by Phil Wilson

Big Labor’s $6.6 Billion Payday

Big Labor has a lot to be thankful for in 2015. Let’s face it. If you’re counting blessings the National Labor Relations Board offered quite a few. From the Ambush Election Rule to expanded online organizing to the Browning Ferris joint employer decision, unions received a lot of gifts this year.

In spite of these gifts, Big Labor is still running in place. For example, unions got the NLRB to rewrite how it conducts union elections – slashing the average election time by nearly one-third (from 38 to around 25 days). But unions have conducted nearly the exact same number of new organizing drives they did during the same period in 2014.

Some argue it is too early to judge how unions will profit from these changes. They say unions are just figuring out how to take advantage of the new election rules or the joint employer changes. There may be some truth to that, but I continue to believe Big Labor’s problem is with their model. I expect them to push for big changes here in the last year of Obama’s presidency.

Here’s my argument in a nutshell. Unions are in a death spiral. For example, the UAW has dumped piles of cash for several years into a “southern strategy” that has exactly nothing to show for it. This week they’re desperately trying to convince a small fraction of Volkswagen Chattanooga employees to join up.

Even if the UAW wins – and that remains a big question – they are just getting started. They will then need to bargain a contract that this small group of Volkswagen employees will ratify. That too is a big question: the UAW barely (some say didn’t) get their Big 3 contracts ratified this month. Then, assuming they can get this small group of employees to ratify a contract, will the UAW be able to convince others that all this hassle is worth the trouble? Doubtful. Their investment in this campaign will never pay off.

This isn’t just a UAW problem. Every union in America faces the same headwinds. The traditional “majority representation” model is broken. It is too hard to get into a company and once you’re in it is too hard to deliver a product that your members (or your organizers) will vocally promote.

Additionally unions have a real message problem with Millennials. The Millennial generation – who will make up 75% of the workforce by 2025 – just aren’t that into yesterday’s unions. They’ll say nice things about unions in opinion polls, but they aren’t joining up in anything close to numbers that matter. If unions don’t change dramatically there is little reason to believe they ever will.

What can unions do to counteract these headwinds? I think they are already building out the model of the future, and the NLRB is helping them do the heavy lifting. The recent joint employer decision is one example. Unions are trying to break apart longstanding business models like franchising and the use of temporary or agency employees. The purpose is to blur the lines of when one employment relationship ends and the next one begins.

I’ve discussed these ideas here before but the quick version is that I think unions must transform into an “association” (services) model and away from their historic “lodge” (bargaining) model. Think the American Association of Retired Persons (AARP) versus the Elks Lodge. This reinvention would allow them to offer services and collect money from any working person wherever they work (a huge increase in potential members), and for the most part get them out of the collective bargaining business which is expensive and doesn’t attract new members.

The big thing standing in the way of this transformation is unions figuring out a bundle of services they can offer that working people are willing to pay for. This is no small task. That’s why in addition to expanding joint employer two big areas I expect unions to push in 2016 include “members only” or non-majority bargaining and the expansion of union access into non-union workplaces. Along with joint employer these two changes will give unions the tools they need to transform their business model – and make huge piles of cash in the process.

How will these changes help unions transform and make money? If unions could compel employers to sit down with them and bargain over disciplinary action or wages, hours and work conditions of any person who signs up they would have something the average worker might buy. In addition to those services unions could also offer benefits that travel with the workers wherever they go (health insurance, retirement savings, lobbying for legislation, etc. –like AARP). This is an offer that could actually sell.

How big an opportunity is this for Big Labor? Think about it like this. There are over 100 million adults over the age of 50 and nearly 40 percent of them are AARP members (over 37 million in 2014). In 2014 AARP collected revenues of $1.48 billion (just over $40 per member annually). Around $592 million of those revenues were generated from the annual $16 membership fee. The remaining came from fees for service or commissions collected on sales of financial services products to members.

Today there are over 122 million full-time workers in the US and another 27 million part-time workers (less than 35 hours). If these workers joined union association in a percentage approaching AARP Big Labor would boast over 55 million association members. If unions just got AARP’s $16 annual membership fee that is nearly $1 billion per year in new revenue. That revenue number jumps to $2.2 billion per year if unions make a similar amount per member that AARP makes.

But the union association offer is much more compelling that that offered by AARP. The retiree association doesn’t go in and directly negotiate on your behalf if you feel like you’re getting a bad deal. They don’t provide legal representation. The bundle of services unions could offer is probably worth much more than what the typical AARP member pays.

How hard would it be for unions to convince people that this new bundle of services is worth something like, say, a Netflix subscription or a couple of cups coffee each month? If unions could get $9.99 per month from association members they would rake in $6.6 billion per year. I think that estimate is conservative. Today the average union member pays around $33 per month for membership. At that rate unions would make over $22 billion per year.

Unions offering services to working people is not a bad thing – if they can offer a great service that people want to pay money for that is terrific. But the issue here is how they are offering those services. Getting the power of the Federal Government to compel businesses to deal with unions even where almost nobody wants them is terrible policy. It’s bad for companies and it’s bad for workers.

That is what’s at stake with these new NLRB rulings. What can employers do to respond? First and foremost is to make sure your company leaders are aware of what is happening. Nobody really pays attention to these NLRB decisions. In isolation they don’t seem to be that big a deal. But when you start adding them together they are worth way more than the sum of their parts.

Second, let your political leaders know about your concerns. President Obama is never going to sign a bill reversing these NLRB decisions. But there are other avenues available. Congress still controls the power of the purse. There are proposals on the table right now that would limit funding for the NLRB to enforce these rulings. That is an important place to start.

If you aren’t sure about your next step let me know and I can help you figure out what to do next. In the meantime, stay tuned.


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