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Labor Unions Should Transform to Producers’ Ownership Unions
Recently there have been numerous articles addressing the scope of problems related to our dependency on job creation as the ONLY source of income and a wanting reliance on labor unions to realize that end. But universally, the authors are oblivious to the non-job-dependent solution. Simply increasing wage levels and extending jobless benefits once again won’t solve the problem of long-term unemployment and underemployment, and the diminishing impact income losses have on the long-term productive capacity of the United States economy.
The common thread of articles that address unemployment and underemployment are solutions that would build an American society of dependent citizens on tax extraction and national debt to provide social insurance to replace wages lost through unemployment and underemployment.
The labor union movement traditionally played the role of protecting worker interests in terms of job security, wage levels, working conditions, and social insurance benefits. Yet union leaders have been experiencing a steady deterioration of support for unionization principally because of the uncertainties that corporate owners/employers will eliminate their jobs and replace them with more efficient, less costly technologies.
As a result, the trend has been to diminish the importance of employment with productive capital ownership concentrating faster than ever, while technological change makes physical capital ever more productive. Technology is an easier and faster way to get a job done. Because technology increases the profitability of companies throughout the world, technology always has the advantage over human labor when the costs of them are the same. But because this is not well understood, what we as a society have been doing is to continually shift the work burden from people labor to real physical capital while distributing the earning capacity of physical capital's work (via capital ownership of stock in corporations) to non-owners through jobs, minimum wage, and social insurance welfare programs. Such policies do not function effectively.
This reality was brought to the forefront of national attention after the United Auto Workers Union’s devastating defeat at a Chattanooga, Tennessee Volkswagen plant.
“We are committed to helping those workers in the South raise their wages, get better working conditions and get a stronger voice on the job in making decisions that affect their livelihood,” said Richard Trumka, President of the AFL-CIO. Trumka, during a meeting with the executive council of his coalition representing 56 unions and 12.5 million workers, said that this year looks as gloomy as any in recent memory.
The unionists were lamenting the narrow decision by workers (712 to 626) at the auto plant to reject joining the United Auto Workers, even though Volkswagen did not oppose unionization. The plant was considered labor’s best chance to gain a foothold in the South.
According to data from the Bureau of Labor Statistics, Union membership stands at 11.3 percent nationally, down from 20.1 percent in 1983. This downturn will continue to marginalize labor’s position in an economy where the non-human factor of production, productive capital, is the factor that is exponentially becoming more productive, not labor. While this is the reality, Trumka’s AFL-CIO has focused ONLY on raising the minimum wage and improving the workplace for all employees. Neither social policy will be enough to effectively help labor in the future nor make jobs more secure.
Trumka, who speaks in rhetoric tongue, offers no concrete proposals. He and his cohorts remain stuck in the “one-factor” labor context of producing products and services. Can he and his cohorts be blind to the reality that fundamentally, economic value is created through human and non-human contributions? He cannot be oblivious to the obvious fact that the role of physical productive capital is to do ever more of the work (not labor), which produces income, or can he?
Full employment is not an objective of businesses. Companies strive to keep labor input and other costs at a minimum in order to operate efficiently and profitably. Private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role and productiveness. Over the past century there has been an ever-accelerating shift to productive capital––which reflects tectonic shifts in the technologies of production, while our human abilities are limited by physical strength and brain power––and relatively constant. Yet the labor union movement is fundamentality built on bargaining with the corporate owners for more wages for the same or less work.
If Trumka is sincere and really wants to benefit working peoples’ interests then he should lead the labor union movement and transform it to a Producers’ Ownership Union movement and embrace and fight for ownership participation. Unions should play the part that they have always aspired to––that is, a better and easier life through participation in the nation’s economic growth and progress. As a result, labor unions will be able to broaden their functions, revitalize their constituency, and reverse their decline.
Amazingly, the reality is that technological invention and innovation is intensely utilized in the manufacturer of vehicles (and most manufactured products), yet the workers and their union representative advocates fail to realize that what they should be organizing and fighting for is OWNERSHIP in the future non-human productive capital assets of their companies. IF THEY DON’T, they will eventually, sooner than later, be replaced by more of the machines and productive capital “tools” and the invisible digital computerized processes that run them.
While VW's investment of about $7 billion in North America over the next five years represents a lot of job creation, it also is a LOT of productive capital investment represented by new plant and equipment. Unless the workers organize their union to be an Ownership Producers Union, they will not have a chance of sharing as employees in the ownership of this new economic growth, and instead will end up bargaining for serf wages and servitude, while constantly being faced with the threat of losing their jobs to further super-automation and robotic tools that lower costs of production and increase profits to the present owners of VW.
If the workers and their representatives were smart, they would organize as a Producers’ Ownership Union and demand not increased wages and benefits but employee ownership participation with full-dividend payout and full voting-rights.
Unfortunately, at the present time the movement is built on one-factor economics––the labor worker. The insufficiency of labor worker earnings to purchase increasingly capital-produced products and services gave rise to labor laws and labor unions designed to coerce higher and higher prices for the same or reduced labor input. With government assistance, unions have gradually converted productive enterprises in the private and public sectors into welfare institutions. Binary economist Louis Kelso stated: “The myth of the ‘rising productivity’ of labor is used to conceal the increasing productiveness of capital and the decreasing productiveness of labor, and to disguise income redistribution by making it seem morally acceptable.”
Kelso argued that unions “must adopt a sound strategy that conforms to the economic facts of life. If under free-market conditions, 90 percent of the goods and services are produced by capital input, then 90 percent of the earnings of working people must flow to them as wages of their capital and the remainder as wages of their labor work...If there are in reality two ways for people to participate in production and earn income, then tomorrow’s producers’ union must take cognizance of both...The question is only whether the labor union will help lead this movement or, refusing to learn, to change, and to innovate, become irrelevant.”
Kelso also was quoted as saying, “Conventional wisdom says there is only one way to earn a living, and that’s to work. Conventional wisdom effectively treats capital (land, structures, machines, and the like) as though it were a kind of holy water that, sprinkled on or about labor, makes it more productive. Thus, if you have a thousand people working in a factory and you increase the design and power of the machinery so that one hundred men can now do what a thousand did before, conventional wisdom says, ‘Voila! The productivity of the labor has gone up 900 percent!’ I say ‘hogwash.’ All you’ve done is wipe out 90 percent of the jobs, and even the remaining ten percent are probably sitting around pushing buttons. What the economy needs is a way of legitimately getting capital ownership into the hands of the people who now don’t have it.”
Unions are the only group of people in the whole world who can demand a real, justice-based Kelso-designed Employee Stock Ownership Plan (ESOP), who can demand the right to participate in the expansion of their employer by asserting their constitutional preferential rights to become capital owners, be productive, and succeed. The ESOP can give employees access to capital credit so that they can purchase the employer’s stock with the earnings of capital, pay for it in pre-tax dollars out of the assets that underlie that stock, and after the stock is paid for earn and collect the capital worker (owner) income from it, and accumulate it in a tax haven until they retire, whereby they continue to be capital workers receiving income from their capital ownership stakes. This is a viable route to individual self-sufficiency needing significantly less or no government redistributive assistance.
The unions should reassess their role of bargaining for more and more income for the same work or less and less work, and embrace a cooperative approach to survival, whereby they redefine “more” income for their workers in terms of the combined wages of labor and capital on the part of the workforce. They should continue to represent the workers as labor workers in all the aspects that are represented today––wages, hours, and working conditions––and, in addition, represent workers as full voting stockowners as capital ownership is built into the workforce. What is needed is leadership to define “more” as two ways to earn income.
If we continue with the past’s unworkable trickle-down economic policies, governments will have to continue to use the coercive power of taxation to redistribute income that is made by people who earn it and give it to those who need it. This results in ever deepening massive debt on local, state, and national government levels, which leads to the citizenry becoming parasites instead of enabling people to become productive in the way that products and services are actually produced.
When labor unions transform to Producers’ Ownership Unions, opportunity will be created for the unions to reach out to all shareholders (stock owners) who are not adequately represented on corporate boards, and eventually all labor workers will want to join an ownership union in order to be effectively represented as an aspiring capital owner. The overall strategy should assure that the labor compensation of the union’s members does not exceed the labor costs of the employer’s competitors, and that capital earnings of its members are built up to a level that optimizes their combined labor-capital worker earnings. A Producers’ Ownership Union would work collaboratively with management to secure financing of advanced technologies and other new capital investments and broaden ownership. This will enable American companies to become more cost-competitive in global markets and to reduce the outsourcing of jobs to workers willing or forced to take lower wages.
Kelso stated, “Working conditions for the labor force have, of course, improved over the years. But the economic quality of life for the majority of Americans has trailed far behind the technical capabilities of the economy to produce creature comforts, and even further behind the desires of consumers to live economically better lives. The missing link is that most of those unproduced goods and services can be produced only through capital, and the people who need them have no opportunity to earn income from capital ownership.”
Walter Reuther, President of the United Auto Workers, expressed his open-mindedness to the goal of democratic worker ownership in his 1967 testimony to the Joint Economic Committee of Congress as a strategy for saving manufacturing jobs in America from being outcompeted by Japan and eventual outsourcing to other Asian countries with far lower wage costs: “Profit sharing in the form of stock distributions to workers would help to democratize the ownership of America’s vast corporate wealth, which is today appallingly undemocratic and unhealthy.
“If workers had definite assurance of equitable shares in the profits of the corporations that employ them, they would see less need to seek an equitable balance between their gains and soaring profits through augmented increases in basic wage rates. This would be a desirable result from the standpoint of stabilization policy because profit sharing does not increase costs. Since profits are a residual, after all costs have been met, and since their size is not determinable until after customers have paid the prices charged for the firm’s products, profit sharing [through wider share ownership] cannot be said to have any inflationary impact on costs and prices.”
Unfortunately for democratic unionism, the United Auto Workers, American manufacturing workers, and American citizens generally, Reuther was killed in an airplane crash in 1970 before his idea was implemented. Leonard Woodcock, his successor, never followed through, nor has any other labor leader since, including Richard Trumka, President of the AFL-CIO.