st World nation on Earth that constantly rewards robber barons and elects right-wing puritan @ssholes that make the jobs that people still have more tenuous every day. Got an interview with my local IBEW apprenticeship board this week. Lord I hope I get in, better to be in a private union than some sweatshop making barely above minimum wage.