Monday Aug 02

Winter 2020

What Can Unions Do About Chronic Community Distress and Permanent Job Loss?

Written by Richard F. America

Organized labor has seen declining membership since the 1970s.  Less than 15% in 2017, of American workers are now in unions.  Labor power has declined.  Management has been able to avoid negotiations for a different split of resources.

Over this span, entire industries, - autos, steel, mining - have declined for many reasons, often summed up as, globalization, with the transfer of formerly skilled and assembly line union jobs to lower cost locations overseas.

Labor relations scholars, labor economists, labor-management relations experts, have a range of views on what this all means, and possible options for unions, and the new role for organized labor in the economy.

In 1996, the Harvard Kennedy School of Government issued a case, Shifting the Labor Relations Paradigm: A Union – Management Partnership in Ohio State Government. In 1998, Harvard Business Review published Constantine von Hoffman's  Does This Company Need a Union? In 2007, Harvard Business School Press published Jeffery Pfeffer's,  In Praise of Organized Labor: What Unions Really Do.    And, in 2015, Elaine Bernard, Executive Director of the Harvard Trade Union  Program,  published,  Why Unions Matter.

All suggest various forms of reboot. My experience, observation, and analysis suggests another new role for labor unions.

I find that unions have a new role in economic development in these distressed areas.  In all those red, blue and purple counties that register disgruntlement at the polls and in other ways about their employment prospects, earnings, and life opportunities in the rust belt, farm belt, mining country, Appalachia, and inner cities, unions should be catalysts, brokers, and drivers of small business formation and entrepreneurship in those places.  That will create new jobs. Many of these jobs will be created by former union members as well as by anyone else in or outside of the community and done so with union help. In return for that union help,  these new business owners and their employees,  will all become members of the union, or, at least, supporters and compatible associates, in various ways.

Unions, like corporations, have a social obligation, beyond the ones they have historically, embraced. Let's call this a new form of Union Social Responsibility.   USR is the new principle that unions should help former members start and grow businesses in down and out regions, towns and cities. It takes its place along with Corporate Social Responsibility, CSR, and Shared Value in shifting the way powerful organizations behave and view their role in society.

I have discussed these observations with labor economists, senior labor union senior officials, and executives, including some who respect the role of unions, and see their decline as harmful to a healthy society.

My first professional job was in consulting and contract research at SRI International. One client was a major manufacturer closing a factory in New York and looking for an ideal new location. Our task was to find relocation options in states with cheap land, good transportation, in a small city under 25,000 population, good utilities, low taxes, and no unions. We examined Indiana, Illinois and Ohio.  We recommended several possibilities. The client/management thanked us.  And, they ignored all of our rankings and found their own new home in Kentucky, an option we had not examined. As young staffer, I had privately suggested to our team leader, that we suggest to the client that they stay in New York. That would have kept the economic and community benefits for that community.   This suggestion was rejected. In the last 50 years, such plant closings have led to loss of such jobs and production for the US as a whole.

Later, I worked on similar problems concerning military base closings. How to mitigate the negative impact of civilian job loss in the surrounding communities.  And, still later, teaching part time, in a business school, I became a union member, as an Adjunct faculty member. The SEIU has been organizing adjunct contingent faculty across the country. Their pay, and working conditions have been improved as traditional collective bargaining has brought university managers to find ways to share the pie more fairly with faculty, who often teach more than 50% of all classes and 50% of all student hours.

But these experiences, including direct membership, and a short term in a leadership role in a campus union, leads to a counter-intuitive conclusion. Unions should be in the economic development business.

Harvard Business Review, and other publications, have addressed the problems of managing layoffs, in mass terminations. For example, in 1991, “The Case of the Downsizing Decision,” in 1998, “After the Layoffs, What Next?”, in 2002, “After Layoffs, Help Survivors Be More Effective”, in 2002, “Look Before You Layoff,” in 2007, Layoffs: Are They Ever the Answer?”, in 2009, “The Right Way to Close an Operation,” and, in 2009, “Downsizing Lost Its Bad Rap.”

During the 2008-2012 Great Recession the employment impacts of management and investor decisions made this a critical issue.   During and after the COVID pandemic, there will be further closings.

Management can manage these processes more humanely. And unions can partner effectively in the process, rather than simply oppose when the action has become unavoidable and inevitable. Investors, consultants, bankers, corporate boards, and senior executives, government officials, union leaders, universities, chambers of commerce, and others, can work together. They can transform job losses into economic development gains.

Former Bain Capital private equity executive, now Senator Mitt Romney drew heat for saying, “I like to fire people.” which was taken out of context. There are better ways to conduct mass layoffs to create positive local impact, and unions have a key role.

As a federal government employee, I worked for several years on military base closure issues as well as on urban and rural development policy.  I worked with public sector leaders at all levels along with trade union and trade association executives.  The goal was to create public-private partnerships to support entrepreneurship in response to large scale job loss.

My interactions with union leaders were not fruitful, in the 1980s and 1990s, but 30 years later, unions might now be receptive to such a new approach. Back then, they did not see it as their role to help members or former members to become entrepreneurs.  But they must do that.  They can help transform economically dismal communities into thriving ones again. They can transform some workers into businesses owners. Such a policy can generate millions of new members, using an imaginative strategy, event though may seem at odds with their traditional role, initially. 

Here is how Unions should approach this:

  • In any group of displaced, redundant or excess assembly line, natural resource, agricultural workers, low, medium or high skilled workers, some are potential entrepreneurs. My rule of thumb is- about 10%. They are potential entrepreneurs, and new job creators, whether they realize it or not.
  • Unions, investors, and government, have an obligation to these workers and their communities to design and implement a transition.
  • There used to be four options.
  • First, wait it out. Live on unemployment compensation, or with relatives, until recovery, then go back to the job.
  • Second, a Federal temporary jobs program, New Deal style. This could succeed if the problem was cyclical, and the jobs would return.  And, if there were political agreement on this approach.
  • Third, relocate. Move to the Sunbelt. There were jobs there. That is not an option now. No region has such a chronic labor shortage, that it can absorb laid off workers from labor surplus regions.
  • Fourth, community and political leaders can chase smokestacks. They can try to attract footloose operations. Offer tax breaks, zoning changes, cash grants, inducements to outbid other locations. Today, that is not a best solution for most communities. It is expensive and communities have weak negotiating positions, and give up too much.

Now, there is a more realistic option. Identify the potential entrepreneurs in the local population, help them learn new business ownership and management skills. Provide quality instruction, help them plan a business, provide start up and growth financing, and ongoing consulting. Do that and they will create a variety of jobs for their neighbors. We know how to do this, but we have not done it, consistently or intensely.

Unions should be helping members, and former members, to start and grow businesses. They should put in place the framework to help train, finance, and continue to assist these new businesses. In return for that assistance, these new business owners will continue as union members. The jobs they create, will also be union jobs, so that would be the quid pro quo.

Unions should be drivers of this kind of entrepreneurial economic development process in any community in decline or at bottom. It is a form of union community responsibility. They can actively help form a more diversified economic base. That will be more meaningful than simple opposition to plant or mine closings. That has been a losing posture in any case.

Mass layoffs should be accompanied by a thorough union led entrepreneurial creation strategy and program. The impacted communities, often relied on one major employer. Now, they can have an economic profile with many more options. Entrepreneurial transition is a way forward.

Richard F. America is Professor of the Practice, Emeritus, School of Business, Georgetown University. Washington, D.C.

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