Labor Day was first officially celebrated as a US federal holiday in 1894, making this year Labor Day’s 125th anniversary, although the very first unofficial labor day celebration had occurred a dozen years earlier in 1882.
Of course, the place held by US labor has always been complicated. On June 28, 1894, President Grover Cleveland signed the bill creating the Labor Day holiday. On July 2, 1894—not even a week later—Cleveland called on federal troops to compel railroad workers striking against the Pullman Company to go back to work. A total of 26 civilians were killed in ensuing violence before the strikers folded a month later.
One suspects that the Pullman workers would have preferred federal support for their labor rights over the holiday. After the strike, George Pullman was so widely despised that, when he died in 1897, “his family buried him under thick layers of reinforced concrete so that no one could desecrate his grave.”
This past June, at NPQ, we noted the recent uptick of traditional union activism—the #RedforEd strikes, for example. We also highlighted the rise of non-traditional labor activism in many forms, including the Fight for $15 campaign, as well as multiple efforts launched by gig, immigrant, and tech workers. Some efforts are backed by unions, some are independent, but very often these campaigns occur outside of collective bargaining. We observed then that, “If labor revives, clearly it will require a mix of both ‘old’ institutional forms and ‘new.’”
Workers, in short, don’t need to be told that the economy is not working for them. Increasingly, even in a policy environment that is hardly friendly to labor, they are organizing accordingly. But what is notable of late is that a number of representatives of capital themselves have taken notice. You know that the imbalance between labor and capital has gotten completely out of whack when folks like the Business Roundtable, at least rhetorically, start advocating for higher wages.
So, what options are available? A complete answer will only emerge over time, but some options are being floated, including a call by one union leader for sectoral bargaining and a new philanthropic push to promote employee ownership and make workers the owners of capital.
Before reviewing these options, though, it is important to recall the degree in shift of income that has occurred. You can slice and dice the numbers many ways, but the shift of income from labor to capital is clear. A May 2019 report from McKinsey Global Institute, which published a 62-page paper titled A new look at the declining labor share of income in the United States, notes that had labor’s share of income “remained at the levels of 1998…all else being equal, average worker pay in real terms might be higher by roughly $3,000 per year today.” A few years ago, the Economic Policy Institute provided an even higher estimate, writing that if the benefits of income growth between 2000 and 2015 had been distributed over the labor force, “this would translate into a $3,770 raise for each worker.”
The decline of wages for the typical earner, however, is even larger, because inequality among wage earners has also increased. McKinsey’s report notes that the impact of “a growing gap between average and median wages” has as large an impact on the median wage earner as the shift from labor to capital. In short, if the income share of median wage earners were the same in 2018 as in 1998, those workers would earn $6,000 a year more.
What can be done? A couple of proposals floated recently suggest possibilities. One consists of altering labor law to dramatically change how wages are negotiated. The other consists of changing who owns businesses so that workers and the owners of capital are increasingly the same people. Importantly, both options focus on building institutions, not simple policy fixes. It has become increasingly evident that changing policy by itself is not enough; rather, what’s needed is a policy regime that boosts institutions, which can translate policy prescriptions into real-world results.
First, the proposed new framework for wage determination. So-called sectoral bargaining would require wages to be negotiated not company-by-company, but industry-by-industry and would create joint worker-company wage determination boards to do so. Sectoral bargaining, long an academic favorite, has been used in many European countries and Australia for decades, but it is only now beginning to be advanced within the labor movement itself.
As Dylan Matthews wrote in Vox last month, Mary Kay Henry, who leads the second-largest union in the United States—the two-million-member Service Employees International Union (SEIU)—said in a recent union speech that, “Bargaining by industry, where workers from multiple companies sit across a table from the largest employers in their industry to negotiate for wages and benefits, is standard practice in almost every developed country in the world. It should happen here too.” So far, two Democratic presidential candidates, Senator Bernie Sanders and Mayor Pete Buttigieg, have endorsed this position.
Typically, sectoral bargaining involves a nested system. In other words, some bargaining happens nationally (for example, the minimum wage), more bargaining happens by industry, and workplace issues are still negotiated at the company level.
While this may seem entirely foreign to the US context, it is becoming less so. And a good part of the reason for that is the Fight for $15 movement, as University of Michigan law professor Kate Andrias details in a Yale Law Journal article. As Matthews summarizes, “Organizers in New York achieved a $15 minimum wage for fast-food workers by convening a wage board. Wage boards have the authority to mandate pay scales and benefits for whole industries, after consultation with businesses and unions. That’s an awful lot like how European countries implement sectoral bargaining.” And like sectoral bargaining in Europe, the fast-food wage floor applies to both union and nonunion workers.
Writing last year for the Center for American Progress, a nonprofit Washington DC think-tank, David Madland outlines what a sectoral bargaining policy regime might look like. Under a system of sectoral bargaining, the focus of unions would likely shift from local bargaining to large-scale advocacy and social movement organizing. In other words, campaigns like Fight for $15 and #RedforEd would become the norm, not exceptions. And because basic wage floors would be negotiated by industry, gaps in wages between union and nonunion workers would decline. Also, employers might reduce their opposition to unions, since, with wage floors set at the industry level, the bottom-line payoff of avoiding unionization would be considerably less.
Of course, consolidating a new policy regime would not be easy, even if sectoral bargaining became law. As Andrias notes, with a reduced gap between union and nonunion wages, unions would face pressure to reduce their dues level. Minimally, the old institution of the union would have to retool itself to meet the demands of a vastly changed policy environment.
As I noted above, however, a second approach seeks to tackle the problem of declining labor income differently—by empowering workers to co-own companies. While there is a growing social movement of worker-ownership advocates, it is nothing like the scale of the Fight for $15 movement. Instead, a major push is coming from the philanthropic community, where, just this past month, the Atlanta-based Kendeda Fund committed $24 million to four organizations.
The four organizations receiving Kendeda grants are the ICA Group, a longtime nonprofit advocate of employee ownership, based in Massachusetts, which is focusing on homecare and child care in both Massachusetts and New York; Project Equity, a nonprofit based in the San Francisco Bay Area that promotes conversions of existing businesses to employee ownership; Nexus Community Partners, a foundation based in the Twin Cities that has supported worker ownership in communities of color; and the Fund for Employee Ownership, a subsidiary of the nonprofit Evergreen Cooperative Corporation, based in Cleveland, Ohio. Kendeda claims that its $24 million will enable at least 100 businesses to convert to employee ownership by 2023.
Of course, as with sectoral bargaining, policy will be important. With employee ownership, a big driver is last year’s Main Street Employee Ownership Act, which makes US Small Business Administration (SBA) guaranteed loans available as a low-cost financing vehicle. In a sense, Kendeda’s $24 million helps unlock this larger financing potential. And more policy proposals have been offered—including potential additional federal lending, funding for state technical assistance centers, and provisions that would require annual stock grants from corporations to their workers. Many of these policies have been endorsed by Democratic presidential candidates, such as Sanders and Senator Elizabeth Warren.
As Robert Hockett of Cornell University noted earlier this year, “The idea here is to make capitalists of the laborers, and I think it’s one that could catch on as we get closer and closer to the 2020 election.” Certainly, with 10 percent of Americans receiving 97 percent of all capital income, there is room for improvement.
As always, multiple obstacles remain. If sectoral bargaining requires unions to retool, achieving effective voice for employee-owners requires a whole new social movement infrastructure.
In short, as Labor Day 2019 fades into memory, many questions persist. But acknowledgement of the need for action is rising, as is the willingness to consider new approaches.