Robert Samuelson February 19, 2013

The United Auto Workers’ defeat, by a 712 to 626 vote, in its effort to organize Volkswagen’s Chattanooga, Tenn., assemblyplant, has been attributed to many causes: the South’s anti-uniontradition; the outspoken opposition of some local, Republican officials, including Sen. Bob Corker, Chattanooga’s former mayor; and anti-unioncampaigns by conservative groups. But the deeper cause is simpler: Private-sector unions can no longer provide big benefits to members.

On paper, unions can deliver three things: higher wages and fringebenefits; greater job security; and better working conditions, including protection against arbitrary or unlawful management practices. In the1950s and ’60s, unions could win these gains. Now, greater competitionhas eroded their leverage. Workers weighing the reduced advantages ofbeing unionized must also consider the possibility that high-priced,rigid union labor might one day cost them their jobs. In Chattanooga,this calculus went against the UAW.

Unions’ eclipse has been stunning. At the end of World War II, roughly a thirdof private-sector jobs were unionized, especially in large firms. By2013, the comparable figure was 6.7 percent, says the Bureau of Labor Statistics. (The rate of unionization for allworkers was 11.3 percent, but that figure resulted only from greaterunionization — 35.3 percent — among government workers. As late as 1983, the total unionization rate was 20 percent.)

What bolstered unions after World War II was the dominance of Americanbusiness. Companies faced little or no competition. In autos, the BigThree (General Motors, Ford and Chrysler) had almost all the market.American Telephone & Telegraph enjoyed a near-monopoly of phoneservice. Government regulatory agencies restricted competition amongairlines (the Civil Aeronautics Board) and truckers (the InterstateCommerce Commission) by limiting the number of companies that couldprovide service on any route.

Together, modest competition and technological superiority produced what economists call “rents” — excess returns that could go to shareholders (in higher profits),workers (in higher wages and fringes) and consumers (in lower prices orhigher-quality goods and services). Labor-management bargainingdetermined how much of the rents workers would receive. Unions’influence also extended to many nonunion firms — say, IBM — thatimitated union benefits, at least in part, to avoid being organized.

But the system broke down in the 1970s and ’80s under pressure fromnonunion domestic firms (Wal-Mart), foreign companies (Toyota) and newtechnologies (Microsoft). Government deregulation of airlines, trucksand telecommunications intensified competition. “Rents” — the system’slinchpin — faded and vanished. Prodded by Wall Street, companiesincreasingly focused on cost-cutting to protect profits. Business became more hostile toward unions. Older, heavily unionized firms grew slowlyor not at all; unions had little success in organizing newhigh-technology sectors.

The upshot: Private-sector unions lost their power to protect jobs andraise incomes. Unions were caught in a vise. If they pressed for higherwages and fringe benefits, they risked destroying jobs. Companies mightlose sales to lower-cost rivals; or they might move to anti-union states or low-wage countries. Even protecting existing compensation levelsbecame hard because — in extremis — companies might fail. On the otherhand, if unions abandoned traditional bargaining goals, they mightinfuriate rank-and-file members and be accused of “selling out.”

The UAW saw the Chattanooga vote as a chance to emphasize a morecollaborative and less confrontational model, embracing the mantra thatcompanies survive only by staying competitive. “With every company thatwe work with,” said UAW President Bob King, “we’re concerned aboutcompetitiveness.” By finding efficiencies, the idea is to “have higherwages and benefits” paid from the fruits of cooperation. ThoughVolkswagen was officially neutral in the vote, it seemed to support theUAW because it wants to establish a “works council” with workers toimprove operations, as in Germany. Under U.S. law, a works council seems to require union representation; otherwise, it might be considered an illegal company union.

A works council may be worth trying, but whatever its virtues, they wereovershadowed by the UAW’s past. Hardly anyone doubts that high laborcosts and obsolete work rules contributed mightily to the crackup of the Big Three. VW’s workers recoiled; they kept the status quo. For theUAW, success in one era sowed failure in the next.

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