Discussions about the future of work are clearly in the air.
This week, Secretary of Labor Tom Perez is convening a three-day symposium on the issue. Simultaneously, the Brookings Institution hosted a discussion about the implications of the “gig” economy for work and employment policy. At MIT, we are also planning a similar conversation for early next year.
And in Silicon Valley, leaders of high-tech companies and worker advocates have recently started discussing new ways to offer benefits to contract workers following several high-profile cases in which Uber drivers and others have sued to be considered regular employees and gain the accompanying benefits.
All this couldn’t come at a better moment, but time is of the essence. Unless talk leads to actions to change the course of the economy and labor market, the next generation of workers is destined to experience a lower standard of living than their parents – the opposite of the American Dream.
What’s the one thing Pope Francis, Barack Obama, Marco Rubio, and Warren Buffett all agree on? America needs to change the way it sets wages to overcome its economically and politically unsustainable levels of income inequality.
The question is how? Let’s start with some lessons from history and see how we can apply them to today’s economy and society.
For 30 years after World War II, wages and productivity in the U.S. moved up in tandem, creating a growing middle class and ensuring baby boomers could realize their American Dream. We called that the “post-war Social Contract.” Then in the 1980s, the social contract fell apart, starting 30 years of stagnant wages, growing inequality, and political polarization.
The post-war Social Contract was possible because the New Deal established a floor on minimum wages and protected workers’ rights to organize and engage in collective bargaining. Then in the mid-1940s as the domestic economy grew on the basis of purchasing power pent up during the war, United Auto Workers’ President Walter Reuther and General Motors (GM) CEO Charles Wilson negotiated what was called the “Treaty of Detroit,” specifying that wage increases would be set to match growth in the cost of living and productivity. The strength of unions then helped spread this “pattern” bargain across American industry.
Works councils — elected bodies representing all workers in a plant, both blue and white collar — are acclaimed as one of the best, most innovative features of Germany’s labor relations system. They have been shown to enhance efficiency, adaptability and cooperation. By supporting the use of work sharing (agreeing to reduce everyone’s hours rather than laying some people off), for example, these councils helped Germany experience less unemployment during the Great Recession and a faster, more robust recovery since then.
For years, labor law, labor economics and labor-management researchers like us have urged experimentation with works councils in the United States. Volkswagen and the United Auto Workers are proposing to do just that at Volkswagen’s Tennessee plant. This could be a watershed in American labor relations, one that rejects the outmoded adversarial doctrines that have built up in U.S. labor law and practice. And it signals management and labor support for a new model of cooperation and partnership.
Unfortunately, the National Right to Work Legal Defense Foundation and others are opposing this effort by arguing that such cooperation would violate U.S. labor law’s 1935 ban on sham or “company” dominated unions.
A comparison of German and American labor law makes it clear they are dead wrong.