Election could help fulfill union dream, management nightmare

By J. Patrick Coolican, Megan McCloskey, Michael Mishak

Sunday, Oct. 19, 2008 | 2 a.m.

Around here it’s called “The Las Vegas Dream.”

It’s a job with a good wage, health care for the family and dignity in retirement. And even with the recent downturn, tens of thousands of people from across America and around the world have come here to own a little piece of it.

Culinary Union Local 226, which represents more than 50,000 workers on the Las Vegas Strip and downtown, can claim a share of the credit for Southern Nevada’s robust middle class.

It is a story traced to 1989, when casino mogul Steve Wynn agreed to recognize the union at the Mirage — and at each of his successive properties — through the “card check” system, in return for some concessions. The card check allowed the union to organize Wynn properties by having workers simply sign a card saying they wanted to be in the union, rather than going through the cumbersome — and often unsuccessful — process of a secret ballot election. Labor advocates say employers use an election campaign to threaten or fire workers to kill support for the union. Business says the process protects both parties’ freedom of speech and the democratic principle of the secret ballot.

Within two decades, the union had won the same right from every other Strip property, save the Venetian.

With each passing year, tourists streamed into new resorts, union rolls swelled, profits grew, wages climbed.

Labor leaders from across the country now view Las Vegas with jealous eyes and have made codifying the card check system into law their top legislative priority, hoping to export the Las Vegas system to the rest of the country.

That dream, which was far-fetched just a few years ago, is close to becoming reality. Democratic presidential nominee Sen. Barack Obama supported legislation, called the Employee Free Choice Act, when it came up for a vote in 2007, and he has promised to sign it if he’s elected president.

Democrats, who are surging in national races across the country, appear to be close to the 60 votes they will need to get it passed in the Senate, even as money from both sides is dumped into those races nationwide — the words “card check” an almost magical phrase for raising campaign cash.

Labor leaders think the legislation would help them reverse the union movement’s long slide toward obsolescence, helping them sign up workers and organize whole industries in a manner not seen in decades.

Although rarely discussed in the presidential campaign, the new law could be the most consequential — and radical — social and economic policy shift since President Reagan reshaped the country by slashing taxes and regulation and crushing unions.

This raises questions thus far unanswered:

What would be the economic effect of a more unionized workforce?

What would happen to wages and the price of goods and services?

What would happen to largely nonunion industries, such as retail, suddenly forced to negotiate with newly powerful unions?

Could a newly unionized America compete in a global economy?

Can the Las Vegas dream be exported?

• • •

W. Bentley MacLeod is a Columbia University economist who studies labor markets, and he summed up the complexity of the questions above. Higher rates of union membership “would be good in some situations and not in other situations, and in the aggregate, I don’t think anyone knows,” he said.

Although the notion of a more unionized economy after decades of union decline presents many unknowns, there are historical parallels. And indeed, the question of whether card check would be good for the country outside the Las Vegas Strip, when posed to economists, business lobbyists and labor advocates, often hinges on what they think of 1950s America.

That’s because that was the golden age of the American labor movement, when private sector union membership, or “union density,” as economists call it, was 33 percent of the labor force.

John Schmitt, an economist at the liberal-leaning Center for Economic and Policy Research, noted that from the end of World War II to the mid-1970s, America experienced a sustained boom, with the economy growing at about 3.7 percent a year, accompanied by rapidly rising wages. During those years, private sector union density was three to four times the current 7.5 percent.

Those years of union popularity might seem surprising, given the dominance of today’s laissez faire orthodoxy, which usually teaches that labor unions are an impediment to the workings of the free market, gumming up a company’s ability to compete and innovate.

But liberal economists such as the Brookings Institution’s Gary Burtless note that such high rates of union density meant whole industries were organized. That in turn meant all the companies in that industry wound up paying similar wages and benefits to the workers, so they weren’t competing with one another to see who could have lower labor costs.

This is what the Culinary has achieved by negotiating similar contracts with both MGM Mirage and Harrah’s Entertainment, the two largest gaming companies with multiple casinos here and across the country. If card check becomes law, expect Culinary Secretary-Treasurer D. Taylor himself to walk through the doors of the Venetian and begin handing cards and pens to workers there.

But back to the 1950s: Even when an industry wasn’t all-union, the nonunion firms faced the “threat effect,” which means they too would face unionization unless they paid good wages that competed with those of the union shops. This is what prompts the Venetian, Station Casinos and other nonunion Vegas companies to pay their workers wages similar to those at union hotels on the Strip, although the companies would likely never acknowledge the “threat effect.”

Either way, the union is driving high wages across the board for average workers.

Liberal economists argue these wages created healthy economic growth because workers had money to buy refrigerators, cars and suburban homes. That consumption in turn led to more high-wage jobs at the automakers and other manufacturers, and the cycle continued.

Jeffrey Waddoups, a UNLV labor economist, said the fortunes of American workers have gone awry in part because of the decay of unions, beginning especially in the 1970s. “Part of the reason real wages have declined has been that workers don’t have union bargaining power,” he said.

• • •

Conservative economists see labor unions as growth killers.

James Sherk, an economist at the conservative Heritage Foundation, said unions drive down profits. With less profit comes less investment in new plants, research and development, and, thus, fewer new workers.

Sherk and other conservative economists refer to unions as cartels or monopolies: When an entire industry is subject to negotiation with one collective bargaining unit, it’s akin to consumers being forced to fly just one airline or use one telephone service. The result: A wildly profitable airline or phone company, but one that faces no competition and so offers an inferior product at an inflated price.

Similarly, the argument goes, companies that have to deal with labor unions get overcharged for an inferior product.

Unions, Sherk acknowledged, can leverage good wages for workers, including the one-third of workers who were unionized in the mid-1950s. But their healthy wages came at the expense of everyone else, he said.

This is the argument of business lobbyists staring down the barrel of card check.

Craig Shearman of the National Retail Federation said retailers would be affected more than other sectors of the economy. “Our costs go directly to the consumer,” he said. “If retailers’ cost of doing business go up, then prices for consumers go up.”

Sherk continued the monopoly analogy: “They’re a more sympathetic group than the typical monopoly company,” he said. “But the straight-up effect on prosperity and the national economy is the same as with other monopolies: It’s destructive.”

Sherk pointed to an oft-quoted statistic: That $1,100 to $1,500 is added to the price of General Motors vehicles to offset the high price of retiree health care costs.

He lamented the fortunes of a single mother who needs a car to get to work but can’t afford one because of the inflated price due to the high cost of the union wages and benefits.

And when that woman couldn’t buy her car, that meant the automakers made fewer cars, which meant they employed fewer people, he said. The result: economic stagnation.

Conservatives and business lobbyists fear more than just stronger unions from any law resembling card check legislation. Last year’s Employee Free Choice Act also included a provision that would have mandated binding arbitration between companies and unions unable to reach a contract compromise. That provision seems unlikely to pass as part of card-check protection, but still frightens the business community as a dangerous encroachment into the affairs of the private sector after decades of deregulation.

Union density is declining, Sherk said, because “we’ve opened up the economy to competition,” referring to the 30-year wave of deregulation, tax cuts and free trade, all while government policy pushed the pendulum away from unions and toward management.

“I think that has been on net very good for consumers,” he said, correctly citing sharply lower prices compared with those of 30 years ago on shipping, phone service and airline tickets.

• • •

Mention low prices, and most people think of one store: Wal-Mart.

Indeed, Wal-Mart, the world’s largest retailer, has catalyzed the card check debate.

The company’s history is bound up with its obsessive desire to avoid unionization.

“That’s the Wal-Mart story,” said Ray Hogler, a labor relations expert at Colorado State University and author of “Employment Relations in the United States.”

His point here: The company thrived in regions most hostile to labor unions: the South and the West, rural and suburban America.

When it ran into union organizing drives, the company did everything it could to crush them, employing the new cottage industry of consultants and lawyers that arose in the 1970s and 1980s and specialized in beating organizing campaigns.

When that didn’t work, the company skirted the law.

The company was found in violation of labor law — or settled cases alleging violations — at least two dozen times from 1998 to 2003, according to the pro-union group American Rights at Work. The National Labor Relations Board, the government agency that oversees labor law, filed formal complaints against the retailer an additional 70 times during the same period.

Just last week, organizers won an election in a Wal-Mart tire and lube shop in Quebec, creating the only union in the 7,200-store chain. The company swiftly closed the tire-and-lube shop, and that was that.

The company has used its considerable market power, inexpensive foreign goods and cheap nonunion labor to drive down costs. Suppliers and competitors have been forced to respond in kind by driving down their own labor costs.

Wal-Mart is the big prize for the labor movement, which has spent millions of dollars trashing the company’s image and fighting it in court.

But what would happen if the company were unionized? After all, its business model is based on huge volume, but relatively small profit margins, about 3.38 percent on revenue of nearly $400 billion.

Would it be forced to raise prices for goods bought by a struggling American middle class? Would it close stores or lay off workers?

If the company has penciled out the cost of organized labor, it isn’t sharing the numbers. Wal-Mart spokesman Greg Rossiter addresses the threat of unions this way: “The last thing this country needs right now in tough economic times is a bill that would hurt job creation and increase prices for consumers.”

• • •

Crocodile tears fall from the eyes of liberal economists and labor scholars when they consider the plight of a unionized Wal-Mart.

The company would still make billions, even with a 10 or 15 percent increase in labor costs.

“It’s not the end of the world if Wal-Mart shareholders get less and workers get more,” said Ross Eisenbrey, vice president of the liberal-leaning Economic Policy Institute.

For labor advocates such as Eisenbrey, card-check is the key way to reverse a 30-year trend — exploding income for the wealthy, and very little progress for everyone else.

Corporate profits grew 13 percent annually since 2001, while employee compensation rose less than one-fifth as fast, even as workers became more productive, according to Steven Greenhouse’s recent book, “The Big Squeeze.”

Eisenbrey noted that the wealthiest 1 percent of America more than doubled its share of the national income since 1980, from 10 to 23 percent.

“Where did that share come from?” he said. “It came from everyone else.”

Here, Eisenbrey and other union advocates, though full of data and economic theory, are just as happy to strip the argument down to its barest essentials: Unions once had more power and money and shared it with their millions of members. But now, executives and shareholders own America.

For the labor movement, card check isn’t just a way to build membership and take back some of that money from shareholders, its also a way to build something permanent.

Indeed, a key subtext of the card check fight is a battle for control of the political landscape for a decade or more.

A salutary effect of card check and an attendant rise in union density would be new political clout, said Helen Ginsburg, a Brooklyn College economist.

With new union members would come new dues.

With new dues, the unions could invest in political campaigns, which would lead to still more power. With the new political influence, the unions could strengthen their hand further still, eliminating right-to-work laws in states such as Nevada that make it OK for a worker to be part of a collective bargaining unit without having to be a member of the union.

The unions could also advance a separate agenda for more progressive taxation, universal health care and tougher trade policies that could block imports of foreign goods.

• • •

America isn’t returning any time soon to the world of the 1950s, when unions were dominant and the U.S. economy was peerless.

The world has changed.

American companies are competing globally and other countries welcome fleeing American companies with open arms.

This could allow businesses to escape the oncoming unionization of card check.

Verizon, for instance, outsourced its call centers to avoid a union drive.

Moreover, unions, if they don’t act carefully and strategically, could wind up worsening the situation for American workers, said Burtless, the Brookings economist.

For instance, if a union were to organize Target but not Wal-Mart, then Wal-Mart could severely undercut Target prices and drive it out of business. The big retailer would then grow even more powerful relative to its workers, consumers and suppliers.

“What is crucially important is how successful unions are in persuading most of the industry to accept union contracts. If they can only persuade one or two, it’s going to be very dangerous,” Burtless said.

Some labor leaders, such as Andy Stern of the Service Employees International Union, seem to get it. The SEIU in New York didn’t negotiate a contract for janitors it had organized until it had unionized most of the industry, which prevented a nonunion upstart from crushing union competition.

Another key to any labor future: Unions must do more than extract higher wages, according to MacLeod, the Columbia economist. He said unions must commit to helping workers — and their companies — become more productive, because if American companies can’t stay competitive, workers will be poorer for it.

Economists are in wide agreement that when American productivity stalled in the 1970s, workers stopped seeing wage gains.

The productivity model here, the economists said, is Costco, some of whose stores are unionized. Costco’s business model isn’t terribly dissimilar to Wal-Mart’s — big box, high-volume retailer — but the company’s management takes a different approach with its labor force. Workers earn considerably higher wages and have better benefits, and the company has less turnover.

Other models, said UNLV’s Waddoups, include Canada and Europe. Many Canadian provinces have card check provisions, and that country’s economy has grown despite considerable union density.

Waddoups said Americans have a choice: “You can follow one of two strategies. Highly skilled, highly productive, well trained workers who are paid well. That’s one way. Another is low wage, low skill, low prices.”