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Dow Jones & Company Inc.
July 27 2005
CAN THE NEW ECONOMY be organized?
The splintering of the AFL-CIO this week was prompted largely by the
fact that the U.S. economy has changed -- with the service sector
growing and manufacturing declining -- but the labor movement hasn't.
Andy Stern, a leader of the dissident unions and president of the
Service Employees International Union, is betting that by targeting
the 92% of the service-industries workers who aren't unionized and
offering them a compelling message, he can effect that change.
Employers -- and skeptics -- believe the infighting will make workers
even more disenchanted with the labor groups and underscore the
unions' declining clout.
The climate isn't very hopeful. Union membership has fallen steadily
in recent decades, particularly in industries that have seen rapid
growth. Industries with a long tradition of unionization -- including
auto manufacturing, airlines and grocery chains -- now are saddled
with huge legacy costs for pensions and health-care benefits and are
vulnerable to nonunion competitors. The United Auto Workers, despite
repeated attempts, has had very little success organizing the U.S.
auto assembly plants of foreign car manufacturers such as Honda Motor
Co.
For many workers today, unions seem unable to offer protection
against the powerful forces of globalization and technology, which
have sent many factory and even white-collar jobs overseas. At the
same time, corporate managements with their sophisticated human-
resources departments, employee-assistance programs and "cafeteria"
benefit choices have successfully countered union claims that workers
could do better if they were organized under a bargaining unit.
High-technology industries have proven especially hard for unions to
crack. With most manufacturing done overseas, U.S. technology workers
generally don't think of themselves as union material. Many are
focused on earning stock options and other rewards for performance
instead of the wage increases and health insurance that unions
typically seek.
When unions have dug in, the victories often have been pyrrhic.
Grocery-store workers used to enjoy generous benefits, including
health-care coverage at no additional cost and wages of almost $18 an
hour. For decades, grocers complied because their competitors had
unionized workers that demanded the same compensation. But in the
past decade, Wal-Mart Stores Inc. and other nonunionized discount
chains have significantly expanded their food offerings. Traditional
supermarket chains have rushed to cut labor costs, demanding that
workers pay for part of their health-care premiums and top out at
lower wages.
The United Food and Commercial Workers International Union fought
back in 2003; 60,000 Southern California grocery workers went on
strike or were locked out for more than four months. Safeway Inc.,
Kroger Co. and Albertson's Inc. suffered massive sales losses. And
the union gained little ground. New workers lost free health-care
coverage and the top pay scale for incoming food clerks fell to
$15.10 an hour from $17.90. Grocers still are seeking to cut labor
expenses, which account for about two-thirds of their operating
costs.
In an interview, Mr. Stern said he realizes the difficulties of
organizing workers from disparate industries and says one of his
goals is to create different kinds of unions. "First of all, we have
to be sophisticated: The 1930s adversarial type unionism isn't going
to apply to nurses and reporters and child-care workers," he said.
"We need to create a lot of different models of unions."
For example, white-collar contract employees who move from job to job
are concerned with how to get and keep benefits. Nurses are worried
about staffing and quality of care. Building security guards are more
interested in wages.
Among the initiatives Mr. Stern's union is studying are 401(k)-type
retirement plans that wouldn't be tied to a particular employer and
job-education programs, both of which could help employees as they
move from job to job in an increasingly flexible economy.
Labor experts say employers shouldn't underestimate Mr. Stern. The
Teamsters, the SEIU and three of their partners in the dissident
Change to Win Coalition have been responsible for more than half of
the new members brought into the AFL-CIO in the past 10 years, says
Mike Asensio, head of the national labor-relations practice at law
firm Baker & Hostetler LLP in Columbus, Ohio. They also represented
more than half of the petitions filed with National Labor Relations
Board to represent employees, he said.
"This is a wakeup call for labor and employers. Tomorrow there will
be more organizing efforts and fights at the bargaining table," says
Philip Rosen, chairman of the labor-practice group at Jackson-Lewis
LLP in New York.
"Some people think [the union split] is good for business, but not
for us," said a Texas hotel entrepreneur who didn't want to be
identified for fear of becoming the target of labor organizers. He
worries that service unions now will step up organizing and that
local unions will feel greater pressure to carve out their own power
base.
Leading the way is likely to be SEIU, whose rise parallels that of
Mr. Stern, who became one of the youngest local presidents in the
movement in 1977, when at age 27 he was elected to head the SEIU's
Pennsylvania Local 668.
Under Mr. Stern, unions have had some luck organizing janitors and
home health-care workers, particularly on the coasts. His union in
particular has had success using a combination of community-based,
political and public-relations tactics to sign up workers.
Among Mr. Stern's efforts to modernize union organizing has been his
move to tap the power of the Internet through the Web site
purpleocean.org. There, SEIU tries to reach out to members and
nonmembers alike, preaching the need to expand health-care coverage
and other protection for 21st-century workers.
The SEIU also has shown a willingness to use some unorthodox tactics.
In one instance, a group of janitors in Washington, D.C., attempting
to organize, wore red T-shirts and whipped out Coke cans filled with
ball bearings just across the street from a popular restaurant not
far from the White House.
Mr. Stern also has had success organizing fragmented industries. The
union had only about 1,000 janitors in the Newark, N.J., area and had
done little to keep pace as corporate flight from Manhattan led to a
boom of new offices in New Jersey. Mr. Stern knew he couldn't run a
typical recruitment drive, targeting one janitorial contracting
company at a time: In this fragmented industry, any that agreed to
higher pay would be quickly undercut by nonunion rivals. So SEIU
tackled whole markets at once.
In 11 New Jersey counties, it told contractors that they wouldn't
have to raise pay until the SEIU got 55% of those in their area to go
along. The union then mounted strikes and rallies by would-be members
and took other actions to try to force contractors to comply. The
first 55% trigger point was reached in 2001, and the union contracts
took effect. By the end of this year, the SEIU will represent about
70% of northern New Jersey janitors, whose pay now ranges up to
$11.75 an hour, plus benefits.
To bolster recruiting, Mr. Stern has moved many headquarters staff
members out to the field. He has focused on recruiting immigrants,
including those from Russia, Armenia and South America.
In 1999, the SEIU organized 74,000 home health-care workers in Los
Angeles County, Calif., alone. The majority of physicians that have
affiliated with unions have done so with the SEIU. As part of that
campaign, it pushed for legislation to protect health-care workers
from being exposed to AIDS or hepatitis from needle sticks and
organized meetings with members of Congress to protest the long hours
worked by nurses and their lagging pay. One proposal was that
hospitals would be required to consult with nurses in setting
staffing levels and would be forbidden from making overtime
mandatory.
One of its locals in Ohio, which is driving the unionization of
nonprofit hospitals, recently released a study challenging Ohio's
nonprofit hospitals to justify their tax-exempt status, saying they
have grown hugely profitable. The move was aimed at indirectly
benefitting workers by giving them a stronger bargaining stance.
"What you see today is pockets of workers in various industries that
have been difficult to organize, from retail to health care, despite
the fact that there seems to be a strong case that can be made for
union representation in those industries," said Marick F. Masters, a
professor of business administration at the University of Pittsburgh.
To gain more clout, some experts say the union needs to offer
affiliate memberships, which would give members all union benefits
except for collective bargaining or grievance protections. The
American Federation of Teachers has done so for years, offering
associate members publications and insurance and union credit-card
programs, inviting them to meetings and to participate in lobbying.
Indeed, Lawrence Katz, a Harvard University labor economist, says
surveys show there is "a pent up demand for unions among workers," a
suggestion that either unions are failing to capitalize on potential
demand or the combination of government policy and employer
resistance is taking its toll. "There is a view," he adds, "that
people want something that looks more like a voice in the workplace
-- and less like collective bargaining and conflict with management."
Back at the Chicago convention hall yesterday, minus the delegates
and officers from the SEIU and Teamsters, AFL-CIO's executive council
tried to put on a good face on the situation as they sat on a two-
tiered dais before a royal blue background. "I think these guys
realize they've been dealt a serious blow," said George Spence, an
aircraft mechanic with American Airlines in Chicago and member of the
Transport Workers Union, Local 563. "I think they're trying to remain
upbeat." One delegate from Kansas City approached the microphone and
said, "As dysfunctional as we may be right now, we're a family."
July 27 2005
CAN THE NEW ECONOMY be organized?
The splintering of the AFL-CIO this week was prompted largely by the
fact that the U.S. economy has changed -- with the service sector
growing and manufacturing declining -- but the labor movement hasn't.
Andy Stern, a leader of the dissident unions and president of the
Service Employees International Union, is betting that by targeting
the 92% of the service-industries workers who aren't unionized and
offering them a compelling message, he can effect that change.
Employers -- and skeptics -- believe the infighting will make workers
even more disenchanted with the labor groups and underscore the
unions' declining clout.
The climate isn't very hopeful. Union membership has fallen steadily
in recent decades, particularly in industries that have seen rapid
growth. Industries with a long tradition of unionization -- including
auto manufacturing, airlines and grocery chains -- now are saddled
with huge legacy costs for pensions and health-care benefits and are
vulnerable to nonunion competitors. The United Auto Workers, despite
repeated attempts, has had very little success organizing the U.S.
auto assembly plants of foreign car manufacturers such as Honda Motor
Co.
For many workers today, unions seem unable to offer protection
against the powerful forces of globalization and technology, which
have sent many factory and even white-collar jobs overseas. At the
same time, corporate managements with their sophisticated human-
resources departments, employee-assistance programs and "cafeteria"
benefit choices have successfully countered union claims that workers
could do better if they were organized under a bargaining unit.
High-technology industries have proven especially hard for unions to
crack. With most manufacturing done overseas, U.S. technology workers
generally don't think of themselves as union material. Many are
focused on earning stock options and other rewards for performance
instead of the wage increases and health insurance that unions
typically seek.
When unions have dug in, the victories often have been pyrrhic.
Grocery-store workers used to enjoy generous benefits, including
health-care coverage at no additional cost and wages of almost $18 an
hour. For decades, grocers complied because their competitors had
unionized workers that demanded the same compensation. But in the
past decade, Wal-Mart Stores Inc. and other nonunionized discount
chains have significantly expanded their food offerings. Traditional
supermarket chains have rushed to cut labor costs, demanding that
workers pay for part of their health-care premiums and top out at
lower wages.
The United Food and Commercial Workers International Union fought
back in 2003; 60,000 Southern California grocery workers went on
strike or were locked out for more than four months. Safeway Inc.,
Kroger Co. and Albertson's Inc. suffered massive sales losses. And
the union gained little ground. New workers lost free health-care
coverage and the top pay scale for incoming food clerks fell to
$15.10 an hour from $17.90. Grocers still are seeking to cut labor
expenses, which account for about two-thirds of their operating
costs.
In an interview, Mr. Stern said he realizes the difficulties of
organizing workers from disparate industries and says one of his
goals is to create different kinds of unions. "First of all, we have
to be sophisticated: The 1930s adversarial type unionism isn't going
to apply to nurses and reporters and child-care workers," he said.
"We need to create a lot of different models of unions."
For example, white-collar contract employees who move from job to job
are concerned with how to get and keep benefits. Nurses are worried
about staffing and quality of care. Building security guards are more
interested in wages.
Among the initiatives Mr. Stern's union is studying are 401(k)-type
retirement plans that wouldn't be tied to a particular employer and
job-education programs, both of which could help employees as they
move from job to job in an increasingly flexible economy.
Labor experts say employers shouldn't underestimate Mr. Stern. The
Teamsters, the SEIU and three of their partners in the dissident
Change to Win Coalition have been responsible for more than half of
the new members brought into the AFL-CIO in the past 10 years, says
Mike Asensio, head of the national labor-relations practice at law
firm Baker & Hostetler LLP in Columbus, Ohio. They also represented
more than half of the petitions filed with National Labor Relations
Board to represent employees, he said.
"This is a wakeup call for labor and employers. Tomorrow there will
be more organizing efforts and fights at the bargaining table," says
Philip Rosen, chairman of the labor-practice group at Jackson-Lewis
LLP in New York.
"Some people think [the union split] is good for business, but not
for us," said a Texas hotel entrepreneur who didn't want to be
identified for fear of becoming the target of labor organizers. He
worries that service unions now will step up organizing and that
local unions will feel greater pressure to carve out their own power
base.
Leading the way is likely to be SEIU, whose rise parallels that of
Mr. Stern, who became one of the youngest local presidents in the
movement in 1977, when at age 27 he was elected to head the SEIU's
Pennsylvania Local 668.
Under Mr. Stern, unions have had some luck organizing janitors and
home health-care workers, particularly on the coasts. His union in
particular has had success using a combination of community-based,
political and public-relations tactics to sign up workers.
Among Mr. Stern's efforts to modernize union organizing has been his
move to tap the power of the Internet through the Web site
purpleocean.org. There, SEIU tries to reach out to members and
nonmembers alike, preaching the need to expand health-care coverage
and other protection for 21st-century workers.
The SEIU also has shown a willingness to use some unorthodox tactics.
In one instance, a group of janitors in Washington, D.C., attempting
to organize, wore red T-shirts and whipped out Coke cans filled with
ball bearings just across the street from a popular restaurant not
far from the White House.
Mr. Stern also has had success organizing fragmented industries. The
union had only about 1,000 janitors in the Newark, N.J., area and had
done little to keep pace as corporate flight from Manhattan led to a
boom of new offices in New Jersey. Mr. Stern knew he couldn't run a
typical recruitment drive, targeting one janitorial contracting
company at a time: In this fragmented industry, any that agreed to
higher pay would be quickly undercut by nonunion rivals. So SEIU
tackled whole markets at once.
In 11 New Jersey counties, it told contractors that they wouldn't
have to raise pay until the SEIU got 55% of those in their area to go
along. The union then mounted strikes and rallies by would-be members
and took other actions to try to force contractors to comply. The
first 55% trigger point was reached in 2001, and the union contracts
took effect. By the end of this year, the SEIU will represent about
70% of northern New Jersey janitors, whose pay now ranges up to
$11.75 an hour, plus benefits.
To bolster recruiting, Mr. Stern has moved many headquarters staff
members out to the field. He has focused on recruiting immigrants,
including those from Russia, Armenia and South America.
In 1999, the SEIU organized 74,000 home health-care workers in Los
Angeles County, Calif., alone. The majority of physicians that have
affiliated with unions have done so with the SEIU. As part of that
campaign, it pushed for legislation to protect health-care workers
from being exposed to AIDS or hepatitis from needle sticks and
organized meetings with members of Congress to protest the long hours
worked by nurses and their lagging pay. One proposal was that
hospitals would be required to consult with nurses in setting
staffing levels and would be forbidden from making overtime
mandatory.
One of its locals in Ohio, which is driving the unionization of
nonprofit hospitals, recently released a study challenging Ohio's
nonprofit hospitals to justify their tax-exempt status, saying they
have grown hugely profitable. The move was aimed at indirectly
benefitting workers by giving them a stronger bargaining stance.
"What you see today is pockets of workers in various industries that
have been difficult to organize, from retail to health care, despite
the fact that there seems to be a strong case that can be made for
union representation in those industries," said Marick F. Masters, a
professor of business administration at the University of Pittsburgh.
To gain more clout, some experts say the union needs to offer
affiliate memberships, which would give members all union benefits
except for collective bargaining or grievance protections. The
American Federation of Teachers has done so for years, offering
associate members publications and insurance and union credit-card
programs, inviting them to meetings and to participate in lobbying.
Indeed, Lawrence Katz, a Harvard University labor economist, says
surveys show there is "a pent up demand for unions among workers," a
suggestion that either unions are failing to capitalize on potential
demand or the combination of government policy and employer
resistance is taking its toll. "There is a view," he adds, "that
people want something that looks more like a voice in the workplace
-- and less like collective bargaining and conflict with management."
Back at the Chicago convention hall yesterday, minus the delegates
and officers from the SEIU and Teamsters, AFL-CIO's executive council
tried to put on a good face on the situation as they sat on a two-
tiered dais before a royal blue background. "I think these guys
realize they've been dealt a serious blow," said George Spence, an
aircraft mechanic with American Airlines in Chicago and member of the
Transport Workers Union, Local 563. "I think they're trying to remain
upbeat." One delegate from Kansas City approached the microphone and
said, "As dysfunctional as we may be right now, we're a family."