Monday, May 16, 2011

The problem with unions and consequences for the ALP

I doubt that I could ever be a proponent for unions; it’s the way I’m wired, sure they had place in the past but today? I find the arguments in favour of them old; that unions help ensure that workers are treated fairly and equally, that unions also give workers a voice in workplace decisions that affect their lives through negotiating a contract with their employer, that unions give working people a real sense of their own power and so on.

I am perfectly adept to negotiating on my own behalf in preference to a collective agreement that brings me down to a lower more common denominator. Cast me aside though, unions cost a company both directly and indirectly, through slower work processes, lower productivity and poor employee relations. As the Heritage Foundation put it some time ago:

Unions and the economy

... unions function as labor cartels. A labor cartel restricts the number of workers in a company or industry to drive up the remaining workers' wages..... Companies pass on those higher wages to consumers through higher prices, and often they also earn lower profits. Economic research finds that unions benefit their members but hurt consumers generally, and especially workers who are denied job opportunities.

... The average union member earns more than the average non-union worker. However, that does not mean that expanding union membership will raise wages: Few workers who join a union today get a pay raise ... Economists consistently find that unions decrease the number of jobs available in the economy. The vast majority of manufacturing jobs lost over the past three decades have been among union members--non-union manufacturing employment has risen. Research also shows that widespread unionization delays recovery from economic downturns.

Some unions win higher wages for their members, though many do not. But with these higher wages, unions bring less investment, fewer jobs and higher prices. Economic theory consequently suggests that unions raise the wages of their members at the cost of lower profits and fewer jobs, that lower profits cause businesses to invest less ...

... unions contracts compress wages: They suppress the wages of more productive workers and raise the wages of the less competent. Unions redistribute wealth between workers. Everyone gets the same seniority-based raise regardless of how much or little he/she contributes, and this reduces wage inequality in unionized companies... But this increased equality comes at a cost to employers. Often, the best workers will not work under union contracts that put a cap on their wages, so union firms have difficulty attracting and retaining top employees ...
The good news is that union density in Australia peaked in the late 1940’s and today it’s a shadow of itself with less than 20% of the workforce belonging to unions in the public sector while over in the private sector the figure is less than 10%.

Blue collar to aspirational and consequences for the ALP

What factors have driven this decline? You may be surprised to learn that it has little to do with big business or the corporate sector or in fact, conservative politics.

Instead those that refer to themselves as blue collar or working class have declined in numbers over the past 50 years and with this, the values that come to define this group has also declined.

Think about how many manufacturing jobs have been lost since the early 70’s in addition to the impact of IR and economic reforms over the past 20 years - reforms set in motion by economic and IR changes initiated by the Hawke-Keating Labor government in 1983.

With the economy changing, blue collar workers have also changed having become increasingly more aspirational. This change is most evident in their behaviour. In my own unionised workplace I often here my colleagues refer to their rental properties and share market activities, these being just two behaviours normally associated with the professional middle. With the latter group now becoming the numeric majority, it is little wonder Julia Gillard and Wayne Swan are having difficulties selling their latest budget with surveys showing that nearly 50% rejecting the notion that a family on $150,000 is rich.

This cultural change alone has adversely impacted on the ALP’s fortunes as firstly, the party was founded on this disappearing blue collar voter and secondly, the union movement has historically been the ALP’s ideological and financial base.