All Commentary
Thursday, August 1, 1996

Big Labor and Big Government

Without Big Government, Labor Leaders Are Stripped of Power

Ms. Kerrigan is president of the Small Business Survival Foundation in Washington, D.C.

Big labor is trying to make itself relevant again by attempting to rebuild its declining membership base, and, more importantly, by striving to increase the role of government in the American economy. Under the leadership of AFL-CIO chief John Sweeney, the union movement has revived its militant organizing activities of the 1930s, updated with a 1990s Madison Avenue message campaign. Indeed, labor is spending unprecedented resources (officially, $35 million) on political campaigns targeted to the congressional districts of incumbents who threaten its agenda.

Inasmuch as national and international competitive market conditions have made labor unions increasingly irrelevant in the private marketplace, the only way unionists can achieve their goals is through the coercive power of government. The union movement’s plan is to place government at the center of the American economy through regulations and mandates which it gets to design. To do this it needs complicit politicians who believe that big government should aggressively and unapologetically micromanage American business.

To that end, big labor has embarked on a militant course “to end social and worker injustice.” With renewed enthusiasm, labor is pushing the minimum-wage hike, “corporate responsibility,” and the expansion of legislative relics like the Davis-Bacon Act. A mere cutback in the growth of government spending—or even small steps to reform the regulatory overload in programs like the Occupational Safety and Health Act—are described by labor as an attempt to unleash havoc on American workers.

In a speech this spring before labor leaders in Washington, D.C., Mr. Sweeney portrayed a world in which “greedy bosses” take advantage of all workers, especially “women and minorities and low-wage workers.” According to Mr. Sweeney, smaller government translates into “a world with no environment safeguards, no public health protections for families, and no health and safety protections for workers at their jobs.” In this same world described by Mr. Sweeney, Americans will be “trapped permanently . . . in a society” controlled by big business and the rich. Of course, programs for the poor and elderly are wiped out in order to pay for massive tax cuts for the wealthy.

Union leaders are putting a lot of capital in the idea that if organized labor can be seen as an institution that cares about all workers—not just its own members—that the movement will be viewed as necessary and relevant again. To accomplish this feat, the centerpiece of their crusade to attract more workers into labor’s ranks is the campaign to increase the minimum wage.

Labor leaders have termed this endeavor their “living wage” campaign, although it is well documented that very few of those workers making minimum wage depend on it as a single source of income for raising families. It also remains very hard for workers to start making a “living” when, as a low-skilled worker, you have been priced out of the labor market because the unions have demanded an increase in the legal wage floor—a consequence most economists agree occurs with each minimum-wage increase.

The rhetoric of labor leaders also would have us believe that minimum-wage earners are forever trapped at this wage scale. This is simply untrue. Census Bureau data reveals that minimum-wage earners, on average, will make $6.09 per hour within a year.

Comparing Apples and Oranges

Most disingenuous is the labor movement’s assertion that the minimum wage has dropped to a “forty-year low”—a declaration that goes unchallenged by wage hike opponents, yet has become the key rallying cry behind labor leaders’ efforts to enact the increase. Forty years ago, the minimum wage mostly applied to skilled jobs like manufacturing. Jobs in restaurants and the retail industry were exempt. Today, the wage scales of skilled jobs in manufacturing and other industries are highly competitive. Simply put, wage-hike supporters are comparing apples and oranges when measuring the wages of skilled workers forty years ago, versus those of low-skilled workers today.

Though characterized by labor as a plot by right-wing zealots to keep corporate profits soaring at the expense of hard-working Americans, minimum-wage hikes draw fire from a wide spectrum of economists and activists. The Democratic Leadership Council (DLC), an organization once headed by President Clinton, asserts in a recent statement that “raising the minimum wage is not the answer” to helping people out of poverty.

While affirming that a wage hike will cost jobs for low-skilled workers, the DLC’s most damning pronouncement is that the cost of the increase “would be borne disproportionately by lower income families.” That cost would be borne by poor families in the form of higher prices amounting to what the DLC calls a “regressive transfer,” which makes the poor “a little more worse off in order to improve the lives, at least for a time, of a group of people which is predominately non-poor.”

For labor leaders to proclaim their concern for all workers, while at the same time pushing for minimum-wage hikes at all levels of government, is a twisted exercise in logic. Nonetheless, the minimum-wage issue is shrewdly being used by labor as a means to an end—to reconnect with the workforce in order to be seen as relevant again, and to force the ouster of politicians who challenge its cause.

The Move Toward “Corporate Responsibility”

The labor movement would like to see politicians hoodwink American businesses into supporting its cause through inducements provided by the federal government. This failed European model, which mistakenly unites government and business as close working partners, has sadly resurfaced in the United States.

Called industrial policy in some parts of the world, it is better known to labor leaders and their advocates in academia and Congress as “corporate responsibility.” Interestingly, the corporate responsibility model recognizes the benefits of tax cuts and regulatory relief, but only for those businesses that meet certain standards established by the U.S. government.

For example, a Senate supporter of labor has proposed a program of corporate responsibility whereby participating businesses—or A-Corps as they are called—would receive special tax and regulatory treatment in exchange for abiding by several provisions: a percentage of corporate income (determined by the government) must be allocated for worker training; the business must provide a government-approved health-care plan for all employees; the CEO and other executives must agree to have their salaries capped; and the business must participate in a collectively bargained (union) pension plan utilizing an employee trustee.

Labor leaders are touting these types of proposals as ways to help the “anxious middle class” deal with the hardships of corporate downsizing and government cutbacks. Unfortunately, these plans only create a new level of bureaucracy, which dispenses tax favors to companies deemed socially worthy by the federal government.

The most glaring shortcomings of the corporate responsibility model is a total lack of understanding as to the trends shaping the twenty-first century economy. Unmistakably, key attributes of this economy will include diversity, mobility, and entrepreneurship. In other words, workers will continue to want different things at different stages in their lives, and they will change careers with greater frequency. In addition, experienced workers who become downsized are, in larger numbers, opting for self-employment and entrepreneurship. It is doubtful whether these smaller enterprises—responsible for the bulk of U.S. job creation—will have the extra cash to allocate toward “corporate responsibility.”

According to a March 1996 report by the U.S. Senate Joint Economic Committee, corporate responsibility proposals “explicitly contradict” twenty-first century trends, and “would make workers more dependent on their current employers at a time when public policy should be encouraging individual responsibility through upward mobility and portable benefits.”

Labor unions indeed fear policies that would make workers less dependent upon institutions (such as labor unions). That is why they continue to advocate bigger government and the expansion of the programs, agencies, and laws that govern the American workplace. Working hand in hand with the politicians and bureaucrats who oversee such programs, labor unions exert a powerful influence over the laws which make them relevant.

Take away such laws, and labor leaders find themselves stripped of power. Suddenly, their reason for existence comes under scrutiny. While big labor may succeed in its attempts to slow down the movement toward limited government, it is highly unlikely that it will overcome the power of the marketplace—a force moving individuals away from dependence on unions and governments and more toward independence and economic freedom.