The Importance of Unions in the Current Economic System

Term Paper 2011 10 Pages

Business economics - Business Management, Corporate Governance


1. Introduction

The issue of unionization has been very contented in the United States for a long time. Even though it was already discussed controversially in the 19th century, it lost nothing of its actuality, despite all changes in the economic environment. Right now this can be seen in Wisconsin, where a hard-fought debate is going on about the privileges of state workers’ unions. Many people today think that unions had a lot of merits in recent history, but are outdated now and not necessary anymore. In this paper I will show that this opinion shortsighted and why unions are still an important factor in today’s society, especially in the face of the challenges of globalization.

2. History and current situation

The definition of a union is as follows:

“A trade union (BE) or labor union (AE) is an organization of workers that have banded together to achieve common goals such as better working conditions [1].”

In the USA, unionization became legally protected much later than in European countries. While in many European countries unions were already broadly accepted in the course of the 19th century, the labor movement in the United States lacked government protection much longer. In 1935, congress passed the National Labor Relations Act, also known as Wagner Act, enhancing workers’ rights by providing freedom of association and limiting the means by which employers can act against workers’ interests. This led to a huge increase in the rate of organization. After World War II one third of the labor force was organized in a union [2]. A long period of economic success and rising wages created a broad middle class. On the initiative of unions, improvements in many fields like the social net, workers’ rights, pensions or health care were achieved. However, the Taft-Hartley Act of 1947 clipped union rights again. An “increasingly hostile legal landscape and aggressive antiunion employers” [2] lead to an erosion of union power in the following decades. In 2010 the union membership was 11.9% of all wage and salary workers, 6.9% if only private sector workers are considered [3]. This tremendous decline is consonant with a general trend in most highly developed industrial economies – the shift from a mainly industry-based economy to a more knowledge-based economy. Nevertheless, a strong and widespread sentiment against unions due to perceptions of corruption, inefficiency and unfairness certainly contributes to the fact that the decline of union power is stronger in the USA than in many other countries.

3. Interests of employees and management

3.1 Interests of employees

The stockholder approach dominates management practice in the US. This means that most managers work solely as agents of the stockholders, increasing their wealth by trying to maximize the company’s profits. On the other hand, employees are mainly interested in maximizing their personal well-being. This contrast creates almost automatically conflicts of interest in a company.

Employees demand first and foremost a reasonable salary and benefits like health insurance and pension plans. Here it is not only important that workers and their families can live from their salary, but also the relation to compensations of their colleagues and managers. Therefore, things like excessive compensation of managers create a sense of unfairness in “normal” workers’ minds. In 2000, a CEO was paid on average 400 times more than an hourly worker [4]. A second paramount interest of employees is job security. This is why unions commonly speak strongly against the employment-at-will doctrine, which allows firing of employees any time for any reason – good reason, bad reason or no reason at all. Furthermore, employees also desire a safe work environment as well as fair working conditions and working hours. Representing these interests, unions were very successful in the recent decades. The Fair Labor Standards Act (FLSA) of 1938, also referred to as the Wages and Hours Bill, the Occupational Safety and Health Act (OSHA) of 1970 account for some of the biggest accomplishments of unions that are not even denied by their most passionate adversaries. There are also some further interests of employees, which may not be underestimated, like the desire for meaningful work, privacy, participation in the company and, of course, appreciation from others, especially from supervisors.

Considering these interests from the perspective of ethical theory, they are clearly in line with Kant’s respect for people principle. Based on human beings’ capacity for autonomy he derives dignity for every person that must always be respected, as he states in the second formulation of the Categorical Imperative:

“So act as to treat humanity, whether in your own person or in that of another, always as an end and never as a means only.” [5]

All the interests stated above aim at respect for the dignity and autonomy of employees. A Kantian would argue that these interests have to be respected to ensure morally right decisions of managers. Of course, another Kantian principle is “ought implies can”. Therefore, unions cannot just be demanded for ethical reasons. It must also be shown that function unions can exist in reality.

The theory of justice by John Rawls, which is based on Kantian ethics, also supports respect for the interests of employees. His concept of the veil of ignorance asks everybody to ignore all factors of social status and experiences and then consider how a just society should look like. If that way the perspective of the least well-off is taken, you will come to the conclusion that employees should be treated with dignity and respect.

Furthermore, these interests are also supported by Utilitarianism, because its purpose is the greatest good, or in the negative formulation the least harm, for the greatest number of people. Because employees are usually the majority in a company, a Utilitarian would argue that their interests have to be treated preferential and avoiding harm to them is crucial.



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Union Graduate College
Unions Ethics Business Ethics Management Ethics



Title: The Importance of Unions in the Current Economic System