Failed Tennessee Volkswagen Unionization Reflects Wider Trend

Tennessee car workers’ refusal to unionize follows downward trajectory of labor power across the United States.

The defeat of the United Auto Workers’ union at the Volkswagen factory in Chattanooga, Tennessee has sent tremors through the American industry. This turn of events is noteworthy in light of the fact that corporate management at Volkswagen was open to, and indeed supportive of, organized labor taking an active role in the plant.

The welcome reception the UAW received also meant that this was a perfect opportunity to make headway into the southern half of the United States where an increasing number of automobile plants are constructed to take advantage of lower labor costs and a cultural atmosphere historically hostile to trade unions. This hostility in the south is mirrored by a welcoming environment in the northern part of the United States.

Certainly the importance of labor unions in the twentieth century, in America as well as the rest of the industrialized world, cannot be overstated. Today, their principal value is found in creating a level playing field for labor in an economy increasingly dominated by capital ownership. Labor unions also provide a mechanism of communication and transparency between management and workers.

Even as they provide this value, they can be costly for firms needing to adapt to the global talent marketplace as well as changing consumer preferences. Labor unions generally, and the UAW specifically, have negotiated for higher than market wages, pricey benefits packages and restrictive workplace rules. They also possess a cartel effect that excludes outside sources of labor not part of their group.

Rather than slide into disadvantageous practices, many companies have simply moved their production facilities to alternative locations — locations with correspondingly lower wage expectations and fewer rules. As the 2008 Detroit auto industry bailout made clear, the consequences for firms with unionized labor forces competing against firms without them can lead to insolvency.

While the downward trajectory of labor union power in the United States has made headlines, it is hardly an American phenomenon. American union membership — low compared to other developed countries — has maintained a consistent rate over the past fifteen years. This stands in stark contrast to its OECD peers, many of which have seen substantial drops in organized labor. Countries as diverse as Austria, Czech Republic, Denmark, the Netherlands and the United Kingdom have witnessed union membership, as a percentage of the workforce, decrease by anywhere between 4 percent and 10 percent since the turn of the century.

The causes of this are varied and many. The shift toward a knowledge and technology-oriented economy, reliant on service jobs, means that the majority of workers is primarily employed in fields without traditional union representation.

But more than economic factors, the real culprit behind union membership decline is government. Labor unions, being effectively anticompetitive entities, only exist when protected by laws and regulations that support their existence. Outside of these protections, labor unions are unable to coerce membership from workers or hold companies to bargaining agreements harmful to their bottom lines.

A new emphasis on global economic competitiveness is eroding many of these protections. Technology and skill transfer means that a country like Canada has little edge over China when it comes to goods production.

The 2008 financial crisis additionally accelerated union membership declines. Especially in parts of Europe and East Asia, social democrat and economically inclusive governance models have since been replaced by right-wing and pro-business ones.

Historical memory also plays a role. Few dispute that laborers suffered abuses in factories during the first half of the twentieth century. But, in the West, we are far removed from such realities today. In some ways, labor unions have been extremely successful in the developed world, in the sense that they shifted individual expectations about working conditions and benefits. But the success this represents is not benefiting the organizations themselves.

The UAW is a perfect example. The union possesses a fraction of the membership it once held in the 1960s and 1970s, certainly the result of a diminishing number of auto worker jobs in its traditional strongholds.

The fact that the UAW could not win a popularity contest even when Volkswagen’s management welcomed it only goes to demonstrate growing union ineffectiveness when lacking the backing of laws, politicians and powerful figures to support its cause.

The failure of the union model has left many to ponder what should replace it. Volkswagen itself employs a different model, one based on German worker-management relations. While this is advocated as a good alternative for the Tennessee factory, including by Volkswagen employees in Germany, there are cultural and legal barriers to its acceptance.

Regardless, whether a German style works council eventually gets accepted or not, it appears too little, too late to slow down organized labor’s hemorrhaging in the United States for long.