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Labor Perspective From Noah Smith, Former Assistant Professor Of Finance At Stony Brook (NY) University: ‘Revive’ The Middle Class By ‘Bringing Back’ Unions - A ‘Crippling Flaw’ In A New Deal-Era Law Governing Unions ‘Needs A Rewrite’

Published Tuesday, November 26, 2019
by Opinion Writer Noah Smith Via Bloomberg
Labor Perspective From Noah Smith, Former Assistant Professor Of Finance At Stony Brook (NY) University: ‘Revive’ The Middle Class By ‘Bringing Back’ Unions - A ‘Crippling Flaw’ In A New Deal-Era Law Governing Unions ‘Needs A Rewrite’

If the U.S. is going to make a big dent in Income Inequality and raise living standards for the Middle Class, it’s going to need a multi-pronged approach.

Higher taxes and more spending on health care will help.

Minimum Wage Laws can raise pay for Workers at the bottom without reducing employment much, but they only benefit a relatively small slice of the workforce.

But something else is needed.

One big idea is to bring back Unions and Collective Bargaining.

Several teams of economists have examined the historical record and concluded Unions were important in reducing inequality.

But although Unions are still important in the Public Sector, in the Private Sector they’ve been almost wiped out.

People argue about the cause of the decline.

Some blame weak enforcement of Labor Laws or the rise of State Right-To-Work (for less) Laws.

Others blame global competition and technology.

But Martin Manley, an entrepreneur who previously served as Assistant Secretary of the Labor Department under Democratic President Bill Clinton, thinks he has the answer.

In a new book titled: A Better Bargain: Organizing Employers and Workers to Grow America’s Middle Class, Manley argues that the U.S. Union System was doomed from the start.

Before 1935, Manley notes, there were several types of Collective Bargaining in the U.S., but the one that ended up being enshrined in law, in the National Labor Relations Act (NLRA), was called Enterprise Bargaining.

Under that law, Workers at each workplace have to vote to Unionize.

If they do, all Workers at that workplace are covered by the Union Contract.

But if they reject the Union - there’s no Collective Bargaining.

This system has a huge downside: competition.

Suppose the Workers at a McDonald’s want to form a Union.

The managers know that if the Workers Unionize, wages will go up and prices for hamburgers at that McDonald’s will rise.

That will put the restaurant at a competitive disadvantage versus the Non-Unionized Burger King down the street, eventually resulting in layoffs.

The managers will make this argument to the Workers, who probably will find it convincing.

If both the McDonald’s and the Burger King could coordinate and Unionize together, competition would be no problem - wages would rise and the profits of the two giant corporations might fall, while consumers paid higher prices for burgers.

But because U.S. Labor Law forces each workplace to act independently on Unionization, they can’t effectively coordinate.

The situation is even worse for companies such as General Motors that face international competition because there’s no way for GM Workers to coordinate with Volkswagen Workers in Europe or Toyota Workers in Asia.

To Continue Reading This Labor Perspective, Go To: www.bloomberg.com/opinion/articles/2019-11-15/revive-the-middle-class-by-changing-law-that-hobbles-unions

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