Transfin.
HomeNewsGuidesReadsPodcastsVideosTech
  1. Reads
  2. Lite

The Rise, Fall and Return of Labour Unions Around the World

Editor, TRANSFIN.
Dec 18, 2021 3:04 PM 7 min read
Editorial

December has been a historic month for the US trade union movement.

Last week, workers at a Starbucks café in Buffalo, New York voted to form a union, making the store the first of over 8,000 US locations of the coffee chain to unionise.

Two more elections - both at Starbucks and both at Buffalo - yielded different results. One store voted against unionising while the other is still waiting to hear results. And this week, two Boston Starbucks cafes filed for their own union elections, with organisers heralding a "new labour wave".

Starbucks is by no means an outlier. Unions are coming for the tech industry. In January this year, Google employees formed the Alphabet Workers Union. HCL, Instacart and Glitch are other other significant examples. And while several attempts by Amazon workers to organise have been thwarted or unsuccessful, unionisation is picking up pace at the world’s largest e-commerce company. Last month, US labour officials declared the firm improperly pressured warehouse staff to vote against joining a union during a recent election, and ordered a redo.

Why is this a noteworthy trend? And why now?

What are Unions?

Firstly, what exactly is a union? It’s basically an organisation that represents the workers of an industry or company.

Unions typically have a democratic structure, with members paying for it to represent them vis-a-vis the employer to negotiate higher wages, improved working conditions, and various benefits.

 

Pros and Cons of Unions

Like it or not, we have a lot to thank labour unions for.

The five-day workweek, sick leaves, paid vacations, pensions, employer-provided health insurance, the concept of a minimum wage... Directly or indirectly, trade unions' efforts reshaped modern work over the 20th century. In many countries, they were also intricately involved in the abolition of child labour and the guaranteeing of civil rights.

That said, union opponents argue that these organisations are counterproductive and detrimental to economic growth. They are an antidote to individuality, make it difficult to hire and fire employees, and drive up costs for companies (and the taxpayers, if the unions are representing public sector workers).

Needless to say, where you stand on the matter of unionisation tends to be determined by your political inclinations. Those on the right are more likely to be suspicious of organised movements, finding them antithetical to individualism and free market economics. Those on the left tend to be too critical of capitalism to trust companies to put workers ahead of profits. 

 

India and Unions

India has a rich history of labour action, which can be traced back to the 1870s when the first workers’ agitation was launched. Deteriorating conditions after the First World War propelled the setting up of the AITUC, the oldest trade union federation in the country, which counted Lala Lajpat Rai as its first president.

Important to note is the fact that union activity in India is largely divided along political lines and commanded by a few major organisations that have been around for decades.

Also important to note is that over the past two decades, Indian unions’ heft has significantly reduced due to the post-liberalisation growth of the service sector + laws weakening their powers (case in point: the new labor codes). But that doesn’t mean they are entirely powerless - just look at the three farm laws that were repealed recently. The movement against them was led by farmers’ unions.

 

The Rise and Fall of Unions

Now, before 2020, you didn’t hear much about workers' unions. Except for the occasional whiff about an employees' strike, trade unions seemed to be a shadow of their former selves.

And indeed, unions’ heydays were long past. They used to be a force to reckon with in the 20th century. Born from the inequalities wrought by the Industrial Revolution, the global labour movement inspired workers to organise and demand better wages and working conditions. Their influence in the West peaked towards the middle of the century, coinciding with the golden age of manufacturing.

The Rise, Fall and Return of Labour Unions Around the WorldThe economic crises of the 1970s proved to be a turning point. The oil price fluctuations, inflation, and high unemployment rates of that decade saw public opinion on unions turn as the latter doubled down on wage increase demands even in the face of bleak macroeconomic conditions.

A good example to study would be the UK, where rampant stagflation (what’s that?) led to Downing Street capping wage increases to curb inflation in 1978. Unions representing lorry drivers, nurses, rail workers, ambulance drivers etc. Immediately launched nationwide strike actions in what came to be called the “Winter of Discontent”. In a matter of weeks, public opinion soured. In the general election next year, the relatively pro-Union Labour government was booted out and the Conservatives were voted into power. Leading the Tories was Margaret Thatcher, who in the coming decade would successfully break the unions’ chokehold on British politics.

Around the same time, Ronald Regan, another anti-union conservative, was voted into the White House. On August 3rd, 1981, negotiations between the US government and the air traffic controllers’ union broke down due to disagreements over wage increases and benefits. The union went on strike that morning. Hours later, Regan held a press conference saying the workers were in violation of the law and said they had 48 hours to return to work else they would be terminated. Most workers assumed he was bluffing: after all, politicians are beholden to workers - how else would they get votes, right? However, on August 5th, Regan began firing 11,000+ striking workers, sending shockwaves throughout the American labor movement.

A fundamental change in the winds was signalled - governments were growing increasingly reluctant to chain themselves to labour. And this wasn’t necessarily a conservative trend: tacitly or overtly, it commanded bipartisan support. In the UK, for instance, the Labour governments that succeeded Thatcher’s retained most of her anti-union policies, despite criticism from their core constituents.

 

Gasping for Air

Post-1980s, union membership declined across countries - particularly quickly in the developed ones. Today, only about 10% of workers in countries like the US and the UK are represented by unions - and most of them anyway have public-sector jobs. According to the International Labour Organisation (ILO), global union density rates halved from c. 36% in 1990 to 18% in 2016.

The fall of unions was partly due to political pressures. But also due to the changing nature of work. Labour movements blossomed in the early 20th century because those were the days when construction, manufacturing and transportation jobs commanded the market. But in the globalised world of the 21st century, the services sector is king and manufacturing jobs in developed nations can be easily outsourced - giving employers more power in union negotiations. Unions, it seemed, were done and dusted.

But now, they might have availed a lifeline from the most unlikely industry.

 

Tech Talk

Over the last couple of years, the winds of unionisation have been blowing ever so fiercely over a sector previously judged to be immune to desires for collective bargaining.

Intentionally and unintentionally, tech was deemed a sector uniquely unsuitable for unionisation. After all, this is an industry that thrives on merit and individual ideation, and offers packages more lucrative than most others.

But the anti-union facet of tech may also be an engineered reality. Intel's Robert Noyce, a key figure in the making of Silicon Valley, argued in 1963 that “remaining non-union is essential for survival for most of our companies”. Tech companies take extra care to avoid “deep divisions between workers and management". They do this in many ways - by remaining flexible, by inculcating work "cultures", providing stock options to employees, and building a horizontal management structure that emphasises small work teams, downplays hierarchies, and espouses unity.

The Rise, Fall and Return of Labour Unions Around the WorldThis modern managerial style - while omnipresent today - is a relatively new invention. And it has been exported to other service industries, most notably the finance sector. Which might explain why services as a whole have remained largely immune to organised worker action for so long.

 

Reasons for the Resurge

Whether the new spurt in trade union activity will last is debatable. But what sparked this renewed interest in organised action in the first place? Two main factors - rising economic inequality and the COVID-19 pandemic.

Researchers found that before the 1970s, union workers often enjoyed a wage “premium" - i.e. higher wages than non-union employees - and there was a relatively narrow gap between the wages of high-skilled and low-skilled workers. Over the past few decades, this gap has widened exponentially even as wage growth for low-paying jobs has stagnated. Moreover, policy gridlocks and misadventures have meant a flawed tax system in many countries that is practically skewed in favour of the extremely wealthy.

Now, correlation doesn't imply causation. Economic inequality is on the rise on account of a myriad of factors. But the lack of sufficient bargaining power for employees naturally puts them at a significant disadvantage vis-a-vis the employers. This might partly explain why minimum wages in many developed countries - where unions no longer hold much sway - have remained largely unchanged over the past decade.

Then there’s the coronavirus. The pandemic did three things to the workplace - one, brought the issue of health at the office to the forefront; two, deteriorated worker-employer relations due to the high levels of job losses and furloughs; and three, led to the so-called “Great Resignation” in many countries.

The first two are fairly self-explanatory. They basically piqued renewed focus on worker protection and job safety. The “Great Resignation” aka the “Big Quit”, meanwhile, was borne out of workers’ frustrations with (1) wage stagnation despite the rising cost of living, (2) soaring inequality during the pandemic, when countless low-income households struggled to cope even as the wealthy became wealthier, and (3) return-to-work directives for employees who preferred work-from-home or hybrid working models.

The Great Resignation is particularly widespread in the US, where October 2021 - aka “Striketober” - saw 100,000 workers engaging in strikes in one of the largest organised labour actions in recent years.

FIN.
 

The cut-throat world of Business and Finance means that there is fresh News everyday. But don't worry, we got you. Subscribe to TRANSFIN. E-O-D and get commentaries like the one above straight to your inbox.