How Unions Make a Nation Competitive

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By MARC McDONALD

Note: welcome to readers of CrooksAndLiars.com.

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.