Strikes at General Motors, an American corporate icon, are a big deal. Last week’s walkout by the United Auto Workers’ union, the first in 12 years, made global headlines and a big political statement about the resurgence of organised labour activity in America.
The recent strike by British Airways pilots might have resulted in fewer headlines in the US (though it arguably caused more customer pain, grounding 1,700 flights), but both disputes reflect a trend that global businesses had better start getting used to: the rebirth of labour as a political and economic force.
No prizes for guessing why this is happening now. In the US, organised labour, which had declined by both membership and activity over the past several decades, is back because large numbers of people are fed up with soaring inequality, retirement insecurity (fewer than half of employees have access to a company pension scheme), rising costs for healthcare that is relatively poor by global standards and a sense of economic vulnerability.
According to a 2018 Federal Reserve Board study, 40 per cent of Americans would have to borrow or sell something to cover a $400 emergency expense. One in five knows someone addicted to opioids or pain killers. No wonder the Fed is worried about an economic recovery predicated on the wellbeing of consumers.
Many will argue that well-paid airline pilots and unionised auto workers have little to complain about. Some might even see such actions as the last gasp of an old-style labour movement that has been mostly swept away by globalisation, financialisation and now the digital economy. But they would be wrong.
It’s not just old, white or more comfortable workers who are striking. Younger, multicultural, underemployed millennials have been behind the recent gains in union membership. The Fight for $15, a move to organise low-wage workers in areas like fast food and retail, began seven years ago in New York and has spread nationwide to become an important political force. The SEIU, one of the labour groups behind the movement, is calling on all Democratic 2020 candidates to get behind a “unions for all” platform that would make it easier to organise people in services industries and the gig economy.
Meanwhile, the Freelancers Union, which caters to white-collar professionals, like photographers, writers and graphic artists, has also gained membership and political clout. Interestingly, the movement has traction among younger conservatives as well as liberals; half of conservative millennials support unions, compared with about a quarter of older Republicans.
The economic woes of millennials, who live with their parents in record numbers because they can’t afford to pay down student debt and buy a home at the same time, are among the many reasons that support for trade unions recently climbed to a 15-year high in the US. Given current politics and demographics, this is a trend that will not subside any time soon.
What does this mean for business? In the short term, pressure on profits, particularly in the technology sector. In California, the recent passing of a law making “gig economy” workers such as ride-sharing drivers into full-time employees could increase costs for companies like Uber and Lyft by as much as 30 per cent.
They will fight the legislation, but it’s not a good look. In our “knowledge” economy, a huge chunk of corporate value is held in human capital. That means that worker satisfaction and wellbeing could become an issue that investors care about.
The CtW Investment Group, which works with union-sponsored pension funds that have more than $250bn in assets under management, began raising concerns late last year about the management of human capital at 30 companies, among them a number of Silicon Valley giants including Google and Uber.
Meanwhile, the market itself may do some of the work of resetting the power dynamic between capital and labour. One of the reasons I think we haven’t seen more strikes already — given that the labour share of the national pie has been declining in most G20 countries since the 1980s — is that asset prices have risen considerably in that time, offsetting stagnant wages for some.
Many Americans have based their retirement calculations on the high returns of the past. But I think we are at a major market inflection point, and that the S&P index funds where most of us have parked our life savings will have much lower returns in coming years than in the past.
An asset price collapse and a lasting period of low returns would bring a looming pensions crisis to the top of the political agenda. That would, in turn, force us finally to reckon with an economic model that has put the interests of capital before workers for far too long. Wealth creation and wealth distribution, after all, come in cycles. At some point, the pendulum must shift.
I would argue, given recent emergency liquidity action by the Fed, that we are due for a swing away from a financially orientated economy to one driven more by income growth. It is a shift that could make the US economy less volatile and more robust. That is something that both workers and management should cheer.
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