Labor's place in New Economy

Tight labor market boosts union leverage, but real test is whether organizers can expand into 'knowledge' sectors.

After two decades of battling the fierce blasts of a hostile economy, American labor unions finally can feel the wind at their backs.

A job-market boom, which is giving new leverage to organized labor, is undeniably behind many recent bargaining-table victories. But when the worker crunch eases, as it inevitably will, big labor will face the biggest question of its future: Can old-time unionism weather the so-called New Economy?

There are some early signs it will survive the transformation. Labor is at last pushing its way into the service sector, especially among healthcare workers. This month's victory by Boeing aircraft engineers has proved labor's inroads even among skilled, white-collar employees. This weekend, flight attendants wrangled a significant pay raise from US Airways in a tentative agreement.

But nagging questions abound over just how good the New Economy - with its tight labor market and big bonuses for highly trained knowledge workers - will be for organized labor. Sure, economic growth is filling union sails, but it's pushing other, sleeker parts of the economy even faster. True, unions may capitalize on the building resentment of workers left out of the huge payouts to the new dotcom millionaires, but it's just as likely that organized labor will fall behind, analysts say, unless it can find ways to organize those high-tech sectors.

Either way, unions don't have the clout anymore to drive the economy into a ditch. If something comes along to stop the job express, it won't have "union" stamped on it.

"There hasn't been a strike in years and years and years where you could calculate the effect," says Jack Triplett, an economist at the Brookings Institution in Washington. Strikes and big pay raises register no more than a blip in today's huge and diverse economy.

Up to this point, organized labor can thank the New Economy. It's caused so much growth that companies are begging for workers.

And when employees are in short supply, unions typically gain bargaining leverage. "They're poised to do well in the next couple of years," says Linda Bell, an economist at Haverford College in Pennsylvania.

"In a time of prosperity, they not only have greater leverage, they can get more from the companies," says Gary Chaison, an industrial-relations professor at Clark University in Worcester, Mass. "I would suspect there will be larger settlements than we've seen in the past."

This weekend's last-minute deal at US Airways may signal the future. The airline's 10,000 flight attendants hadn't gotten a raise in four years. But according to the Association of Flight Attendants, the new agreement hikes pay 10 percent, includes a signing bonus, adds new paid holidays, and eliminates a two-tiered system that paid some workers fewer benefits.

Flight attendants will vote on the tentative agreement in the next few weeks. In return for giving on higher pay, despite its already high cost structure, US Airways reportedly got more flexibility in scheduling. In a short statement, the airline, based in Arlington, Va., said it was pleased to reach an agreement "that works for our flight attendants and allows the company to compete in the marketplace."

A decade ago, flight attendants had far less bargaining power because airlines easily recruitednew trainees to take their place. No longer. "Those workers have never been highly paid workers with skills," says Ms. Bell. "But in tight labor markets they're hard to replace."

Nor are these bigger settlements likely to derail the economy, these analysts say. Organized labor doesn't have the clout anymore. Fewer than 1 in 7 American workers belongs to a union, according to government statistics. That's down from 1 in 5 in 1983 and 1 in 3 in the mid-1950s.

"There's still a tremendous nonunion sector," says Mr. Chaison of Clark University. "So it's not having the inflationary effect that it had 30 and 40 years ago."

To regain that clout, unions will have to organize more workers. Last year, they added 100,000 to their ranks, and the AFL-CIO hopes to double that rate this year. But just to keep up with the burgeoning economy, it will need an estimated 350,000 net new members this year.

That tall order could be met more easily if unions could organize the burgeoning high-tech sector. Labor scored an important victory earlier this month when unionized aircraft engineers won pay raises and full medical insurance from the Boeing Co. Always loosely organized, the engineers put together a surprisingly solid 40-day strike that forced the aircraft-maker to come to terms.

"Boeing really had to concede on that one," says Bell. "Their workers had a very high skill level that they would have had a hard time replacing."

One reason for that success: The Society of Professional Engineering Employees in Aerospace was able to capitalize on the resentment its members felt toward the New Economy. In the old days in Seattle, those aircraft engineers stood at the top of the pay heap. Now, Microsoft millionaires and other high-tech winners overshadow them.

"You see a lot of people leaving these bigger, more high-tech firms and going off on their own to start businesses," says Tom Hyclak, chairman of the economics department at Lehigh University in Bethlehem, Pa. "People like that are moving into the so-called New Economy. The problem with Boeing is that [aircraft design experience] is not something you can take to do something on your own."

If unions can tap into that resentment, they may be able to appeal to more white-collar workers.

"It's really the longstanding question of dividing up the pie," says Ray Hilgert, a management professor at Washington University in St. Louis. "There's a lot of resentment that the power balance has swung so heavily" to management and owners.

But analysts don't expect big labor gains anytime soon. "You can expect to see periods like this when strikes [or the threat of them] are more prominent," says Mr. Hyclak at Lehigh University. "But that doesn't signal the revival of the labor movement."

"It's remarkable," adds Chaison. "Unions are trying to take advantage of the prosperity. But in times of prosperity, workers need unions less."

(c) Copyright 2000. The Christian Science Publishing Society

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