There once was a union maid, she never was afraid of goons and ginks and company finks and the deputy sheriffs who made the raid. She went to the union hall when a meeting it was called, and when the Legion boys come ’round she always stood her ground. Oh, you can’t scare me, I’m sticking to the union, I’m sticking to the union, I’m sticking to the union. Oh, you can’t scare me, I’m sticking to the union, I’m sticking to the union ’til the day I die. The lyrics to the 1940 song by Woody Guthrie were written, according to Pete Segar, “In the plain little office of the Oklahoma City Communist Party.”
Back in Guthrie’s time, unions were organizing American industrial firms to some success. Between the late 1930s and mid-1950s, union membership tripled as a percentage of the workforce, rising from about 10 percent to a peak of just under 35 percent. Since that time; however, union membership has been rapidly decreasing falling to just about 11 percent of the labor force today. If one does not include government unions, the share of the private labor force in unions is only 6.6 percent, well below the levels that they were when Guthrie wrote the song.
One of the main reasons why union membership has fallen so rapidly is that the unionization of the American industrial sector led to huge increases in industrial productivity – and not because of any positive effect of the unions themselves. Between 1940 and 2014, the latest year for which data are available, manufacturing productivity rose (in real terms) from about $3,100 per worker to over $202,000. In other words, while one manufacturing worker could produce about $3,000 worth of stuff in 1940, the same worker today would produce about $202,000 worth of stuff – and this is adjusted for inflation. The fastest changes in productivity occurred in the post-war years, when union membership was at its peak and in the early 1970’s, a period when unions were particularly aggressive. Following the 1970’s manufacturing productivity has tailed off somewhat, and over the same period union membership has fallen rapidly.
What did the unions actually do? They made labor less productive through restrictive work rules and wage structures that did not encourage individual initiative. Since workers were less productive, manufacturers substituted capital, and it was the increase in the use of machinery and technology that overall factor productivity (as measured by output per worker) rose so quickly. While consumers and shareholders gained from this, the people who lost out were the union employees who became inefficient and overpriced. This is one reason why manufacturing employment has been falling steadily since the early 1950’s when it was about a third of the total labor force. It is just 12 percent today.
Having lost the manufacturing sector, the unions are turning to the – well the maids – and similar workers to help swell their dwindling ranks. In New York and in other cities across American, the unions are working overtime to try to organize fast food workers. Their mantra is that fast-food workers should be paid a minimum of $15 an hour. They won this battle in New York State as Governor Cuomo in an ill-conceived scheme has administratively raised the wage for fast-food workers to $15 an hour.
According to Forbes Magazine, the average McDonalds (as an example) takes in about $2.5 million per year. This is equal to about $6,850 per day. The average fast food establishment has about 16 FTE employees, so output (sales) per employee is about $428, or $53.5 per hour. Using pretty standard multipliers this would imply a wage of just about $10.70 per hour. A $15 wage would mean that employees were being paid 40 percent more than they were worth. Since the fast food establishment competes against other unregulated businesses, it cannot raise its prices by 40 percent, so like the industrial firms of the 1970s it will have to increase productivity. This is exactly what is happening.
In New York City, and around the world for that matter, McDonalds is rolling out a new style of restaurants where burgers are ordered on touch screens (replacing the now expensive cashiers). Rather than having workers behind the counter, McDonalds has shifted to servers, who both clean and move product from the kitchen to consumers (replacing the cleaners in the restaurant itself). Much of the production process – for much more complicated and individualized burgers – is automated. All in all, the chain will be able to sell more expensive fare using fewer workers.
The winners, customers (particularly those who can afford $10 hamburgers), and higher skilled workers. The losers, people on limited incomes who depend on low-priced food, and less skilled workers, who cannot generate the $75 in hourly sales needed to justify a $15 wage. Look to see the 9.6 million restaurant workers suffer the same fate as the 29 million fewer manufacturing workers in the US as a result of capital substitution. I would be sacred to stick to the union, because it looks like the unions are sticking it to the workers.