After a bitter battle, the lawmakers in the US state of Michigan voted to approve a Bill euphemistically called ‘right-to-work’ and the Bill has been signed by the governor. It is a law that guarantees workers’ right to work without being forced to join a union or pay labour dues, even if there is a union in the plant. Union supporters are furious that this is an end to unionism. It isn’t. A worker may still join the union if he wants to, it is only not a requirement.
One-by-one, 23 states have passed such laws, and they are seeing a growth in jobs for employers are more willing to hire when they don’t fear the fury of a union. But it is also true that the average wage has fallen in those states with the right-to-work laws.
The power of unions in the US has been shrinking as a secular trend. With manufacturing in decline (having significantly moved overseas, primarily to China), the traditional power base of the union has been weakened.
Many of the newer work/skill areas do not lend themselves to easy unionisation, such as the ITES sector. In Michigan, it is reported that only 17.5 per cent of workers are union members. (For political reasons, the powerful police and firemen unions have been exempted from the new law.)
When you think about it, unions and management must want the same thing – namely a successful organisation where the pie gets larger. Ironically, how they go about it is by being at loggerheads with each other.
Karl Marx recognised this inherent conflict between unions and management and both groups seem determined to behave in a manner that proves him right. With the objective of protecting jobs and getting the workers a greater share of the pie, unions have tended to ignore the needs of growth of the enterprise, and have preferred to fight towards increasing benefits for those currently employed, dampening job growth.
With the intention of job security, unions have fought for rigid work and compensation rules that have prevented managements from having the flexibility they need to adjust to a changing market place by re-assigning employees. And it is on compensation, security, and work rules that most fights begin.
OBSTINATE MANAGEMENTS
Not to be left behind in being pig-headed, top managements have also worked hard to break the trust and credibility needed to run the enterprise with the cooperation of the workforce. In the past, airlines have filed for bankruptcy because it gives them the tool needed to break union contracts. Managements have also sought to get a greater share of the pie themselves. Look at these two recent examples.
The legislators of the state of Massachusetts quietly approved pay raises for employees of the legislature, and not too long ago, the governor himself gave raises to various managerial level employees of the state. But about the same time, various lower level workers in the area of human services were told that their pay raises have been frozen due to falling tax revenues and shortfall in the budget. Austerity does not seem to apply to the influential.
An even more egregious example is what has been happening to Hostess Brands – a company that has been having a protracted battle with its union and has filed for bankruptcy. Their signature product was a sweet pastry called the Twinkie which is a cake filled with cream.
The product was so popular with children that it was a staple in school lunches till people realised that regular consumption of this item will not be friendly to your arteries. The firm has not been doing well and was negotiating with unions for various concessions.
But at the time when it was seeking cuts from the union, top management compensation was raised significantly. It was just another straw that led to hardening positions and eventual bankruptcy.
These are difficult times for CEOs. They are being asked by shareholders to show growth under difficult economic times. But they are not going to be able to take their staff along the bumpy ride if they add extra cushions for themselves.
The Institute for Policy Studies, a non-profit multi-disciplinary think tank, reports that a group of about 90 CEOs, who have launched an expensive lobbying campaign in the US called “Fix the Debt” advocating cuts in Social Security (a public pension programme) are sitting pretty with theirretirement assets averaging over $9 million (about Rs 50 crore) each.
DOUBLE STANDARDS
How much credibility would this group have when they recommend cuts in benefits for retirees?
Citigroup, the financial services giant, has announced layoffs that amount to about 4 per cent of the workforce.
Everyone knew this was coming, since it is supposed to have been a priority with the Chairman, Michael O’Neill.
But recent announcements do not suggest any new activities or strategies that the bank is initiating – it is just shrinking and cutting staff. That’s ok, and the current global economic situation may demand that.
But firms are usually quick to institute layoffs to shore up a plunging bottom line without simultaneously tightening belts elsewhere, especially at the top. Hopefully, the savings generated from the layoffs do not end up as higher salaries for O’Neill and the top management of the bank.
To go a step further, the top managements of companies need to take pay cuts at the same time as their workers, not because of an old-fashioned notion of sharing the pain, but because they have not done their primary job of coming up with new ideas for growth and profitability, other than salary cuts.
(The author is professor of International Business and Strategic Management at Suffolk University, Boston, US. blfeedback@thehindu.co.in )