State-Government Labor Policies (Such as "Right to Work") That Attract Relocating Businesses

STATE-GOVERNMENT LABOR POLICIES (SUCH AS "RIGHT TO WORK")
THAT ATTRACT RELOCATING BUSINESSES

Barry D. Friedman, Ph.D.
Professor of Political Science
North Georgia College & State University

Presented at the Panel on "U. S. States’ Policies for Attracting Business" at the
2009 Annual Meeting of the Association for Global Business
Lake Buena Vista, Fla. ♦ November 13, 2009

A. The Evolution of the Management-Labor Relationship

The purpose of a business firm is the maximization of its owners’ wealth, and so it follows that its owners and managers will make decisions that are designed to reduce operating costs. One such decision may involve the location of the firm’s facilities. "For any single firm, the landscape is imagined as a choice set of possible locations with different configurations of costs of production and distribution."¹ Each location that the firm’s owners and managers may consider presents costs associated with the price of real estate, rates of state and local taxes, utility charges, and transportation costs, among others. One of the most significant costs involves levels of wages and salaries that are common in the location’s market area. Management may anticipate the extent of its ability to deviate from its market area’s customary pay levels. Whether the political and economic climate of the market area provides an influential role to labor unions may constrain management’s ability to pay its eventual employees less than other employers are paying.

1. RECOGNITION OF THE RIGHTS OF LABOR

Prior to 1929, labor unions operated under sets of laws, policies, and customs that acknowledged very few privileges to which unions were entitled. Labor unions’ limited power was based solely in their ability to coax unity from laborers at their work locations. The assumption on which labor laws were based was that the employer, whose wealth made the enterprise possible, had the privilege to decide whom to hire, how much to pay employees, and whom to fire. Faced with demanding labor-union officials and members, employers could utilize a variety of tactics to defeat labor, such as obtaining an injunction order from a court, dismissing striking employees, or locking the laborers out of their workplaces. Some employers resorted to harassment and violence to disrupt the unity of the union membership.

The Great Depression undermined the supremacy of the owners’ decision-making prerogatives. The willingness of the public and its elected officials to trust the laissez-faire economic system to regulate itself and to provide prosperity and opportunity for the United States was damaged. In 1932, President Herbert Hoover and the ill-fated Republican-controlled Congress approved the Norris-LaGuardia Anti-Injunction Act. "The substance of the Norris-LaGuardia Act prohibited the federal courts from issuing injunctions in labor disputes, subject to stringent exceptions. The public policy underlying the act stated, for the first time, the government’s interest in the rights of workers to organize."² As Franklin D. Roosevelt and a Democratic-controlled Congress assumed control of the national government in 1933, the presumption of the sanctity of private property gave way further to a new regime under which everything about how owners and managers conducted their business operations became negotiable. Roosevelt and Congress decided to affect the balance of power between managers and labor unions. The National Industrial Recovery Act, which Congress enacted and Roosevelt signed during his "Hundred Days" honeymoon, granted to laborers the legally protected right to organize labor unions. That law was a casualty of the struggle between the New Deal and the laissez-faire Supreme Court, which declared the law unconstitutional in its decision in the case of Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935). Mindful of the National Industrial Recovery Act’s relative ineffectiveness, Congress enacted the even more pro-union National Labor Relations Act (popularly known as the "Wagner Act") and the president signed it on July 5, 1935. By the time the Supreme Court handed down its decision in the case of National Labor Relations Board v. Jones & Laughlin Steel Corp., 301 U.S. 1, on April 12, 1937, the court had decided to acquiesce to Roosevelt’s vision of the new mixed economy, and the court pronounced the National Labor Relations Act to be constitutionally permissible.

2. ADJUSTING THE MANAGEMENT-LABOR RELATIONSHIP

In January 1947, the Republican party resumed its control of both houses of Congress. The Republicans had awaited an opportunity to remedy what they believed to be the labor unions’ advantage in their transactions with management. With bipartisan support, Congress enacted the Labor-Management Relations Act, better known as "Taft-Hartley." President Harry S. Truman vetoed the act on June 20, and Congress completed the override process three days later. The law modified Section 7 of the National Labor Relations Act to give individual workers the "right to refrain" from union activity. The provision of Taft-Hartley that most offended labor-union leaders was (and remains) Section 14(b), which authorizes state legislatures, if they so desire, to enact state laws prohibiting "union shops," also known as "closed shops"--i.e., workplaces in which non-members of the labor union would be ineligible for employment. Businesspeople refer to such laws as "right-to-work" laws. At present, there are 22 states with "right-to-work" laws in effect.

According to Jennik, two additional laws have adjusted the relationship between management and labor unions. They are:

■ The Labor-Management Reporting and Disclosure Act (popularly known as the "Landrum-Griffin Act") of 1959. The purpose of this law is to regulate internal union affairs. Jennik explains: "Liberal members of Congress informed union leaders that if they accepted the regulation of internal union affairs, they could perhaps defeat the destructive constraints proposed by management adherents in the Taft-Hartley amendments. . . . The union democracy section of the bill was largely drafted by the American Civil Liberties Union, which supported the civil liberties of union members. The bill was passed by an odd coalition of civil libertarians and employer supporters, who favored further governmental regulation of unions. . . . For the first time, union members were given statutory rights within their unions." Labor-union leaders opposed the bill, but were overcome by the "odd coalition."³

■ The Racketeer Influenced and Corrupt Organizations ("RICO") Act of 1970. This law addressed the persistent belief that labor unions were beset by corruption, much of which was caused by the influence of organized crime. Says Jennik, "A major innovation of RICO was that, in addition to criminal penalties, it provided for a civil remedy allowing federal courts to dissolve or ‘reorganize’ an enterprise affected by a pattern of racketeering activity. . . . The Department of Justice has used RICO to ‘reorganize’ corrupt unions, usually by appointing some independent monitor to supervise certain union functions for a time, culminating in a supervised election of new officers."⁴

Jennik concludes that a common theme of labor legislation has been to "protect the rights of individual workers in relations to their employers, their unions, and organized crime." But, she observes, "as each law has matured, institutional interests have gradually been favored over individual rights."⁵

3. DECLINE OF ORGANIZED LABOR

While the decline of the U. S. manufacturing sector has been a fundamental explanation of the weakening of organized labor, several other factors have exacerbated the labor unions’ difficulties. One such factor is the de-energizing of the National Labor Relations Board. Accomplishment of its original mission of protecting the labor movement is now impeded by the board’s obsessive commitment to its own legal and bureaucratic processes as ends in themselves. Clark writes:

John Dunlop . . . and Ray Marshall . . ., both noted labor economists and previous U. S. Secretaries of Labor, argue that the current labor relations system is not adequate in the face of the international competitive threat. They contend that the [National Labor Relations] Board is too slow to make decisions, is too legalistic in terms of its procedures, and is not sensitive to the changing economic conditions facing both firms and unions. As a consequence, they argue that the U. S. is severely hampered economically in terms of its capacity to adjust to the changing economic environment. Economic efficiency seems to come a very poor third to other apparently more important quasi-legal objectives: due process and adjudication. Many lawyers and labor specialists would agree with Dunlop and Marshall, especially as regards the procedural morass that faces all participants when seeking a decision from the Board.

The economic costs of this system are difficult to quantify. . . . In any era of economic crisis, Dunlop suggests that the [National Labor Relations Board] fundamentally compromises the economic system.

The crucial issue for the Board has become the right of management to conduct [its] business without undue interference from labor over decisions to restructure operations, close and open plants, introduce labor-saving technology, and the like. Put slightly differently, the Board has narrowed the scope of collective bargaining by narrowing the legitimate interests of labor to issues of compensation.

According to some commentators these cases, and other related ones, constitute a concerted attack by the Board on meaningful collective bargaining. . . . All issues other than compensation (narrowly interpreted) become non-mandatory bargaining issues, and as a consequence organized labor [is] drastically limited in [its] attempts to bargain over the changing economic environment.⁶

It is important to my paper to note that the National Labor Relations Board has generally declined to uphold union demands to be involved in decisions related to "the location of work." When he was the president of the AFL-CIO, Lane Kirkland "argued that the labor movement might be better off without the National Labor Relations Act and the National Labor Relations Board."⁷ Unfortunately for labor, however, it really has nowhere else to go.

The decline of the U. S. manufacturing sector was fueled in the 1980s "by the high value of the U. S. dollar against other currencies (notably the Japanese yen)." Because of this second factor for the decline of American labor unions, the importation of foreign goods gathered momentum, while other countries’ demands for U. S. exports sank.

The U. S. has turned from being a net creditor to a net debtor nation. Though the value of the dollar has fallen dramatically, the whole Midwest region has undergone a dramatic restructuring, affecting workers, communities, and whole industries.⁸

A third factor, which Clark traces to the Taft-Hartley Act, is the "localization" of the U. S. labor-union movement. Taft-Hartley’s nod in the direction of federalism set the stage for a patchwork of inconsistent rules state by state, disrupting the tight organization of the International unions. Clark explains:

Where a truly national union movement may have forced a different design of economic restructuring, the weakness of unions as national entities has allowed corporate flight, even blackmail of communities.⁹

Finally, the fourth factor is about as old as the U. S. organized-labor movement itself. When Samuel Gompers, founding president of the American Federation of Labor, repelled suggestions that he and his movement were anti-capitalist and possibly socialists, he offered an alternative explanation for their motivations when he proclaimed in speeches in 1893: "What do we want? More, more, more--now!" This acquiescence of the inevitability of free enterprise has limited the range of policy proposals that organized labor has been willing to advance. Nissen explains, "The U. S. labor movement has been content to mount no political challenge to corporate control of the economy."¹⁰ As a result, union leaders have been hard-pressed to enunciate a coherent argument for why corporate owners should not be free to locate their facilities wherever they want and to move them without interference.

B. The Portability of Manufacturing and Capital

Public policies like the National Labor Relations Act rest on the assumption that a labor union’s bargaining chip in its negotiations with the management of a manufacturing facility is the ability to disrupt the continued operation of that facility with a strike, which would stop the facility’s productive output at no small cost to the employer. They also rest on the assumption that, if management concludes that it cannot continue to do business productively in the face of the resistance of its local workforce, not to mention the local labor market, management’s ultimate recourse is to shut down the facility and start anew someplace else, where it can find a workforce that would find management’s employment offer to be entirely acceptable. The usefulness of the National Labor Relations Act depended on the expectation that a firm would deem relocation a costly, undesirable, and last resort--a very lamentable detachment between the firm and the community with which it has long been associated.

But, during recent decades, the durable association between firms and the communities in which they are located has significantly eroded. In fact, few firms today are determined to persist in their current form; they tend to be entirely content to offer themselves for sale to another firm or investor for the right windfall price. An employer’s warning that it will shut down operations at its current location and reconstruct the same operations elsewhere is not readily dismissed as an idle threat.

Such threats are thought to be very powerful management election propaganda, particularly in communities and regions already adversely affected by plant closings. Given that many industrial unions have fared very poorly in representative elections in these types of regions in recent years, union officials have come to believe that relocation of production is as much an anti-union strategy as it is a legitimate business decision based upon "purely" economic considerations.

Bluestone and Harrison . . . suggested evidence consistent with this assessment, and demonstrated that plant closings and the relocation of work are closely related to corporate investment policy. Instead of treating investment as simply a capital asset, it is thought that management now couple[s] investment with labor relations strategies that deliberately seek to avoid unions . . . or basically compromise the power of unions in existing work places. . . . [T]he location of capital can be directly associated with geographical patterns of union strength.¹¹

1. SENDING MANUFACTURING JOBS SOUTH

The American union movement gathered steam in such locations as Boston, New York, Philadelphia, Pittsburgh, Chicago, and Detroit. Clark observed that "unionization appears as a north central and west-coast phenomenon, as opposed to a national or even a multi-regional phenomenon." He adds that the growth in union strength that gathered in those locations did not persist when unions attempted to gain a foothold in the South. ". . . [T]he failure of the union movement to penetrate other regions, especially in the South, . . . contributed to the decline of national unionization rates." On the other hand, Clark said, in the 1980s unions had a higher proportion of growth in the South than in the "industrial heartland[, t]he only exception [being] New England."¹²

"Rural" plants are very difficult to unionize, Nissen wrote. "The workforce is unfamiliar with unions, industrial wages seem generous compared with traditional income sources, and the workers are so geographically dispersed that organizing is logistically difficult."¹³ Philip N. Dine notes that the right-to-work laws of most southern states have attracted industrial facilities. This relocation of jobs from union-friendly states to right-to-work states has caused the number of union jobs to decline.¹⁴ Nissen agrees:

Companies increasingly located their new production facilities in the South or in rural locations without a history of unionization. The southern states have long histories of hostility to unions; most are "right-to-work" states with laws forbidding the union shop. Those states have the lowest rate of unionization in the country; union organizing drives are difficult and, in the past, were often outright dangerous for the organizers attempting to conduct them.¹⁵

2. SENDING MANUFACTURING JOBS OVERSEAS

The detachment of firms from their communities set the stage for the detachment of firms from even their country of origin.

The internationalization of capital and the geographic dispersion of production were facilitated by similar factors. Advances in communications and transportation made mobility increasingly easy. Technological change simplified the tasks necessary for many types of production, lessening the dependence of corporations on the high skilled (unionized) labor force located in the traditional U. S. manufacturing centers. Government tax, trade, and industrial policies encouraged the flight of capital and production abroad and south.¹⁶

This is Dine’s summary of the very dramatic effect of globalization on the American labor movement:

Labor Department figures show a net loss of more than 3 million manufacturing jobs--disproportionately union jobs--since manufacturing employment peaked in 1998, with perhaps half having gone overseas. And while globalization and national wage disparities spur the loss of these jobs, public policy also plays a role in that employers are not discouraged from--and in some cases are even rewarded for--sending jobs overseas. Sometimes these jobs are reimported back into the country in the form of foreign auto makers setting up plants, but this often takes place in southern, right-to-work states, precisely because labor practices and laws work to complicate any union efforts that represent those workers.¹⁷

The significance of this flow of jobs--from traditional U. S. manufacturing communities to other countries and then to the union-hostile southern United States--is a surprise outcome that has confounded the efforts of American labor organizers to maintain any kind of consolidated national union movement.

3. MAKING A QUICK PROFIT

In the years of the Industrial Revolution and those that followed, even the greediest of capitalists seemed to have a need to be proud of their companies and their products. John D. Rockefeller was committed to the long-term profitability of Standard Oil. Henry Ford showed a significant interest in preserving his reputation as a manufacturer of dependable vehicles. Professional employees would be immensely proud of their affiliation with such employers as AT&T, General Electric, General Motors, IBM, and so on, linking their own stature with the reputations of their companies. Even owners’ and managers’ desire for profits and high salaries would have to co-exist with the companies’ need for investment in research and development so that the companies would still be competitive and successful many decades hence.

Then, in the last decades of the 20^th century, a frenzy of corporate-takeover transactions changed the American corporate culture. The Jones Fruit Company and the Smith Engine Company may have had long histories of selling fruit and engines, and may have done it better than others, but now, if CDE Investors could buy both companies, extract from them a quick profit by chopping them up and dividing them up among a variety of buyers, the transaction would attract congratulations from the Wall Street community for making all of the owners of the former companies and the new companies wealthier once the smoke cleared. The fact that any productivity or wealth generation resulting from the transaction would be mostly momentary, and that nothing had been done to set the stage for productivity in the long term, would not matter at all to those who were adding up their profits. Many of the former employees of the Jones Fruit Company and the Smith Engine Company would have learned the lesson that one cannot rely on her employer to perpetuate her professional status and her livelihood. Those who had been united in their proud association with a company now understood themselves to be independent agents, looking for the next temporary source of income that could be exploited until that relationship ended, too. A job with unnaturally high rewards, but with little long-term potential, would be preferable to a job that resembled the older, traditional format, because the former employers of the Jones and Smith companies were probably left without any remnants of their terminated pension programs and without much hope of qualifying for any other pension program, making a "get-rich-quick" arrangement look tremendously attractive. Everything about the corporate sector seemed to become "ad hoc." Nissen wrote:

The response of U. S. producers to increased competition was to "emigrate, evaporate, or annihilate." "Emigrate" meant more and more production located or relocated outside the confines of the United States. "Evaporate" meant closing operations and shifting to easier sources of quick profitability, such as stock market manipulations and paper asset shuffling. "Annihilate" meant destruction or near destruction of the union in those facilities where it was impractical to relocate or withdraw but feasible to take on the union. "Union busting" became a multimillion-dollar industry in the 1980s.

Emigration and evaporation created the phenomenon known as "deindustrialization" . . . [--]the wholesale abandonment of manufacturing communities in the United States. By the 1980s, plant closings were widespread in their occurrence and devastating in their impact.¹⁸

For labor unions and their leaders, the spate of mergers and acquisitions has greatly damaged the unions’ ability to protect the livelihoods of their members and to preserve the influence of bargaining units. John Russo explains:

. . . [M]any corporate takeovers have had a devastating impact on employees and union members. As a result of asset-stripping, many employees have lost their jobs, regardless of the competitive position of the company. In the case of successful takeovers, the new owners are not obliged to rehire former employees or honor existing contracts. Consequently, older, high-seniority, full-time employees can be replaced by a new, younger, part-time workforce. When this occurs, unions can do little legally to stop such activities.

Alternatively, highly leveraged companies have asked workers to accept reductions in wages and fringe benefits in order to service the assumed debt. . . .¹⁹

The capitalists who orchestrate the corporate-takeover activity notice and appreciate the fact that these transactions undermine the ability of labor-union officials to represent the interests of the laborers whom they represent. Current legal provisions neutralize the union as the workers’ bargaining agent.

For unions, conglomerates often mean premature plant shutdowns, failed strikes, and a general failure of bargaining. The latter was caused by shifts in tactical bargaining strength resulting from conglomerates’ operational mobility and financial power. . . . For example, traditional pressure tactics such as strikes are ineffectual against conglomerates because conglomerates can easily subsidize operations from other divisions or shift production to subsidiary companies. Since each conglomerate subsidiary is considered separately under labor law, disputes are largely limited to primary employers (the subsidiary directly involved in the labor dispute), while expansion of strike activities to other subsidiaries can subject the union to secondary boycott provisions and damage claims.²⁰

Unions have pleaded with government policymakers to update the statutes with new laws that address the new economy.

The labor community has been instrumental in passing legislation, such as the Trade and Tariff Act of 1984, that links trade benefits to worker rights. Currently, the Generalized System of Preferences (GSP) and the Overseas Private Investment Corporation (OPIC) link trader and investment incentives to worker rights. These rights include the freedom of association, the right to organize and bargain collectively, the prohibition on compulsory labor, child labor laws, and acceptable conditions of work (minimum wage, hours of work, and safety and health). . . .

However, the enforcement of these laws regarding trade and worker rights has been minimal.²¹

To those ideas, Russo adds:

. . . [U]nions should promote legislation that ensures workers a legal right to participation. For example, in 1976, the Swedish government passed the Act on the Joint Regulation of the Workplace, which largely abolished "management rights" clauses and permitted bargaining over work organization and personnel policy. This could be accomplished by amending the National Labor Relations Act to legally sanction the rights of workers to bargain over investment decisions and the organization of production.²²

If the American economy is to become productive as it once was, the shell game of mergers and acquisitions and the treatment of employment as a momentary relationship of convenience cannot continue. Russo attributes to the corporate-restructuring arrangements the misfortunes of "reduced competitiveness, plant closings, deunionization, unemployment, the expansion of part-time jobs and underemployment, and the impoverishment of American workers. . . ."²³ The persistence of these circumstances will not allow the United States to recover from the economic collapse of 2008, in which case a future of poverty and distress awaits Americans and their offspring.

C. Being Competitive in Attracting Industry

1. LABOR LAWS

A staunchly New Deal Democratic Congress enacted the National Labor Relations Act in 1935, bolstering the labor-union movement. In 1947, a Republican majority joined by numerous Southern Democrats overcame President Truman’s veto of the Taft-Hartley amendments, allowing certain states to uphold management’s authority to define its relationship with labor. The creation of a patchwork of state-by-state labor laws relieved the pressure to repeal the National Labor Relations Act. Taft-Hartley’s "Sections 14(b) and 8(b)4(A) promote the idea that workers’ interests are distinctive and necessarily different between and within employers, places, and issues." This seemed to be sufficient for Southern legislators, who asserted, according to Clark, that right-to-work laws were "necessary to industrialize the South."²⁴

Clark explains that there has been an ongoing debate about the variables that lead to the enactment of state right-to-work laws, and about the effect of those laws on unionization. On the first part of the controversy, Clark has this to say:

In an early [1971] study, Palomba and Palomba . . . suggested that [right-to-work] states had lower levels of unionization prior to the passage of these laws. They suggested too that states with high rates of unionization lacked the political power to pass such laws. They then concluded that the determining variable affecting whether or not a state passed [right-to-work] legislation was the level of local economic development. More recently [1975], Tollefson and Pichler . . . reworked their data to argue that, in fact, the Palombas had under-emphasized the significance of the level of unionization in determining the passage of [right-to-work] legislation [and that research on the matter] should stress factors originally associated with the saturationist school: the proportion of blue-collar labor, urbanization, and southern culture.²⁵

On the other hand, Clark notes, there has been very limited research about the second part of the controversy, which is the impact on state right-to-work laws on unionization in the states that have such laws.

Ellwood and Fine . . . noted that passage of [right-to-work] legislation had an immediate negative effect on the number of representation elections held in those states that passed such legislation. But they also noted that this effect was temporary, a finding consistent with Smith’s . . . study of the effect of [right-to-work] laws on unionization. Farber . . ., however, found it more difficult to come to a conclusive determination. He, like others including Dunlop . . ., emphasized the importance of the local culture. Specifically, he concluded that despite a strong correlation between (low) levels of unionization and the existence of [right-to-work] legislation, this "is largely a reflection of tastes against union representation rather than a real effect of the [right-to-work] laws." While that is an interesting conclusion, one that reinforces the importance of the local context in determining the level of unionization, it nevertheless raises an unasked and unanswered question: in the absence of a [right-to-work] variable, how would we represent the local institutional effect?²⁶

A reasonable analysis of labor laws would hold that labor unions had a position of weakness in the 1920s, and have returned to that position of weakness. Business owners and managers have found effective ways to circumvent the provisions of the National Labor Relations Act that constrained them from fully controlling their firms. ". . . [T]he promise and potential of the NLRA," Clark intoned, "[are] now exhausted." Clark adds:

Thus, union security has become an empty promise. The underlying structure of labor law, which encouraged localization of labor-management relations, has become a fundamental disadvantage for unions and communities in their bargaining with employers. Indeed, the very geography of the union movement has made it vulnerable to the global reach of corporate capitalism.²⁷

To the extent that labor unions might have had the opportunity to protect not only their own members but also the stake that the lower and middle classes have in the U. S. economy, the unions were legally thwarted from obstructing capitalists as they sapped American industry of its vitality and cashed in on their breathtaking jackpots.

2. COMMUNITY CLIMATES

Clark explains the importance of corporate location decisions:

Location is a vital element in understanding union performance and the anti-union strategies of corporations. At an obvious level, the connection between location and labor relations was created by the structure of federal and state labor relations laws. But at a deeper level, the connection is strategic in the sense that unions and employers use this inherited geography in their bargaining with one another as their behavior is structured by the geography of labor relations.²⁸

In the 1920s, Max Weber turned his attention to the development of a theory of location. His industrial-location theory integrated the costs of labor and transportation as the principal ingredients for developing maps of industrial production. "Most industrial location theories give labor costs a central role in allocating production across the landscape, especially neoclassic economic theories."²⁹ Weber’s recognition of labor costs as a causal variable for the location of industrial facilities inspired the research of others to evaluate location decisions based on management-labor relationships. For state-economic-development officials, it undoubtedly presented a simple formula: Control state pay levels, and the state will be a more attractive location for industry. As Clark reported, ". . . South Carolina’s union-free environment is an important economic development policy, an interpretation that has been made by others of the interaction between [right-to-work] laws and state economic growth. . . ."³⁰ For labor-union officials, it undoubtedly presented another simple formula: Organize nationwide and maintain unity, or else industrialists will find locations in which labor is poorly disorganized and hampered by state and local impediments from achieving effective collective bargaining. As Clark also reported, ". . . Unions[ are] dependen[t] upon inter-community solidarity, a fragile democratic ideal which is often overwhelmed by economic imperatives operating at higher scales in other places."³¹

Consider the problem from organized labor’s point of view. Clark explains:

In the United States, the unionization process is distinctly, and inherently, a geographical one. Workers choose to be represented by the union at the local (plant and sub-plant) level. . . . My assumption is that the local context in which union elections are won or lost is a crucial lens for understanding the current predicament of American unions.

. . . [T]he geography of unionization is very important for a couple of reasons. Not only does it go to the heart of current problems faced by the union movement, but it also has a crucial role to play in the strategies and behavior of corporations with respect to unions. Not only is the overall national level of unionization important, but so too is the spatial differentiation of unionization."³²

Undoubtedly, labor-union leaders know what needs to be done to keep up with management’s relocation strategies. But, inevitably, labor leaders cannot develop a consensus among themselves and the rank-and-file membership as quickly as management can decide what its next move will be. The supervisor’s agreement with the chief executive officer on just about anything that the CEO decides to do can be secured within a matter of hours. Even the most persuasive union president cannot cause a majority agreement to coalesce about any significant topic within weeks or even months, no less within hours. Also, as I mentioned previously, public policy begins with the assumption that the capitalist has the right to decide what to do with his wealth. Clark states:

My interpretation of parties’ actions and motives was premised upon a theory of location . . . that assumes a fundamental role for the social-cum-spatial relations of production in determining the organization of the economic landscape. By this account, local labor relations environments, what management consultants sometimes call business climates, are vital elements in corporations’ locational calculations. While possibly illegal, . . . such calculations typically involve the collective bargaining process as opposed to purely economic considerations. In this way, spatial differentiation of the collective bargaining process is intimately connected to the economic prospects of towns and cities across America. Consequently, the institutions of the collective bargaining process--unions, arbitrators, courts, the [National Labor Relations Board], and the structure of labor law itself--are all part of the location decision frameworks of corporations.³³

This additional observation by Clark elaborates on the management considerations in location:

Richard Walker . . . argued that technological change and regional growth and decline [are] mediated, indeed sustained, through local employment relations. To the extent that regions are dominated by different forms of employment relations there will be consequent differences in the pace, type, and nature of technological change. It is apparent that the institutional environment or production is the crucial factor in allocating capital between places. In an empirical analysis of this proposition by Clark, Gertler, and Whiteman . . ., differences in state-level regulations regarding workers’ rights of union representation and open-shop employment were argued to be fundamentally important in understanding the locational imperatives of firms’ investment decisions, and the consequent map of economic growth and decline.

Similarly, Warde . . . and Cooke . . ., following Massey’s . . . lead, argued that differences in local work practices provide multi-locational firms with opportunities to dominate certain geographical labor markets, and thereby escape entrapment by sections of organized labor who would otherwise constrain firms’ abilities to accumulate capital. Johnston’s . . . paper on the role of the National Labor Relations Board in regulating relocation decisions has shown that the institutional structure of local labor relations can have a deciding role in firms’ locational decisions. In Johnston’s example, the right of a firm to relocate production during the course of a contract was interpreted by the [National Labor Relations Board] in terms of a legal relationship between capital and labor.³⁴

Clearly, management has a far wider and richer range of options from which to choose when it decides where to locate and relocate its means of production.

Caught between the management-labor relationship is the well-being of communities affected by locational decisions. ". . . [U]nderstanding the decline of organized labor," Clark asserts, "is premised upon understanding the intersection of community life and the diversity of the union movement."³⁵ Clark offers four propositions "about understanding the intersection between American communities and the crisis of organized labor." The four propositions may be summarized in this manner:

■ ". . . [T]he crisis of American unions involves a more subtle interplay of interpretation and empirical analysis than heretofore evident in the literature.

■ ". . . [T]he future of the American labor movement is bound up in its communities, as evident in the geography of union representation elections (for example).

■ ". . . [I]nstitutional mediation of local relationships between labor and capital is an essential component of the differentiation of places.

■ ". . . [E]conomic restructuring is a process that has made connections between institutions, unions, and communities in ways that are only now becoming apparent."³⁶

3. A NEW APPROACH TO MANAGEMENT-LABOR RELATIONS

The National Labor Relations Act sought to enhance the unbalanced management-labor relationship by giving labor unions a few weapons to use in their struggles with the power of management. After taking notice of our seven decades of experience with this law, observers are willing to declare management to be the winner. However, the defeat of labor comes with growing dissatisfaction among the American public over the manner in which owners and top executives have looted their firms, pocketing fabulous rewards in the process. Meanwhile, they all but declared poverty in stating that they could not afford to continue to pay laborers the supposedly inflated wages that their unions had extracted from management over the years.

Any remediation of our economy’s current dysfunctions should not involve new formats for throwing management and labor into renewed conflict with each other. It didn’t work before, and it won’t work hereinafter. Instead, public policy needs to recognize both (1) the right of owners of capital to profit from their property and (2) the right of employees to a decent wage and an expectation of stable employment.

Laws should also encourage and reward cooperation between management and labor. General Motors and the United Auto Workers displayed their Saturn Project as a model of "a new form of labor relations" based on "cooperative interest bargaining" that should be "the basic mode of labor-management relations." Clark explains:

Instead of economic warfare over management rights, the goal is to facilitate the cooperation of labor and management in the creation, design, and production of their new automobile. Instead of economic warfare over wages and working conditions, the goal is to make these issues conditional upon the success of the joint partnership. And, instead of depending upon the [National Labor Relations Board] as the forum for adjudicating irreconcilable differences between the parties to the partnership, the goal is to make all matters subject to internal collective bargaining procedures. Essentially, collective bargaining as it is known in the [National Labor Relations Act] is to be replaced with local co-determination premised upon the mutual interests of the partnership. The Saturn Project . . . attempt[ed] to duplicate the Nissan experiment, while maintaining a union environment. . . .

The Saturn Project implies a form of corporatism. Indeed, it implies quite different political values: group interests as opposed to individual interests, co-determination as opposed to economic warfare, and a culture of collective action as opposed to American individualism.³⁷

As an experiment, the Saturn Project was immensely valuable partly because it exposed some of the most ardent opponents of management-labor cooperation. Pro-business interest groups, such as the National Right-to-Work Legal Defense Foundation, filed lawsuits against GM and the UAW, claiming violations of Tennessee’s right-to-work and other labor laws. GM chairman Roger Smith observed that opponents of the Saturn Project, such as the National Right-to-Work Committee, found ready-made tools within National Labor Relations Board procedures to attempt to overturn the agreement between GM and the UAW.

The complex contracts that have evolved in highly unionized industries, thanks to the National Labor Relations Act’s emphasis on confrontational bargaining, makes those industrial facilities’ operations rigid and difficult to streamline, leaving the firms at a distinct disadvantage compared to non-union firms. Balfour explains:

These nonunion firms have pursued human resources management policies encouraging high levels of communication, involvement, commitment, and motivation of individual workers. They have emphasized broad-banded jobs with few job classifications, fewer work rules governing job assignments and transfers, and more active training programs. The Japanese enjoy similar flexibility. This capability allows these employers to adapt more rapidly and appropriately to changing markets, products, and production methods.³⁸

The cure for this counter-productive rigidity is joint participation of managers and laborers in decision-making, even in real time.

. . . [T]he union may need to engage in joint efforts with management to bring individual employees more directly into the process of communications, decision making on shop-floor issues that affect their jobs, and the adaptation of current rules to the demands for more flexible and productive work systems. This may require the union to assume the role of providing access to the information and the power that workers will need to effectively influence their work environment and enhance their careers. These union efforts will be needed to help produce the productivity and cost controls needed to support a high-wage industrial relations system.³⁹

Another aspect of the traditional management-labor relationship that needs to change is the unions’ effort to create a set level of wages for employees, rather than allowing wages to fluctuate with productivity and profitability. The arguments against set wage levels include "the growth of domestic nonunion competition[;] foreign nonunion competition[;] deregulation of leading sectors of transportation such as airlines, railroads, and trucking; and a trend towards smaller, more specialized markets." Balfour suggests that unions accept variations in labor costs and "rely more on contingent compensation systems tying pay to the performance of the firm." He expects that "various forms of profit sharing, employee stock ownership plans, and productivity gains sharing will take on added significance," and that "job-security protections will become more important as wage increases are subjected to more constraints."⁴⁰

U. S. labor law should not continue to throw labor unions into confrontational relationships with management, letting the best man win. Instead, the law should afford to laborers substantive protections against oligarchies and elites in unions, in management, and in state and local governments. Laborers ought to be entitled to a number of protections against exploitation, unfair discharge, and other arbitrary and capricious decisions. An American economy that will persist will have to provide benefits to all of the partners to the transactions.

ENDNOTES

¹ Gordon L. Clark, Unions and Communities Under Siege: American communities and the crisis of organized labor (New York: Cambridge University Press, 1989), p. 52.

² Susan Jennik, "Toward More Perfect Unions: Public Policy and Union Democracy," in Unions and Public Policy: The New Economy, Law, and Democratic Politics, ed. Lawrence G. Flood (Westport, Conn.: Greenwood Press, 1995), p. 115.

³ Ibid., pp. 115-116.

⁴ Ibid., p. 116.

⁵ Ibid.

⁶ Clark, Unions and Communities Under Siege, pp. 173-174, 180.

⁷ Ibid., p. 250.

⁸ Ibid., pp. 172-173.

⁹ Ibid., p. 253.

¹⁰ Bruce Nissen, "Combating Plant Closings in the Era of the Transnational Corporations," in Unions and Public Policy, p. 134.

¹¹ Clark, Unions and Communities Under Siege, p. 155.

¹² Ibid., pp. 12-13, 20.

¹³ Nissen, "Combating Plant Closings in the Era of the Transnational Corporations," p. 132.

¹⁴ Philip M. Dine, State of the Unions: How Labor Can Strengthen the Middle Class, Improve Our Economy, and Regain Political Influence (New York: McGraw-Hill, 2008), p. 237.

¹⁵ Nissen, "Combating Plant Closings in the Era of the Transnational Corporations," p. 132.

¹⁶ Ibid.

¹⁷ Dine, State of the Unions, pp. xxvii-xxviii, emphasis added.

¹⁸ Nissen, "Combating Plant Closings in the Era of the Transnational Corporations," pp. 132-133.

¹⁹ John Russo, "Corporate Restructuring and the Decline of American Unionism," in Unions and Public Policy, p. 60.

²⁰ Ibid., p. 10.

²¹ Ibid., pp. 62-63.

²² Ibid., p. 63.

²³ Ibid., p. 56.

²⁴ Clark, Unions and Communities Under Siege, pp. 201, 212.

²⁵ Ibid., p. 30.

²⁶ Ibid., pp. 30-31.

²⁷ Ibid., p. 253.

²⁸ Ibid., pp. 6-7.

²⁹ Ibid., p. 7.

³⁰ Ibid., pp. 63-64.

³¹ Ibid., p. xi.

³² Ibid., pp. 9, 20.

³³ Ibid., p. 66.

³⁴ Ibid., pp. 8-9.

³⁵ Ibid., p. 41.

³⁶ Ibid., p. 66.

³⁷ Ibid., pp. 185-186, 190.

³⁸ Alan Balfour, Union-Management Relations in a Changing Economy (Englewood Cliffs, N. J.: Prentice-Hall, Inc., 1987), p. 428.

³⁹ Ibid., p. 429.

⁴⁰ Ibid.

Bibliography

Balfour, Alan. Union-Management Relations in a Changing Economy. Englewood Cliffs, N. J.: Prentice-Hall, Inc., 1987.

Clark, Gordon L. Unions and Communities Under Siege: American communities and the crisis of organized labor. New York: Cambridge University Press, 1989.

Dine, Philip M. State of the Unions: How Labor Can Strengthen the Middle Class, Improve Our Economy, and Regain Political Influence. New York: McGraw-Hill, 2008.

Flood, Lawrence G., ed. Unions and Public Policy: The New Economy, Law, and Democratic Politics. Westport, Conn.: Greenwood Press, 1985.
• Jennik, Susan. "Toward More Perfect Unions: Public Policy and Union Democracy."
• Nissen, Bruce. "Combating Plant Closings in the Era of the Transnational Corporations."
• Russo, John. "Corporate Restructuring and the Decline of American Unionism."