Unions and the Public Interest:
The Degeneration of Collective Bargaining
Today labor unions are big business. And some of them show an increasing tendency, as A. H. Raskin here points out, to behave like businessmen of the “robber baron” era, with attitudes to the public often startlingly resembling some of the worst manifestations of that free-wheeling period. From his intimate knowledge of how collective bargaining is increasingly carried on by union and industry—a knowledge gained in covering most of the major labor-management conflicts, “negotiations,” and settlements of recent years—he traces out a dominating pattern, which he believes has in it the seeds of a transformation ominous not only for the future of labor, but for our whole society.
Twenty-one years have gone by since the passage of the National Industrial Recovery Act gave unions an affirmative legal base on which to build their membership and economic strength. This, then, should be the year in which American labor comes of age, and a good time to take stock of the extent to which unions have grown up.
If the measure is size, unions have certainly reached man’s estate. The biggest of big businesses is puny alongside the biggest union. Such giants as Walter P. Reuther’s United Automobile Workers, David J. McDonald’s United Steelworkers, or Dave Beck’s International Brotherhood of Teamsters are twice the size of the colossus of American industry—the American Telephone and Telegraph Co., with 700,000 employees.
If wealth is the test, unions need not take a back seat to our best-heeled financial institutions. Labor organizations that were so broke they had to withhold stenographers’ pay and scrounge a few dollars from the banks to pay their electric bills in the early months of the New Deal now have millions of dollars in their treasuries and many times that much in pension and welfare reserves.
If power to shut down major industries becomes the yardstick, unions have demonstrated their effectiveness so often and so completely that few employers attempt to carry out or even encourage a back-to-work movement when a strike is called. Strikes in coal, steel, and automobiles evoke so little company resistance that the unions often neglect to post pickets in places where men once died in battles for union recognition.
But if our focus is on dedication to the public welfare or on the maintenance of high standards of probity in the conduct of their affairs, the union record is full of disquieting passages. Too many unions are in a “robber baron” phase as devoid of social concern as the most sordid chapters in corporate development around the turn of the century, when “the public be damned,” and “all that the traffic will bear,” were the ruling slogans.
Racketeers have made their way into control of unions from New York to Los Angeles on a scale unparalleled since the repeal of Prohibition sent unemployed hoodlums scurrying into union ranks. Some locals have been turned into instruments of extortion; in others the underworld rulers have been content to loot the union welfare fund through kickbacks and exorbitant fees for non-existent services.
Fixers and “influence peddlers” have set themselves up as merchants of labor peace. Even where there is no gang penetration, many employers have come to the conclusion that they need a high-priced consultant with strong union and political ties to float a harmonious solution of their contract problems. Their function is very much the same as that of the “5 per centers” on whom manufacturers depended to get them government arms contracts.
The idealism that animated many veteran unionists in the days when each union advance was dearly bought is surrendering to the ethics of the market place at the lowest levels. The line between union chief and employer has become so shadowy in many industries that more and more leaders find it possible to run a union and a business at the same time. The fact that they have to write contracts with themselves presents no problem, even without the use of mirrors.
This ability to sit comfortably at both sides of the bargaining table without any feelings of ambivalence is in many ways the most disturbing of all union manifestations—worse in its implications than the seizure of union power by crooks, the atrophy of democratic process in many unions, the exaltation of one-man rule, and the increasing tendency to treat union members as the inviolable possession of the union that happened to organize them.
For it reflects, in microcosm, the ominous possibility that our great power aggregations of labor and industry are moving in the direction of collusive arrangements, based on the theory that they exist to make the most advantageous possible deals for themselves, regardless of the effects of such deals on the consumer. The only restraint on such wage and price cabals would be the danger that costs would be pushed so high that people would cease to buy, thus wiping out profits for the employer and jobs for the union’s members. Within that outer limit, the consumer would have no protection at all.
In a period when public attention is preoccupied with finding ways to reduce the economic waste caused by strikes and other expressions of labor-management conflict, it is hard to get anyone to worry very much about the possibility that our chief future problem may become the development of a cartelized economy based on excessively cordial relationships between Big Labor and Big Industry.
It is especially paradoxical to have to be concerned about too much labor peace at a time when an expected economic downturn seems to be opening the way for bitter new industrial and political battles. Labor’s campaign for a guaranteed annual wage in the mass-production industries will run into the stiffest kind of employer resistance, even though what the unions are asking is not really a wage guarantee but simply a fund to supplement state unemployment insurance payments. If labor decides to make 1954 the year for a showdown on this issue, strikes in steel or electrical manufacturing are almost certain.
Congress is likely to duck any choosing up of sides on the vexing question of Taft-Hartley amendments, but it may find itself caught in a labor-industry crossfire on what to do to shore up the economy if unemployment gets worse. But these battles, costly or politically embarrassing as they may prove, are unlikely to thwart, over the long pull, the drawing together of our great economic power-centers of industry and labor into mutually dependent relations that contain within them the seeds of collusion against the public welfare. The big question for the future is whether we will move out of labor-industry conflict into something even more destructive of democratic values than all the losses engendered by industry-wide tie-ups today.
The rise of union racketeering provides a very immediate warning of the danger that cooperation between unions and employers may take forms which are as criminal as they are corrupt. Far from being the foe of the businessman, the union racketeer is often his creature. Indeed, the racketeer is himself a businessman, an exponent of the free enterprise system at its worst.
His aim is to make every dollar he can out of his business, the union, and in the process he switches from service to the union membership to service to the employers with whom he deals. If he is really smart, however, he finds it possible to achieve both objectives.
The successful union crook is the one who can line his own pockets and improve the standards of the membership at the same time. This is not as hard as it sounds. By forming an alliance with a particular set of employers, the racketeer is able to use his control over the labor force as a weapon for hounding competitors out of business. The favored companies get strike insurance; those outside the syndicate get strikes until they knuckle under. The end result is a “stabilized” situation in which the employer members of the partnership are able to fix prices without effective restraint and the union writes its own ticket on wages and welfare protection. Both are the gainers. The loser is the public; the gains of both come out of the consumers’ pockets.
The New York City Anti-Crime Committee, under the chairmanship of Spruille Braden, the former Assistant Secretary of State, has made a fascinating study of the circumstances surrounding the formation of a trucking union to haul garbage from stores, restaurants, and other business establishments in the metropolitan area.
The committee’s investigation provided strong evidence that the union’s principal aim in life was to steer all the garbage business to one company—a company headed by an old buddy of Frank Costello. The union actively campaigned in behalf of the company and called strikes against those who balked at letting it haul their refuse. Complaints that its rates were too high got no more sympathy from the union than they did from the company. The whole set-up is under investigation by the Anti-Trust Division of the Justice Department, but the reluctance of businessmen to testify in such cases has made it difficult to round up support for an indictment.
The sordid story of employer collaboration in the degradation of the International Longshoremen’s Association is spread on the record of the New York State Crime Commission for all to read. It was a story a quarter-century in the making and it wound up in the transformation of what had been a union into an amalgamation of gangs so powerful that the insurance companies and the police joined with the shipping lines and the stevedores in acknowledging and confirming their supremacy.
The ILA was a Frankenstein monster of the employers’ own fabrication. They subverted the union over the years; they kept its president, Joseph P. Ryan, in automobiles and expensive clothes, right down to the pajamas he wore to bed at night; they subsidized the hooligans Ryan recruited from Sing Sing to hold the rank and file in subjection. The imported gangsters set up satrapies of their own within the union and battled among themselves for control of the international organization; the membership lost its docility as the abuses of the high command became increasingly flagrant. But at no time, even when its investments in “harmonious labor relations” ceased to pay any dividends, did the shipping industry undertake any discernible role of leadership in the campaign to dislodge the ILA from its dominant position on the piers. On the contrary, the employers took sanctuary in the pious defense that the law required them to be “neutral” in union affairs.
By the time the American Federation of Labor kicked it out, ILA was an anachronism in union corruption. The more up-to-date operators in the field of union administration as a road to riches are a good deal slicker than Joe Ryan and his confederates. Take the late Thomas F. Lewis, slain union boss of the Yonkers Raceway, and Joseph J. Delaney, who succeeded to the vice-presidency of the AFL Operating Engineers after Joe Fay went to jail for shaking down building contractors.
Lewis, an enterprising fellow, was quick to grasp the potentialities of union welfare funds as a source of personal income. Through his wife, he became a partner in an insurance agency into which he funneled all the money paid by employers to provide hospitalization, life insurance, and other forms of welfare protection for the 5,000 apartment house, country club, and race track workers who belonged to the Lewis union. More than one-quarter of all the money stayed with the agency—a total take for Lewis and his associates in a five-year period of $412,634. The employers, who theoretically exercised joint trusteeship over the funds, took the view that it was really the workers’ money and there was no reason for them to antagonize Lewis by quibbling about how it was spent.
Joe Delaney shared in the Lewis swag. He was listed in the agency’s records as a consultant, but a diligent effort by investigators for the State Insurance Department failed to produce any record of his ever having been consulted about anything. The closest thing to consultation Delaney could recall was that Lewis once had asked him, “Joe, what’s new?” Delaney never came to the agency’s office, but his services were considered so valuable that he got a raise in pay halfway through his fourteen months of consultation. At the start he and his union aide, Richard Nolan, were struggling along on a combined salary of $350 a week, but later this was pushed up to $400. This did not, of course, take into account what Delaney and Nolan were drawing in salary and expenses for their regular duties as officers of the International Union of Operating Engineers.
The fact that Delaney’s own union and a number of others in which his influence was strong placed their welfare business with the Lewis agency might just possibly have had something to do with the money he was paid. Delaney has been a lavish liver for many years. He has a home in the exclusive Fieldston section of the Bronx and another in fashionable Westport, Connecticut; he owns two big cars and he spends about half the year at the race track. Once he showed a friend a $10,000 check he had received at a testimonial dinner given in his honor by one of his union locals. He was properly indignant when asked why he had not taken the money in cash: “I don’t do things that way.”
Another union officer with a highly developed business sense is James R. Hoffa, kingpin of the AFL Teamsters Union in the Midwest states. Hoffa is an engaging sort of roughneck, idealized by the truck drivers he leads. When he proposed last year that he be permitted to buy a secondhand Beech-craft plane to hop around his territory in, his members were outraged at the idea that he be allowed to risk his neck in such fashion. They voted to buy him a new Douglas DC-3 instead. He turned down the offer.
But the members got an insight into another phase of the Hoffa character when a Congressional investigating committee got to work on him a couple of months ago. The testimony the probers turned up indicated that Hoffa was in more businesses than the House of Morgan. His basic union pay comes to $21,000 a year, but one investigator estimated that his total annual income from all his enterprises was almost ten times that.
Hoffa’s business interests ranged from a share in a Flint brewery and a Columbus harness racing track to boys’ and girls’ vacation camps in Wisconsin. The most piquant testimony related to the formation by Hoffa and Bert Brennan, another union official, of a car haulaway agency that paid their wives $65,000 in dividends in less than three years. They set up the agency and got a prized contract to transport cars for General Motors after they had forced settlement of a strike by nine independent haulaway truck operators in 1948. One of the strikers testified that Hoffa had “jumped down our throats” to get the strike called off.
The new agency had only one employee. He had the title of vice-president and general manager, and he told the Congressional committee that the 100 shares of ownership stock were divided equally between the two wives. They set up in business by buying ten trucks from the company that had been on strike, at a cost of $20,000, and then proceeding to rent them back to the company at a rental of $70,000 for the year. The hearings drew a blank on efforts to find out what happened to $100,000 in checks endorsed by the insurance agent to whom Hoffa’s union had given its welfare business. The investigators made no secret of their belief that the checks represented kickbacks to union officials, but no one would admit it. The fact that the insurance agent was the son of a Chicago AFL unionist with powerful racket associations did nothing to dispel the probers’ suspicions. Neither did the fact that the company that wrote the welfare insurance had won out over rival bidders with a much lower retention rate.
For those who regard an honest trade union movement as essential to the maintenance of any kind of idealism in a democratic society, it is heartening to note the disquiet with which the leadership of all major unions views the spread of corruption in union ranks. George Meany and the AFL Executive Council have tossed into the ashcan the seventy-year-old concept that an AFL charter gave the officers of each international a license to do exactly what they pleased without any interference from the parent body.
In expelling the International Longshoremen’s Association, the Federation made itself the custodian of the good name of all its affiliates. How aggressively it will follow through on this policy in the Operating Engineers and other polluted unions remains to be seen, but the will to clean house is strong among some of those who only a year ago were staunch supporters of the hands-off doctrine of union autonomy.
The mass-production unions in the Congress of Industrial Organizations have been far less vulnerable to the incursions of racketeers than the AFL unions that have the bulk of their strength in construction, trucking, entertainment, food, and other industries with local organization and a multiplicity of small, competing employers.
But there are indications that the shooting of Walter P. Reuther, president of both the CIO and the United Automobile Workers, was engineered by racketeers bent on seizing control of the auto union. What is more, there is reason to suppose that the would-be assassins had links with union-busting employers in the auto industry. These employers apparently proceeded on the theory that their businesses would do better with a complaisant union than with no union at all. Other CIO unions have had less spectacular experiences with attempts at racket penetration, and in several unpublicized instances minor union leaders have been removed for getting too chummy with management.
Without minimizing the extent of union racketeering that remains, it is fair to point out that the men at the head of organized labor have demonstrated a greater disposition to do something about uprooting it than the employers who have had contact with union crooks. Industry has had a great deal to say, in the broad sense, about labor racketeering, just as it had a great deal to say about Communism in trade unions in the days when a sizeable chunk of the CIO was under Communist rule. But when it comes to assisting the authorities in prosecuting union racketeers, employers are just as loath to come forward as they were to stand up against Communists in the unions.
It is not simply a matter of fear. Over and over again I have heard employers say about some notorious union freebooter: “I never knew him to go back on his word,” or, “We always got along fine with him,” or, “All he wanted was to make a buck, what’s so wrong about that?” Among those who have been most sedulous in petitioning the State Parole Board to let Joe Fay out of jail are the very employers whom he shook down. They say they never met anyone more interested in promoting labor peace.
That brings us back to what seems to me the pivotal problem, and the one the AFL and CIO appear to have overlooked entirely in their approach to union racketeering. The real significance of the racketeer is not that he is a crook, but that he is a pathological expression of the kind of labor-management cooperation toward which industrial relations are headed.
The most universally applauded precept of labor statesmanship is the notion that the welfare of the worker is inextricably bound’ up with the welfare of the industry in which he works. Hand in hand with this goes the concept that one cannot prosper unless the other prospers. If the identity of interest is so complete, what is wrong with the head of a union running a business? Why shouldn’t the president of the Bakery Union operate a bakery, or the president of the Teamsters Union own a fleet of trucks? How else can a union leader understand what is good for the industry that gives his members their livelihood?
A lot of local union officers, who would be irate at the suggestion that they are betraying their members, do find it in their conscience to function as silent partners in companies that operate under union contracts they help to write. Their number may be microscopic when considered against the 30,000 or so paid officials who work for unions in this country, but the fact that there are any indicates the direction in which we are going.
There are two main reasons for believing that labor and management will grow closer and closer together, with adverse results that may outweigh the gains resulting from a sharp reduction in strikes. One is that the precipitous growth in the size, wealth, and power of unions, coupled with the postwar emphasis on industry-wide and even economy-wide wage patterns, has inevitably made unions more bureaucratic, their leadership more self-contained, their contact with the rank and file more remote. Unions are big business and the problems of bigness tend to make their leaders think of themselves as administrators in much the same way that the officialdom of AT&T or General Motors envisages itself in its relations to its hundreds of thousands of stockholders.
In a sense, it is outdated to talk of labor-management negotiations. It is more accurate to talk of negotiations between the management of labor and the management of industry. They negotiate on mutual problems and each seeks to emerge with an agreement that will serve the interests of his group. But, if both start with the premise that neither can succeed without the help and prosperity of the other, then the negotiations cease to be a duel and become a joint search for a formula that will make each group of administrators look good in the eyes of its principals—in one case, the union rank and file, and in the other, the owners.
A year ago, with a businessman’s government come to power in Washington, many observers feared that industry would unleash an all-out attack on unions. It took only a few months to make plain that the ideas of the real pattern-setters in industry ran to more cooperation, not less. General Motors took Walter Reuther off an uncomfortable spot by voluntarily improving the wage and pension provisions of a contract that still had two years to run. United States Steel gave Philip Murray’s successor, David McDonald, a handsome first contract and thus spared him the unpleasant necessity of starting his career with a strike. In both cases the union gains were investments in good will on the part of the companies.
These settlements evoked widespread and merited public approval. They provided improved economic standards for the union members, strengthened the unions, and enhanced both the prestige and security of the union leaders. The employers, for their part, were entitled to expect that their generosity would bear fruit in more cordial shop relations, increased productivity, and a greater assumption of responsibility by the union leadership for combating wildcat stoppages and other breaches of plant discipline. No one quarrels with these objectives; they are all thoroughly desirable. They become harmful only when the managers of labor and industry grow so eager to give one another a hand up that the public finds itself mashed under the rock-crusher of uninhibited cartels.
This brings up the second danger point in union structure. It is the cross pull engendered by the union’s dual role as guardian of the worker’s interest as consumer and also as wage-earner. After all, the vast bulk of consumers are themselves workers. As the mainstay of the consuming public, the worker is concerned with keeping the general level of prices down and thus maintaining or increasing the purchasing power of his pay envelope. As a wage-earner in a particular industry, however, the worker’s concern runs in the opposite direction. He is perfectly willing to have his employer raise prices if that will make it easier for the worker to get more pay.
The result is that unions have cheerfully accepted the onus for price increases that go far beyond the amount necessary to cover the agreed-upon improvements in labor costs. Michael J. Quill and his Transport Workers Union carry the ball on higher subway and bus fares. The Utility Workers Union sends representatives to the Public Service Commission to warn against setting electric rates so low there will be no margin left for wage rises. The Building Service Employees Union lobbies for the abolition of rent controls as a means of providing more money for landlords and janitors alike. The national CIO has an “understanding” with its telephone union, the Communications Workers of America, under which CIO central bodies are barred from opposing higher telephone charges unless they get a green light from the Bell System union.
In the recent New York milk strike, the milk distributors were obliged to constitute themselves the public’s shield against an attempt by the Milk Wagon Drivers Union to wipe out the three-cent-a-quart differential between the price of store- and home-delivered milk and thus make store sales uneconomic. The strike ended in a general rise in milk prices, but the dealers held out against the union’s make-work scheme for encouraging home deliveries by a disproportionate boost in store cost.
The list of situations in which unions have allowed themselves to be used as whipping boys for price increases could be extended indefinitely. Indeed, in the days of wage and price regulations, the stabilization agencies grew accustomed to union pleas for above-ceiling price hikes and employer petitions for above-ceiling wage jumps. Now that economic controls are ended, this kind of back-scratching can go on without exposure to embarrassing publicity.
Union cooperation in such endeavors does not reflect any deliberate desire to hurt the consumer. On the contrary, the leaders of organized labor are quite sincere when they say, in the words of Walter Reuther, that unions must go forward with the community and not at the expense of the community. Or when they paraphrase Charles E. Wilson’s unhappy remark about General Motors and say: “What is good for America is good for labor.” Unions, in their capacity as spokesmen for a broad segment of the consuming public, use their limited legislative influence to push programs for expanded social security, housing, education, and a general strengthening of the economy in the interest of all Americans.1 And they have been a chief mainstay on the international scene in firming up American foreign policy in defense of our free society against the Communist aggressor.
The basic problem is that unions are themselves political organisms, and it is difficult to carry the public service spirit to the bargaining table. The union member may ardently support the New Deal in national elections, but his idealism is limited to the size of his pay check when a new contract is written. The union leader, dependent on membership support for his job, follows the course that means most pork chops for the rank and file.
That course is likely to carry him into an increasingly intimate relationship with industrial management. He tends more and more to make himself over in the image of the men who sit opposite him in collective bargaining—union salaries go up, opulent headquarters are built, the union leader stays at the best hotels and complains if his suite is not pretentious enough, the union buys him a winter home in Florida, he joins a country club, and in a thousand other ways satisfies his urge for status.2
And, as his living standards grow away from those of the men he represents, the necessity for holding their support becomes increasingly acute. Otherwise, he is faced with the prospect of going back to his work bench as a rank-and-filer himself, stripped of the power and comforts he has learned to cherish. The problem is a real one, a very human one, a very difficult one.
It will take a lot of thought—a fundamental reexamination of most of the standards we hold for labor-industry conduct—to come up with any sound answer. The needle trades, operating under a benevolent union despotism, have worked out an admirable relationship under conditions too specialized to have much general application. Some headway toward a broader solution has been made in the Reuther-General Motors provision for non-inflationary wage increases based on technological improvements and other gains in productivity. But this slide rule approach is no complete answer. If labor and industry do not find a way to protect the public, a reaction will set in and the public will find its own way. The outcome may be an economy in which the government makes all decisions. In that kind of economy, all of us together stand to lose our freedom.
Working out effective safeguards for the community interest may mean a short-term exposure to more and longer strikes, but that price will be worth paying if in the end we get a thoroughgoing acceptance by all the power forces in our economy of the idea that the economy exists to serve the total welfare of society and not to provide special privileges to those who command the greatest strength.
We must recognize, too, that we will not get a pro-public labor movement simply “by making the labor movement more democratic.” Indeed, the more democratic our unions are, the harder it may become for their leaders to make the public interest paramount. The leader who has a dozen rivals gunning for a job is more likely to try to outdo them in promising benefits to the rank and file than he is to promote a sober sense of civic responsibility. Most unions stored their education programs away so long ago that the chances of reviving them are slim. But somewhere, somehow, someone is going to have to make a start toward building affirmative membership support for relationships that are cooperative without being collusive. That is the road to a fruitful, free economy in which the benefits of rising productivity are applied to higher standards for consumers, workers, and employers alike.
1 When it comes to public policy affecting their own narrow interests, however, unions have shown less concern with the general welfare. Individual unions line up with their employers in support of tariff bills intended to restrict foreign competition in their industries, even though the general labor policy endorses removal of trade barriers. The same tendency to put selfish interest first reflects itself in the approach of most unions to legislation having to do with their own industries—e.g., the opposition of utility unions to the extension of public power, the insistence of maritime unions on shipping in American vessels, the hostility of railroad unions to laws benefiting trucking, etc.
2 The head of the local Chamber of Commerce stirred appreciative laughter at the AFL convention in St. Louis last year when he said the evident prosperity of the unionists made it hard for him to tell from the dais whether the sign on one of the delegates’ tables read “bankers” or “bakers.” The tendency of many union heads to think of themselves as bankers exercising unbridled control over their union treasuries was strikingly reflected in John L. Lewis’s decision to turn over $100,000 in United Mine Workers’ funds to the orphaned ILA. There is no record to indicate that he bothered to ask anyone else in the mine union whether it was a good idea.