This is a post entirely inspired by David Fredericksen, Assistant Manager of Production Engineering at NVIC, a foundry in central Indiana. He and I got a back-and-forth debate going on LinkedIn over the weekend, focused on the topic of unionization that was raised in a video I’d posted.

He raised some excellent points in his last couple comments, which I thought it might be easier to reply to here.

He began:

Jim, based on a report published by the Economic Policy Institute in 2019 CEO pay has increased 940% since 1978 while the wages of the typical worker have increased by only 12%. That indicates to me that something in our US system doesn’t work, or only works for a few. It is interesting to me that the 1978/1979 timing has marked both the decline of union membership and such a stark increase in inequality regarding pay. I do not for a minute believe it was ever fair for a worker to be forced to join a union but it is just shocking the ties that can be made to the change point in 1978/1979.

I’m personally of a mixed mind on this point. I had to do a bit of homework (gee, thanks, David!), but it looks like the biggest driver after the late ‘70s of falling union membership was the sharp decline in manufacturing employment, from almost 20 million in 1979 to under 12 million by 2010. That to me explains the lack of progress in worker compensation, since manufacturing jobs pay significantly better than service-sector work. All that being said, though, I agree that the rise in CEO and other executive pay is absurd. What additional value are they providing now that they didn’t in 1980 that would explain earning hundreds of times more money? The rise of company stock as compensation is part of the picture, and was supposed to have the laudable goal of orienting leaders’ focus toward the long term. But I think that’s largely failed thanks to Wall Street, and it still doesn’t explain the explosion in total executive compensation. I’ve seen some work recently that show the huge increase in companies buying back their own shares of stock is feeding that situation. That to me is a failure of appropriate board oversight, not a failure of government. Activist shareholders, anyone?

David continued:

I’ll ask this question of Right to Work as well. If in Right to Work no-one is forced to join the union why is any percent of the workforce required for organization? If 100% wants to organize they should be allowed to. If 10% wants to organize they should be allowed to. Either way, no worker is in a situation that is forced.

Here I agree wholeheartedly. Workers should be completely free to enter into contracts of their choosing, whether that’s by accepting employment or by joining together for collective bargaining. And they should be equally free not to. I’m have no interest in digging into where the rule that 30% of employees have to sign up to have a union election, but I suspect all that mess is from the National Labor Relations Board, which I think is a disaster from top to bottom. In fact, the NLRB to me represents a mighty find example of why the government has absolutely no business inserting itself in any way in between workers and employers.

David closed with this:

Jim, for the record I’m not advocating the unionization of the American workforce or a minimum wage. I’m just cognizant of the apparent correlation between de-unionizing the workforce and the increase in disparity of earnings between the most highly compensated employees and the average worker. There are many ways this could be corrected, unionizing the workforce is only one of them and arguably not the best way – however, I believe it is the most common way.

And I’m not in any way philosophically opposed to unions. They didn’t arise for no reason, right? Only a fool would say that companies haven’t many times abused and taken advantage of workers. Eventually those workers saw the power in coming together to present a unified front. I’d hope that abuse is far less common today. But the fact that we’re all human hasn’t changed, so unfortunately the possibility of a company’s leader(s) mistreating those who work there still exists. I do, however, agree with Milton Friedman that if we’re to have unions, they ought not receive government assistance or advantages not available to other organizations. In fact, they ought not receive anything from government at all. But then, neither should companies.

It’s nice to see the points of agreement David and I share. I’m certain there are other points on which we’ll continue to disagree. But I appreciate his joining the discussion with logic and respect, which I hope I’ve returned to him here.