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Labor Day Victories to Celebrate

It would be easy to go on about how bad things are for labor rights, but it is worth highlighting a couple of good news items against the current backdrop of stagnant wages, declining unionization rates and anti-union court rulings.

In recent decades the news for the country’s workers and the labor movement has been mostly bad. We’ve seen stagnant wages, declining unionization rates, anti-union court rulings, and for the last six years mass unemployment as the labor market is still far from recovering from the collapse of the housing bubble. It would be easy to go on about how bad things are, but it is worth highlighting a couple of good news items against this backdrop.

First, there was the victory of the workers at Market Basket, the Boston based grocery store chain. This was far from a normal labor action. It involved most of the workers, and most of the managers, uniting to bring back Arthur T. Demoulas as CEO of the company, after he had been fired in a coup engineered by his cousin Arthur S. Demoulas. Workers supported Arthur T. because he had a policy of paying decent wages and providing good benefits. His cousin was looking to trim costs to ready the firm for a private equity buyout.

The workers had support of people in the community who boycotted the stores and many political figures in the area who proclaimed their support of the Arthur T.’s high road policy. Last week Arthur S. struck a deal and agreed to a buyout offer that put his cousin back in charge.

The other piece of good news for workers was the decision by 27,000 home health care workers to join the Service Employees International Union (SEIU). This is an important step towards making these decent quality livable wage jobs. In other states where home health care workers have organized, like Illinois and California, wages have risen by 30-40 percent from levels that had been near the minimum wage.

Higher pay not only means a better living standard for these workers and their families, it will mean better care for patients. Low-paying jobs are high turnover jobs. No one will stay at a job paying $7.25 an hour if they see an opportunity to get a living wage job. The sick and the elderly will not be getting good care if they constantly must adjust to new providers. By allowing workers to remain at their jobs, pay increases mean that patients will get better quality care.

But enough of the good news, the big picture is still not looking great. While Market Basket may continue to go the high road, it faces stiff competition from low-road competitors. The outcome is far from clear.

It is worth noting that the low-road path is not always a winning route even on a pure dollar and cents basis. Back in 2007, the electronic retail chain Circuit City fired its more senior employees as a cost saving measure. Whatever it saved in wages, it lost in sales, as customers realized they could no longer count on finding knowledgeable sales staff. It filed for bankruptcy two years later.

The Minnesota victory for home health care workers is inspiring but unions face an enormous uphill drive in organizing. In addition to the opposition of employers, they also have to deal with a hostile court. Most recently the Supreme Court ruled that unionized home health care workers who are paid by the government cannot enforce contracts that require that all the workers benefitting from the contract pay for their union representation. There is a real risk that the court will apply this principle to all public sector workers and possibly even the workforce in general.

This further increases the asymmetry in labor law. When workers do an illegal action, like an unauthorized strike, employers can go to court and within hours have an injunction threatening union leaders with jail if they don’t end the strike. By contrast, if the company illegally fires workers for trying to organize a union, it can take months or even years for them to get a hearing at the National Labor Relations Board (NLRB). The worst the employer risks is being forced to hire back the workers and make up back pay.

Of course the biggest factor affecting workers’ standard of living in the years ahead is the overall state of the economy. Here also there is much to worry about. While Federal Reserve Board Chair Janet Yellen has repeated her commitment to allowing the economy to grow and unemployment to fall, the inflation hawks are constantly looking for new excuses to press the Fed to raise interest rates and dampen an already weak recovery.

Naturally the inflation hawks are prepared to lie, cheat, and steal to get their way. Inflation erodes the value of the money they lent. They don’t care if workers have jobs.

In the absence of substantial political pressure for more jobs and growth, Yellen will eventually have to give in to the inflation hawks. If the Fed acts to prevent the unemployment rate from falling much further, labor markets will never get tight enough so that most workers are in a position to share in the gains of economic growth. That would make the picture on future Labor Days even bleaker than it is today.

So we have a full agenda for the year ahead. We have to ensure that workers have the right to organize and bargain collectively and that the Fed doesn’t act to slow the economy and throw people out of work.

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