Stealing the Economy in 6 Easy Steps

So… How Does So Much Wealth End Up in the Pockets of CEOs and Wall Street Firms?

1. Companies buy other companies using borrowed money.
Since the 1980s, corporate raiders, corporations and hedge funds have looked to take over any company they could. But here’s their secret.

2. Raiders use the assets of the targeted company to pay for the costs of the acquisition.
The target company is weakened because it has to pay back millions of dollars. Worse, the corporate raiders pay themselves from the assets of the acquired company, too, in fees and special dividends. The CEOs and bankers get their cut as well. Not much left to share with the workers from a once-successful company.

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3. CEOs get paid with stock incentives.
That means when a company’s stock goes up, CEOs get even more money.
Unfortunately, in the U.S., most CEOs are focused on very short-term goals, like improving their own compensation. They most likely aren’t looking at long terms goals like increasing productivity or reinvesting in research and development. They aren’t interested in increasing workers’ real wages and benefits. So what does the CEO do?

4. CEOs use company earnings not to invest in better equipment or operations, not to pass along gains to workers, but to buy more stock.
That raises the stock prices and raises the CEO’s salary.

5. CEOS IMPLEMENT “THE SQUEEZE.”
The company downsizes, and workers get laid off. Jobs are shipped offshore. Pension funds are frozen. Wages and benefits are cut.

6. Results
The earnings of the corporation are redistributed to executives and Wall Street bankers.

What’s left for workers?

NOT MUCH.

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Five Dumb Things People Believe About Unions

1. Unions are no longer necessary
Wage stagnation and a decline in real incomes for middle class families has become one of the biggest problems facing the country. The middle class is shrinking and college graduates are putting off buying homes and cars because of low salaries. Meanwhile productivity is higher than ever and corporate profits are through the roof. So where is the money going? Instead of to the worker, more and more of it is going to corporate execs and CEOs, leading to increasing income inequality.

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2. Unions are undemocratic
Nothing could be further from the truth. In fact, one could argue that unions are among the most democratic organizations. Unlike a corporation, for example, unions are bottom up organizations where the members elect their officers, approve bylaws, and vote on contracts. Each union has member committees, member meetings, member-driven elections, and so forth that help to ensure that the opportunity for member participation is available to all.

3. Unions pay their officers and staff obscene amounts
Union salaries are determined democratically, often with the salaries approved by delegates and set forth in the bylaws or constitutions.

The reality is that most union officers are local officers. They get paid very little especially when you take into account the hours that they put in when it comes to negotiations, union administration, and contract administration. And many don’t get paid at all.

Some officers and staff at the national level get paid more but it is far from obscene. They often work long hours in cities with very high costs of living, such as DC and New York, where many unions are headquartered. And when compared to their peers in corporations, and some non-profits, their pay is often low.

4. Unions increase labor costs, leading companies to send jobs overseas
This allegation is completely refuted by recent history. If a highly unionized workplace was, as the argument goes, the cause of companies sending jobs overseas, then the absence of high union density should lead to very few jobs going overseas, right?

Well, union density in the private sector has been declining for decades and is currently less than 10%. Yet for the last few decades, American businesses have shifted millions of good paying jobs overseas, despite the huge increases in productivity at home and the stagnating wages.

It’s not unions that lead to job loss. It’s greedy corporate executives who simply don’t want to share the fruits of higher productivity and profits with American workers – unionized or not.

5. Unions lead to lower productivity and worker laziness
No. Not even close. Studies show that productivity in unionized American workplaces is actually higher, with a meta-analysis noting that “”a positive [association between unions and productivity] exists for the United States in general and for U.S. manufacturing in particular.”

Your Turn

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Have Democrats Rediscovered Unions Too Late?

In early 2016, a remarkable thing happened. Mainstream liberal opinion makers suddenly decided that labor unions do good things, and that they are worthy of the public’s support. Last February, the Editorial Board of The New York Times sadly described America as “a nation where the long decline in unions has led to a pervasive slump in wages,” and they worried about the ongoing struggle between “pro- and anti-union forces,” noting that “Republicans’ support for anti-union legislation is at odds with their professed commitments to helping the middle class.”

The previous week, the Times op-ed contributor Nicholas Kristof had operatically outed himself as a born-again supporter of labor unions. Saying that, “[l]ike many Americans, I’ve been wary of labor unions,” Kristof first repeated some carefully distorted anti-union anecdotes, but then he announced: “I was wrong. . . . [A]s unions wane in American life, it’s also increasingly clear that they were doing a lot of good in sustaining middle class life.”

This new theme has now become prominent in the Times and elsewhere, with (among many examples) another Editorial Board piece in October extolling the role of union power in raising the wages of automotive workers and in pushing for a higher minimum wage, as well as occasional guest op-eds making similar points. Suddenly, it is acceptable for mainstream liberals to say that they support unions.

The Question of Unions’ Role in American Life

The question of unions’ role in American life found its way into the Supreme Court earlier this month, in the case of Friedrichs v. California Teachers Association, in which the justices will decide whether public-employee labor unions can continue to collect dues from non-members to help pay for the union’s efforts that raise pay and benefits for members and non-members alike, while leaving in place the prohibition on using non-members’ money to support political activities. The current system prevents the classic “free rider” problem, in which people will sensibly choose not to pay for something when they know that they will be able to benefit from it in any event.

The oral argument in the case was rather astonishing. Chief Justice Roberts blithely offered the unsupported claim that the financial costs to unions resulting from losing the case would be “really insignificant,” evidently believing that people will pay for things that they like, even when they are not required to do so.

But the Chief Justice’s rationalizations were the least of the problem. Supreme Court reporter Linda Greenhouse, calling a comment by Justice Kennedy at oral argument “as unconstrained and revealing a rant as I’ve heard from the Supreme Court bench,” noted that Justices Kennedy and Scalia are now arguing that there simply is no distinction between political and non-political activities by a public-sector union. Justice Kennedy even described as “almost axiomatic” the idea that government agencies deal with matters of public concern, so that if a non-member thinks that the union should not be taking one position or another in negotiations, that position is per se political, with the union “making these teachers ‘compelled riders’ for issues on which they strongly disagree.”

The justices in the majority thus apparently believe that there can be no real distinction between a union’s workplace activities and its political activities. One might impertinently suggest that this would also be true of private-sector unions, many of whose members would also surely be willing to say that they disagree with their representatives’ activities. But whether the Roberts majority ultimately decides to selectively look past the public/private distinction in this area is as yet unknown.

In any event, the outcome of the Friedrichs case seems certain. And with union membership having dropped to ten percent of American workers, and with the vast majority of those who do belong to unions being in public-sector jobs, this could be a further blow to the ability of unions to do the good things that the editors of The New York Times and other liberals now proudly support.

If this outcome is not the death blow to unions, therefore, it will certainly be a major event. And if mainstream liberals are worried about this case, they need to think seriously about how we reached the point where unions are in such a precarious state.

The New Political Case for Unions

At the top of the Democratic Party, there is continued discomfort with pro-union activity. When Wisconsin Governor Scott Walker aggressively attacked his state’s public-employee unions, as part of a broader national strategy to weaken labor unions even further, President Obama was notably absent from that debate. Wisconsin’s progressive activists were disappointed but not surprised, because Obama had been tepid at best in his support of labor’s interests.

Even so, people who used to disparage or discount the importance of unions are now apparently seeing the light. It is easy to see why. With inequality having become a matter of concern even among some Republicans, we can no longer ignore the clear connection between declining unionization and the expanding gap between the wealthy and everyone else. These recent decades in which Democrats have been pulling away from unions, after all, are exactly when we have seen workers’ incomes essentially stagnate even while workers’ productivity has multiplied impressively.

More generally, the decline of the middle class is unambiguously related to the decline of unions, simply because it is labor unions that are best able to preserve mechanisms that allow workers to share some of the gains of a growing economy. Most obviously, it is unions, as noted above, that have led the fight to increase the minimum wage across the country.

Neil H. Buchanan, an economist and legal scholar, a Professor of Law at George Washington University, and a Senior Fellow at the Taxation Law and Policy Research Institute asks and answers;

“Is still time to prevent further declines in the role that unions play in America? And can the decline of unions be reversed?

“Liberals who once recoiled from unions have suddenly seen that unions must play an important role going forward. If it is too late to stop the anti-union momentum in this country, however, the killing of the labor movement – and of widely shared American prosperity – will have been aided and abetted by far too many people who should have known better.”

Your Turn

Is still time to prevent further declines in the role that unions play in America? And can the decline of unions be reversed? Sound off in Comments, on the Union Built PC Facebook Page in the #UnionStrong Facebook Group or on Twitter. And don’t forget to sign up for our monthly eNewsletter for articles like this delivered straight to your inbox.

Commentary: As Supreme Court Weighs Unions, Middle Class Hangs In the Balance

by Ron Grossman, Chicago Tribune

I don’t belong to a union. I didn’t have to because my maternal grandfather was a member of the Amalgamated Clothing Workers of America. His brother was, too, and their sister belonged to the International Ladies’ Garment Workers’ Union. Another brother drove a taxi, a union button pinned to his cap.

They were part of a labor movement that was midwife to the American middle class.

Unions never enrolled a majority of workers. At their high point in the 1950s, they counted a third of American workers as members. But their impact was far greater. Where unions are strong, nonunion workers benefit because employers offer competitive wages to keep their workforce from defecting.

That’s how I got to wear a white shirt and tie, the dress uniform of the middle class. I was a child during the Great Depression, when my father sometimes drove a cab. Other times he was a furniture mover, and most often he was out of work. Then defense production for World War II kicked off an economic boom, and my father became a department store salesman.

There was no union, as many white-collar workers disdained the labor movement as beneath their newfound dignity. But salaries were decent, buoyed by the general rise in pay as unions got members a bigger slice of the pie. My father could afford for me to stay in school and go to college. So here I am. And not just me. Such was the experience of myriad families.

Think about that as the U.S. Supreme Court wrestles with the issues in Friedrichs v. California Teachers Association.

Earlier this month the justices heard oral arguments in the case that turns on the so-called no-free-lunch provision of the union contract in a school district near Anaheim, Calif. It requires teachers to pay a portion of the union’s dues even if they choose not to join. Several teachers sued, claiming that violates their First Amendment rights. Unions take political positions, the teachers noted, with which they might not agree.

By the union’s logic, all teachers benefit from the salary scale it negotiates. So shouldn’t all have to pay their share of the cost of negotiating a contract? Can’t the free-speech issue can be addressed by giving nonmembers a discount — subtracting an amount proportional to what the union spends on political activities?

Some legal scholars say it’s hard to imagine a line cleanly separating politicking from collective bargaining. Fair enough, but should the justices agree, it will close a chapter of what, in the heady days of the 1960s, was proclaimed “People’s History.” The story of the little guy. The kind who carries a lunchbox and a thermos to work.

Before unions, he long got the short end of the stick. His work day was arduous — 10 and even 12 hours was the norm — and extra pay for overtime was unheard of. In the needle trades, when orders backed up, the boss’ mantra was: “If you don’t come in on Sunday, don’t bother to come in on Monday.” Unions were handicapped by courts declaring them a “conspiracy.” Even when unions got a toehold, progress was painfully slow.

My grandfather supplemented his sweatshop wages by working evenings at home. I can still see him sitting behind a sewing machine, occasionally joining the conversation between running a line of stitches. Yet even then, the union provided a benefit: an exhilarating sense that a worker wasn’t on his own. My grandmother complained that all her husband wanted to talk about was “shop, shop, union, union.”

The benefits got more tangible in the postwar decades. Industries that had held union organizers at bay were organized. Assembly line workers got contracts, and the nation’s demography was radically altered. Most societies look like a pyramid: a few rich people at the top, a lot of poor people at the bottom, and a small middle class in between. But America’s profile got a potbelly: the middle class grew until, by 1971, it was larger than the upper and lower classes combined.

Ordinary folks bought homes and, every few years, could trade in their car for a newer model. They proudly watched their kids go off to college.

But beginning in the 1970s, the process was reversed. Decade after decade, the middle class declined and its clout was lost proportionally. Now a week doesn’t go by without the media or a blogger proclaiming that America’s middle class is getting squeezed out.

As the Great Recession eased, upper-income folks did nicely. Middle-class families went back to the short end of the stick. No voice insisted that they get a fair share of the pie — as the labor movement did at the end of the Great Depression. Union membership has declined to about 11 percent of the workforce. Organized labor’s remaining strength is in public-sector unions, and that is up for grabs — pending the Supreme Court’s ruling on the no-free-lunch issue.

Yet if its fate is sealed, it deserves a proper obituary. So let us remember the mothers and fathers of the middle class, brave souls who persuaded others to sign petitions asking for union representation. Who denied themselves a paycheck by voting to strike. Who walked picket lines. Who came home bubbling over with news of the shop and the union, the shop and the union.

Your Turn

What do you think the impact will be as the U.S. Supreme Court wrestles with the issues in Friedrichs v. California Teachers Association? Sound off in Comments, on the Union Built PC Facebook Page or in the #UnionStrong Facebook Group. And don’t forget to sign up for our monthly eNewsletter for articles like this delivered straight to your inbox.