The Rise of Labor Unions

(upbeat music) - A recently released Gallup survey reveals 71% of Americans now approve of labor unions.

It's the highest approval rating since 1965.

Gallup concluded the pandemic is the reason.

A Grand Valley State University professor argues the reason is a shift in generation demographics that just so happened to coincide with the pandemic.

We take a closer look at historical trendlines and the impact on labor on "West Michigan Week."

Found within Gallup's 2022 annual Work and Education survey is the rebirth of labor unions.

Labor union support was at its peak in the 1950s with 75% approval.

It dipped below 50% in 2009.

Now nearly three out of every four Americans approve of unions once again.

Why has its popularity grown?

And joining us now to explore the issue and why is Dr. Paul Isely, Associate Dean in the Seidman College of Business at Grand Valley State University.

How are you?

- Pretty good - Unions, I thought they were gone but they're back.

- Well, there's always a need from a labor perspective to have some negotiating power with the management perspective.

And that has never gone away.

It's just evolved through time.

- And timing is everything here.

I had an opportunity to sit with you in your office last week.

You took me through this, and it's quite interesting.

So Gallup is saying one thing, but you're saying there's history, and we see how generations and something called an echo impacts all of this.

Yeah, so as we were talking to people seven years ago, we were telling them that the 2020s would be the decade of labor: that they were going to see more unionization attempts; they're gonna have to pay higher wages.

And that that was going to accelerate as we went through the 2020s.

That was long before we had heard of anything called COVID or the Ukraine.

And those things created some momentary blips, but they haven't changed the overall trajectory.

And really what's been happening here as we've gone through this decade, is that the millennials have moved through.

So we all know the name millennial because there's so many of them.

There's a big pile, and everybody's interested in the millennials 'cause of the sheer density of people that are there.

So the last of that group was born in the middle of the 1990s, and they first was born in the early 1980s.

And that group had shifted along as we went through time.

So what's happened most recently is that during the early part of the 2000s, all of them were entering the labor force.

And they were entering the labor force As young workers.

young workers are the ones who get paid the least and the ones that are in lowest-skilled jobs.

Also the jobs that tend to have the greatest ability to unionize.

Or they have the greatest benefit from unionizing.

So what's happening here?

In that timeframe, there were so many of them that it bid down the wage.

And so they were paid less and less compared to people in higher income ranges.

And by the time we reached 2014, '15, that group had moved through.

And then instead of that baby boomer echo which was the millennials, we had the Gen X echo which are the Gen Zs.

So these are the children, the Gen X, and there aren't many Gen Xers.

And so there's not many Gen Zers in comparison to the millennial group.

So now all of a sudden labor's becoming scarce, and that's starting to bid up the wage.

It's starting to result in people having to work longer hours to do the same stuff.

And that tends to also lead to labor power and the desire to unionize.

- It wasn't that long ago, Paul, and it seems like it was before the pandemic.

It seems like the pandemic is this marker.

We can get into some of that.

But before the pandemic, it seemed like we had so many workers.

And so it seems like the pandemic created this.

You're saying no, but why is there such a shift so quickly?

- Well, it's a shift so quickly because we reached the end of that Millennial generation.

At the same time we have the baby boomers retiring.

So the combination of those two things really starts to reduce the entire size of the possible labor force.

Now, COVID resulted in that labor force shrinking a little bit because we forced some retirements forward.

And a few people decided that maybe it's not the right time to work.

But that's already getting erased, and we're already seeing those people come back to work.

So realistically, COVID was a three-year blip as far as our economy is concerned.

It's changed some attitudes.

It's changed some ways we view things, but it hasn't changed that fundamental issue of we're not gonna have enough workers to maintain the growth that we've had.

- And you talk about change.

We're all changing the way we work.

I mean, there was a time you and I would've had this via Zoom.

We would've recorded it and broadcast a Zoom interview.

But you're back, and that's a good thing.

but there is a lot of change.

What has changed through the pandemic in the workplace, and when it comes to the lower-skilled worker?

- So since we have fewer young workers, we have fewer workers competing for that: semi-skilled, low-skilled jobs.

And as a result that starts to bid up the price.

And what we've really seen is already starting in 2014, those low-wage workers were starting to gain wages faster than those at higher-wage levels.

So that's changed the game.

That's changed how that perception happens.

But it did another thing.

It also resulted in not enough workers in the workplace.

So what happens?

Each worker has to do more things, and it becomes more difficult for that worker.

And they have to do things that they didn't have to do before.

That starts them saying, "Hey, I need to find a way to bring my work back into scope.

And I need to bring it back into scope so that I have a quality of life."

That's when you start to see more unionization; when we start to run workers too hot and there's not enough of them.

And that's what we have right now.

The economy was running too hot and there were not enough workers to keep it there.

So what we've seen most recently is the productivity of workers has started to drop.

That means we're starting to get more workers for each piece that we're making.

And that's gonna start to take some of the push off of this in the coming few years.

- And we've seen Amazon, Apple, Starbucks, last week the Chipotle in Lansing became the first of that chain to unionize.

So in this Gallup survey, Gallup says the National Labor Relations Board has reported a 57% increase in union election petitions filed during the first six months of 2021.

- Right.

And that's because workers have figured out that there's not enough workers to replace them.

So if you go back to the 1990s, if somebody had tried to move down this path, there's a chance that they might have lost their job.

And there would've been no other job for them to get to.

And their job would've been replaced by other people.

That threat's not here at this point, because if you leave your job, there's not enough workers to backfill.

And that increases the ability of workers to strike and workers to collectively bargain to try and get a better work environment for themselves.

- So labor is tiered.

We're talking about the lower-skilled workers here.

So take me through the bottom end, the middle, the top.

What are the percentages and how do they all interplay here?

And we can get into wages, because it sounds like the bottom is where the wages are increasing.

- The wages at the bottom have been keeping up basically with inflation.

So if you look at that bottom quartile, you really see a hockey stick here in the last few years as there wasn't enough workers to take on the types of jobs that are in that lowest quartile.

And that's now bled into the next quartile.

So the bottom 50% now are growing much faster than wages in the top 50%.

That's partially because people in the top 50% have a different baseline: they have higher wages.

So the same dollar increase doesn't have the same percentage increase.

But it's also because those millennials have now moved up, and they're now up into those higher-income jobs.

And there's this big pile of millennials now who are vying for those jobs as engineers, as production managers, as lawyers.

And that's taken the heat off of those wages that used to be growing very quickly in the 1990s.

- So how is this impacting the typical business owner who's hiring this younger demographic?

And then how is that impacting the consumer?

- Well, that's rolling up into part of the inflation that we're seeing now.

So that inflation has lots of different drivers, but one of the things that has made it more enduring than inflation increases we've seen in the last 30 years is that it started to affect labor.

And it started to affect how that moves through.

So most things are at least partially made from labor; somewhere between 25 and 30% of the activity is through labor.

And so that results in that wage increase then affecting the overall prices we have to pay.

Now, it does another thing.

It also makes it more worthwhile for the business to switch to using what we call capital.

That might be a robot; that might be an AI system.

And as a result, we now see businesses spending a lot of time trying to find ways to use less labor because that labor's becoming more expensive.

So you reach a point where labor will price itself high enough that it's now worthwhile to use something other than that labor to do it.

And we've all experienced that when we've gone out to eat and have to scan a QR code to get our menu.

We've all seen it when we've gone to the bank.

And we now have to use the ATM because there's not a teller.

And we've all seen it in other places as well where we don't get the service that we used to get.

And that's businesses replacing that labor with other means to get the job done, because labor has now made it cost effective to do this other thing.

- How will this work?

You touched on it earlier about Gen Xers, right?

They're the parents of Gen Z.

Where are we in population in this country?

What's the trendline there?

- So what we're seeing right now is the workforce is decreasing.

So this entire demographic trend is also the reason why economists get very scared about the 2030s.

That we have this growing body of people who are no longer doing productive work.

So they've retired or they're younger people, which will now be the Millennial echo which will give us our next small bump in the 2030s on the bottom side.

But think about this.

If we have all of these people moving into non-productive piece, we now have, as we look at 2030, probably going to have more people being retired or in high school than are working.

That means that there'll only be one worker to support everybody who's not working, for each person who's not working.

That's not enough to maintain things like Social Security.

So it's one of the reasons why we start getting worried about the 2030s is because the demographics are so bad going forward.

- So when you look at jobs available now, is it two for every one?

I mean, you know the numbers better than I do.

Is that where we are right now when we're looking at job openings?

- Yeah, if we look at job openings, yeah.

So job openings, we were two for one for a bit here.

It's now been shrinking.

So we're now starting to have less and less in that group.

And what we're starting to see right now as the economy cools is that we're starting to see what we call misemployment or underunemployment.

So workers are taking jobs that are different than the job that they want, which they haven't had to do in quite a while now.

And so that's a resulting in workers doing things that they don't like doing.

Workers doing jobs that are below their skill set.

And that results in a misallocation of labor.

So we're starting to see that now as the economy starts to cool.

- I thought we were at a point where this was the opportunity to find the work you wanted.

- Well, it was, but you couldn't wait forever.

And so we saw a lot of people switch jobs over the course of the last year.

And they moved up and they got much higher wage gains because they switched jobs and moved around.

It was really exciting times.

It actually moved us into a better allocation of labor than what we've had before.

But now we're to a point where things are starting to slow down.

And it's starting to see layoffs.

We're starting to see hiring freezes.

We're starting to see businesses say, "Hey, I'm not sure."

And that's starting to slow things down.

And the only reason we haven't seen unemployment go up is because we were that short in labor going into this year.

- Before we switch to the labor market and potential for the R word, recession, what are some of the labor law challenges that...

I mean, forming a union is no simple proposition.

- No, it takes a lot of organization.

It takes a really dedicated group of people to continue moving the ball forward to create a union.

And that requires that they follow a whole set of processes.

Right now it's a little easier because of who controls the National Labor Board.

So it's a little easier now than it would've been four years ago.

But it still requires that people go through these hoops.

They have to be aware of these hoops.

They have to be dedicated to go through them.

To be that motivated, something has to be wrong in what you're doing in your workplace.

So you're unhappy for some reason or you feel that the world is unfair in some way.

So some of what's been going on is people have been saying how unfair it is for a while now.

And that's building up people's desire to say, "Hey, we need to shift some of this income to different groups of people."

- Is the unfairness that there just aren't enough people?

And so those who are working or doing, they're multitasking essentially.

- Yep, so right now if you have a job, chances are, let's just use a restaurant.

If you're waiting tables, you're probably waiting more tables every night and having to keep up with more customers.

You're having to do more double duty, maybe busing your own tables.

And all of that decreases the quality of the job that you're in, the quality of the time that you're there.

And you're having to be on the entire time you're there.

Since you're having to be on, that gets very tiring over time.

And it reaches a point where you say, "I can't do that anymore.

I'm burning out."

And so one of the reasons why we're seeing the burnout numbers so high right now is people have been having to work double duty in many cases in order to keep the businesses functioning.

- So does this lend itself then to, when we talk about unions, the word strike does come up.

Is there potential for more of that taking place?

- Yes, and it's going to be that way certainly for the rest of this decade, that the power of a strike increases when there's not an ability to backfill, or that business is already running full-out.

Then if you lose workers to a strike, you can't backfill it with management and other things.

So what it's done is because of how tight the labor market is, it's made the tools that labor organizers use and labor unions use much more effective.

- What pushback is there on the corporate side to all of this?

How can a corporation say, "Hey, wait a minute."

They might not be union friendly.

How can leadership step in and create change?

- Well, leadership has to be figuring out where their workforce needs to be.

There's things they can do and things they can't do.

But they need to make sure that labor feels respected, that they feel part of the solution.

And that they feel that somebody cares for them.

And if they're working really, really hard and they see their manager not, that starts to happen.

If they complained about something not working, and they've complained over and over and it's never been changed, then they start distrusting what management is going to do.

So what we see management trying very hard to do right now is figure out what things do their workers actually need.

Do they want more flexible work time?

Do they want higher salaries?

They want all these things, of course.

But what mix of them can they afford to give to the workers?

And then there's the concept of what's the fair share between labor and capital.

And in this case, often that shows up in stock buybacks.

So I think that you'll see more firms using dividends as opposed to stock buybacks because it doesn't have that same effect of saying, "Hey, I'm shifting income to stockholders."

- A strong labor market which is where we are now.

And there's this balancing act with high inflation, the Federal Reserve raising interest rates to try to tame inflation, and being careful of the soft landing.

We talk about the soft landing So we don't trigger the recession.

When you see a strong labor market the way it is and all the other dynamics, where do you see us landing in all of this?

- Yeah, that's a really tricky thing right now.

Because almost every marker we have looking at these things now says we should be having a recession except for the labor market.

So the labor market is still showing strength.

It's weakening now, but it's still showing more strength than it should given how weak housing is.

Think about this.

We went from a four-month supply of new houses to a nine-month supply of new houses in three months.

That's breakneck speed.

And normally when we get to that level, we have a recession.

Not normally, every single time we've ever reached that level we have a recession.

We have inverted yield curves, another sign of a recession.

We're seeing productivity starting to drop: another sign of a recession.

And I could tick them off and tick them off and tick them off.

So the question is how long can the consumer continue to support purchasing things to keep this labor market strong?

And a lot of that has to do with the residual of savings that they have coming out of the pandemic.

There was a lot of government support, and there was no place to spend your money.

So the wealth of Americans went up by quite a bit.

Their balance sheets look amazing compared to what they did five years ago.

But they're starting to burn through that.

They're continuing to purchase even though prices are going up.

And we're just now starting to see that starting to bite.

That's when we'll know that we are getting to a recession, When people have to pull back more than just shifting from Macy's to Target or Target to the dollar store.

They're making those shifts, and now they're running out of money.

We think that will happen in the third quarter.

- You've also been keeping an eye on industry.

You talked about housing, the housing market.

You looked at the automotive industry here in our state.

Has the Federal Reserve overplayed its hand at this point?

I know that you follow this all the time.

- Yeah, the increase in interest rates are decelerating the economy very quickly.

It hasn't shown up in the price side quite yet, but it will.

So you have to start wondering when do they have to stop increasing interest rates.

And what they're telling us right now is they're not going to.

They're going to keep increasing it because they still see price pressures.

But we've already seen the number of cars being purchased not increase, maybe decrease a little bit.

We've seen the stock of cars in storage starting to increase even though it's still at a historic low.

And so that tells us even though the automotive market is slowed down, even though there's lots of people whose cars are now two years older than they thought they were gonna be when they were buying a new car.

So we've already seen that.

We've seen it affect every single place where we have interest-sensitive things.

And that's going to lead to probably reductions in some prices as we get into spring in construction.

It's going to result in easier ability to find subs subs for construction, in easier ability to find subs subs for construction Because by that time the unemployment numbers will start catching up.

the unemployment numbers will start catching up.

You had mentioned what you're seeing now and then looking into the 2030s.

What is it about the 2030s that concerns you the most?

- Well, what concerns me the most is we won't have enough workers combined with the number of people who are no longer working.

That puts a lot of pressure on the federal government for healthcare spending, for retirement spending, for making sure that people have food, clothing, and shelter.

that people have food, clothing, and shelter.

And at the same time that we're carrying forward from right now, from the pandemic spending that we've done and from some of the other spending that we're looking at.

And that's gonna start to catch up with us in the 2030s.

So all that tells us is we won't have enough workers, that it will slow down the growth; slower growth means less tax increases, less tax collected, and that's going to make it harder and harder for them to maintain those social safety net.

And that could lead to big problems in the 2030s.

- Dr. Paul Isely, Associate Dean in the Seidman College of Business at Grand Valley State University.

Always a pleasure.

I feel like I'm in your classroom.

- Well, it was a fun conversation today.

- Well, let's hope things start to slow a little bit and we get back on the right footing.

Thanks again.

I appreciate your time.

- Awesome.

Thank you.

- And thank you for joining us.

We'll see you again soon.

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