Beyond Wisconsin, This Could Be the End of Labor Unions

Antiunion protest in WisconsinWith the efforts in Wisconsin and some other states to eliminate or severely limit collective bargaining for public employees, the entire labor union movement in the U.S. is threatened with a potential starvation of funds and a sharp drop in membership. That could have a big impact on labor's voice on everything from the value of China's currency to new laws dealing with worker protections.

"This is a direct assault on the institutional viability of labor unions," says Marick F. Masters, director of the Douglas A. Fraser Center for Workplace Issues and Labor at Wayne State University in Detroit. "This isn't an effort to legislate changes in benefits. This is an effort to rewrite the collective-bargaining laws."

Wisconsin Gov. Scott Walker has proposed a plan that would end collective bargaining for a number of state and municipal workers on retirement pay and on health-care benefits. He also wants to limit the "agency shop" -- where workers covered by union contracts pay either union dues or a fee even if they aren't union members -- and require public sector unions to be recertified on an annual basis.

Ohio is also holding hearings on a bill that would eliminate all collective bargaining for state workers. And New Jersey Republican Governor Chris Christie has introduced measures to require teachers to pay more for retirement and health benefits and has proposed ending their tenure.

A Threat to Democrats

"They have lit a spark that I think is going to spread," Masters says. "There is a lot of public antipathy toward the public sector because they are perceived as being overpaid and underworked." Many public sector workers, for example, receive taxpayer-financed defined-benefit pensions, which have all but disappeared in the private sector as defined-contribution plans such as 401(k)s have taken their place.

The anti-union rhetoric has become so heated in Wisconsin that President Obama on Friday intervened publicly.

"Some of what I've heard coming out of Wisconsin, where you're just making it harder for public employees to collectively bargain generally, seems like more of an assault on unions,'" Obama told a local TV station. Obama is right to worry -- an attack on union membership could weaken labor's financial and political support for the Democratic party.

Many Cops Are Teamsters

If there's a general attack on public unions, it could be a huge setback for the entire labor movement. Since the 1950s, union membership has declined in the U.S. from about 35% of the workforce to about 12% today.

Most of that drop was due to automation in factories or jobs being sent offshore to places like China. At the same time, unions covering public employees grew substantially beginning in the 1960s and now constitute 48.9% of the unionized workforce, according to Amaya Tune, a spokeswoman for the AFL-CIO in Washington.

Not only are public service unions such as the American Federation of State, County and Municipal Employees largely financed by dues paid by covered workers who are not in the union, but some other large unions, such as the Teamsters, also have a large public service membership. The Teamsters is the country's largest police union, and about 300,000 of the Teamsters' estimated 1 million members are in public sector jobs.

Undermining Union Finances

Walker's proposal to end deductions of union dues from state paychecks especially threatens the unions' existence, according to academic experts.

"I think you would see union coffers go down dramatically if they weren't able to keep the agency shop," says Masters. He notes that in the federal government, which is an open shop that can't require payment of dues for covered employees, 70% of the workers don't pay any dues to the unions. If such a change is widely adopted at the state level, it could undermine the finances of many big unions, not just public sector unions.

Organized labor spends some of that money on lobbying efforts in Washington to influence legislation on workplace issues. But unions also lobby Congress and the president on trade issues like the value of the Chinese currency and offshoring of jobs.

Daniel Cornfield, a professor at Vanderbilt University and the editor of the journal Work and Occupation, says another consequence of clampdown on public sector unions would be a widening of the gap in wages between women and men and between racial minorities and whites. That's because women and minorities are disproportionately represented in state and local work forces nationally.

Nonunion Workers Could Also Suffer

"The public sector unions played a significant role in narrowing any wage gaps that exist between races and genders because of who they represent," Cornfield says. "The dismantling of collective bargaining in the public sector could exacerbate the gender gap and the race gap on pay." Cornfield says. He notes that the rise of public sector unions in the 1960s was closely associated with two other trends: the burgeoning women's movement and civil rights movement.

Cornfield also points out that weakening of organized labor could also hurt the wages for the bulk of workers who are now employed in companies that don't have unions. That's because nonunionized companies often will match union benefits in an effort to keep union representation out of their firms. Without that model, Cornfield says, the "wages of the 90% of the labor force that's not unionized" could be threatened.

Learn about investing from the comfort of your own home.

Portfolio Basics

Take the first steps to building your portfolio.

View Course »

Investment Strategies

Learn the strategies you need to build a winning portfolio

View Course »