Portside Date: August 9, 2016

Author: Saqib Bhatti and Stephen Lerner

Date of source: August 9, 2016

Jacobin

The numbers have grown familiar, though no less stark. When the American Federation of Labor (AFL) and the Congress of Industrial Organizations (CIO) merged in 1955, one in three private-sector workers were in unions. Union density in the private sector has declined with increasing speed almost every year since then, and less than 7 percent of private-sector workers belong to unions today.

Having already crippled private-sector unions, corporations, the superrich, and the Right have now set their sights on the public sector. The Supreme Court dealt public-sector unions a devastating blow with its Harris v. Quinn decision in 2014 and would have landed a knockout punch to public-sector unions with Friedrichs v. California Teachers Association if Justice Antonin Scalia had not died unexpectedly.

But these decisions are merely symptoms of labor’s decline, not its cause. The challenge before the labor movement today is to figure out how to reverse course now, when it is smaller and weaker than it has been in nearly a century.

Anything that unions can do by themselves with the dwindling power they have now will necessarily be insufficient. Instead they need to think and act bigger than ever before to rise to the challenges of the new economic realities we now live in.

For too long most unions defined their mission narrowly as winning higher wages and benefits for unionized workers without challenging how companies were managed or how capital was invested and controlled. Unions accepted that it was management’s job to run companies and the broader economy, and that the unions’ primary job was to get as much as possible for their members.

This still dominates labor’s thinking: we focus on income inequality but not wealth inequality; we focus on how to raise the bottom, but not how to stop wealth from concentrating at the top; we deal with our direct employers, but not those who really control the broader socioeconomic conditions in which our members work and their families live.

We have bought into the notion that the boss is entitled to endless profits and should be allowed to have control of the business and the economy as long as our members win incremental improvements in every contract. But that bargain no longer works.

First, our planet cannot sustain endless profits, and as the global climate changes, it is the working poor who will be the first to suffer the consequences. Second, even incremental, contractual improvements are getting harder to come by, as contract negotiations are increasingly reduced to defensive fights to limit cuts and concessions.

This approach does nothing to address the structural problems in our economy and is at the root of labor’s relentless decline. While it is important for unions to work on raising the floor, that alone is inadequate. They also need to stop wealth and power from concentrating at the top, and to do that they need to get serious about democratizing and winning greater control over capital.

Following the Money

Over the last forty years, there has been a fundamental shift in the United States that has seen economic and political power shift to the financial sector. The biggest investors in most major corporations are big banks, hedge funds, private equity firms, investment houses, and other Wall Street firms. The financial sector now accounts for nearly a third of all corporate profits in the country.

This trend, known as “financialization,” has fundamentally altered the employer-employee relationship.

Many private-sector unions believe they are primarily bargaining with their direct employers. However, increasingly the companies that sign workers’ paychecks are no longer the ultimate decision-makers.

This is most evident among subcontracted, outsourced, and “1099” workers (workers who are paid as independent contractors). But even for workers who are directly employed by their companies, management’s decisions are driven by pressures from investors.

Wall Street investors do not simply want their companies and the companies they control to be profitable — they want them to be more profitable and to generate higher shareholder returns than the year before. Because endless growth in profits is not economically (or environmentally) sustainable, one way to generate higher returns is to push their CEOs to cut expenses, which include labor costs.

But unions don’t typically enter into negotiations with the investors. They deal with their direct employer, even though in many major companies investors, even the CEOs, are ultimately constrained by the pressures put on them by investors.

Unions need to start looking to these actors higher up the food chain, to the people who control the money in the public sector as well as the private sector.

In the public sector, state and local officials accurately decry the fact that there is not enough money in public coffers to properly fund public services. However, the reason why there isn’t enough money is that corporations and the wealthy have waged a sustained war on taxes over the past forty years to avoid paying more.

Increasingly, these corporations are owned by Wall Street investors seeking to cut taxes in order to increase their return on investment. These wealthy few have a large part of their wealth tied up in the financial sector.

By trying to squeeze pennies out of public officials while letting the billionaires and bankers off the hook, public-sector unions are fighting with one hand tied behind their back.

Illinois is facing an unprecedented budget crisis and Governor Bruce Rauner is refusing to negotiate in good faith with the nearly one hundred thousand state workers who are currently in contract negotiations. However, Rauner, who himself is a former private equity firm manager, would have more than enough money to settle state workers’ contracts if he passed a millionaires’ tax to make hedge fund manager Ken Griffin pay more in taxes, or if he passed a financial transactions tax on the exchanges run by the state’s most profitable company, the CME Group, which runs the Chicago Board of Trade and Chicago Mercantile Exchange.

Public-sector unions in Illinois have come to realize that they cannot win unless they can force millionaires and big corporations to throw more money into the public pot, and they are increasingly matching this analysis with bargaining proposals that call for progressive revenue solutions, in partnership with community organizations like the Grassroots Collaborative.

For example, the Chicago Teachers Union held a one-day strike for revenue on April 1, which directly engaged community organizations, students’ groups, and racial justice groups from across the city who had disparate issues but all shared one common theme: a demand around more city and state funding for services, particularly in working-class communities of color.

The Grassroots Collaborative is now leading the CTU, SEIU, and other community partners in a campaign to force the governor to stop an $870 million payout to Wall Street banks and to use that money to fund services instead.

Most unions are accustomed to bargaining with their direct employers, as they have done for decades. But the financialization of the economy has rendered that structure obsolete.

The financial sector is extractive — it extracts money from corporate and government balance sheets alike. As a result, traditional employers often no longer have the money or ability to meet workers’ demands.

In order to win for workers, unions need to take their demands directly to those who actually have the money and control. They can often be found on Wall Street.

Bargaining for the Common Good

American unions sometimes act as though their members’ lives start when they clock in at work and end when they clock out. As a result, most unions bargain with employers solely over workplace issues. But they do so at their own peril.

In a society in which corporations have come to control so many different aspects of our lives and may even render our planet uninhabitable, any union that ignores the other impacts that a company is having on the broader communities in which its members live is missing a golden organizing opportunity. Unions need to push beyond mandatory or permissible subjects of bargaining to bargain over issues that matter to their members and their communities.

By doing this, they can redefine the role of the labor movement and show with their actions that the interests and fortunes of union members and their communities are intrinsically linked.

For example, SEIU Local 26 represents janitors and security guards at US Bank’s corporate headquarters in Minneapolis. Many of these SEIU members are Somali immigrants who now find themselves unable to send money back home because nearly all American banks refuse to transfer remittances to Somalia any more. This is a crisis because 40 percent of Somalis rely on remittances from relatives abroad.

Local 26 has taken on this issue directly. In addition to demanding that US Bank guarantee fair wages and benefits for union members working in its buildings, Local 26 is also working with the Minnesotans for a Fair Economy community-labor partnership to demand that the bank restart remittances to Somalia.

Similarly, hotel workers at Hilton who are being priced out of their neighborhoods in cities around the country would probably care deeply that the Blackstone Group — the world’s largest private equity firm, which manages $311 billion of investments and is Hilton’s largest shareholder — is buying up homes in their neighborhoods, converting them to rentals, and raising prices. Blackstone is now the largest landlord of single-family homes in the country and is on its way to being the biggest landlord of rental properties in New York City.

A fifty-cents-per-hour raise is a lot less valuable if your rent has shot up 25 percent in three years.

In addition to bargaining over wages and benefits, unions representing Hilton workers and other companies controlled by Blackstone, like Equity Office, could also demand that Blackstone freeze rents on its rental properties at rates that would be affordable to Blackstone workers. A campaign to fully unionize Blackstone-owned companies and keep rent affordable would unite the work of housing groups and unions in a powerful way.

By expanding the purview of bargaining beyond the strict confines of the workplace, unions can also build stronger, long-term partnerships with the communities their members live in and serve.

In the public sector, where the employer is the government that writes public policy and the customer is the community in which union members live, public-sector union members are uniquely positioned to use workplace bargaining to demand broader social change that will positively impact their communities.

The Fix L.A. Campaign brought together community groups and unions during citywide bargaining and allowed them to successfully resist demands for concessions and score major victories. The coalition won an agreement from the city to create five thousand new city jobs, to prioritize hiring those workers from the city’s disadvantaged communities, and to form a revenue commission to identify ways to increase funding for those jobs and other city services.

The Saint Paul Federation of Teachers has also used this strategy. In contract negotiations, the union demanded that the school district stop doing business with banks that foreclose on schoolchildren during the school year.

Not only are foreclosures disruptive to affected students’ education, but the union argued that it is also highly disruptive to the rest of the class to have displaced students cycling in and out throughout the year.

On July 19 the Saint Paul Federation of Teachers led a march, during the American Federation of Teachers convention, protesting the killing of Philando Castile that ended at US Bank to illustrate that US Bank profits off of the school-to-prison pipeline (they invest in private prisons) and other business activities that suck wealth out of communities of color.

The biggest long-term threat facing all workers today is global climate change. Our planet cannot sustain the endless profits that corporate investors demand.

Unions need to think boldly about putting forth bargaining demands and demands in organizing campaigns that tackle this problem directly as part of a broader campaign to “a just transition to sustainable production and consumption.”

For example, the United Auto Workers (UAW), could bargain over emissions standards for the cars and trucks their members build, uniting with and winning the support of environmental groups in a call for well-paying jobs that produce environmentally sustainable cars.

Public-sector workers can demand that the state and local governments with which they bargain implement policies like greening their infrastructure, increasing investment in mass transit, providing workers with transportation benefits, and ending business with companies that partake in, invest in, or fund environmentally destructive practices.

Supporting the creation of state and municipal banks also offers cities and states the opportunity to create vehicles to invest in and finance sustainable development projects and policies.

Finally, all workers with pensions can play an active role in pushing their pension funds to divest from fossil fuels and other extractive industries and to use their shares to advocate for corporate policies that promote long-term sustainability.

Unions can play a key role in ensuring that workers’ capital is used to change the extractive corporate business model that would trade the long-term survival of all humanity for short-term profit.

Breaking the Law to Change the Law

Some will point out that employers are not required to bargain over non-workplace issues, and that public-sector labor law in many states makes doing so illegal. Unions should do it anyway.

We will never pass the laws we need unless we are willing to break the laws that exist. Our lawmakers have been bought and paid for by bankers and billionaires. They enact laws to make anything that is effective illegal.

Secondary boycotts were effective until Congress outlawed them. Corporate social responsibility campaigns have helped secure many victories, which is why courts are now letting employers use RICO laws to stymie them.

The public sector is the last union stronghold in the United States, which is why conservatives have been funding lawsuits aimed at securing a Supreme Court ruling that holds fair-share fees in the public sector to be unconstitutional.

If unions limit themselves to what is permissible by law, then they will never be able to win structural changes. Throughout history, mass movements have led the way and changes in law have followed.

The Civil Rights Movement didn’t start with the passage of the Civil Rights Act in 1964. The women’s suffrage movement didn’t get underway after the passage of the Nineteenth Amendment.

We can only win radical changes in the law if we bring the crisis in our communities and workplaces to the doorsteps of those in power. We have to directly confront them with our demands, make then uncomfortable, and cost them real money to get them to agree to stop using their wealth to hold our democracy hostage and plunder our planet.

We must recognize, however, that when something makes rich people uncomfortable or costs them money, they tend to find a way to make it illegal. In order to be effective, we must be willing to break the law like generations of organizers have done before us.

Exercising Greater Control of Capital

These strategies need to be matched with bigger demands aimed at fundamentally transforming workers’ relationship with finance capital.

For years, American unions accepted the argument that if we grew the pie, then workers’ share would also get bigger. But this trickle-down, “what’s good for the boss is also good for workers” approach — which many would argue never worked — certainly does not work in an extractive economy dominated by the financial sector.

The only way to shift the balance of power toward workers is to take from Wall Street. There are several ways to do this.

The largest pools of worker-owned capital in the world are public pension funds. However, instead of using worker capital strategically to empower the working class, we willingly hand that control over to investment managers on Wall Street, and we pay them expensive fees for the privilege.

There are two strategies that workers are starting to employ to take control of public pension funds to ensure that their capital protects their class interests. The first is divestment from hedge funds, which are the most extractive and economically destructive types of investments available on Wall Street.

Building on the recent decision by the California Public Employees’ Retirement System, the largest public pension fund in the country, to divest from hedge funds, the Hedge Clippers campaign has embarked on a plan to work with unions to move billions of public pension dollars out of hedge fund investments over the next two years.

And we’ve had successes, most notably in the recent decision by the New York City Employees’ Retirement System — which has total assets of $51.2 billion — to eliminate nearly all of its investments in hedge funds. The Illinois State Board of Investment, the University of California, and the University of Maryland all recently reduced their hedge fund investments as well.

The second is bringing pension fund management in-house in order to cut out Wall Street altogether. Instead of paying Wall Street firms exorbitant fees to manage workers’ investments, public pension funds can hire in-house investment managers who are directly accountable to pension fund trustees for a fraction of the cost.

The Ontario Municipal Employees Retirement System (OMERS) in Canada uses in-house managers to manage nearly its entire investment portfolio. Union members and retirees can push their pension fund trustees to follow OMERS’s lead and insource investment management.

While this would be far from a complete solution to unions’ problems, at least Wall Street firms would suffer a major financial blow from the loss of union business.

This idea of cutting out Wall Street altogether does not need to be limited to pension fund investments. State and local governments in the United States have $3.7 trillion of outstanding municipal bond debt.

They do billions of dollars of business with banks every year, which allows Wall Street banks to profit from the budget crisis at Chicago Public Schools, or the bankruptcy of Detroit, or the Puerto Rican debt crisis, all by selling them predatory financial deals.

Many of the financial services that banks provide to municipal borrowers could be more cheaply provided by a public entity. For example, instead of paying bond underwriters millions in fees on each bond sale, states and many bigger cities could underwrite their own bonds.

States could similarly cosign bonds issued by smaller municipalities with weaker credit ratings instead of forcing them to get “credit enhancements” from banks. In contract negotiations, public-sector unions could demand that their employers pursue these models for creating public options for financial services.

But perhaps the most meaningful change in the municipal finance system would be if the Federal Reserve started lending to cities and states directly, cutting out the need for banks in the municipal finance system altogether.

Instead spending billions each year on banking fees and high-interest payments, this would allow cities and states to access low-interest loans from the Fed without all the fees.

Many of the community groups and unions organizing around the Puerto Rican debt crisis have been calling on the Federal Reserve to provide an emergency loan to help the island avoid the humanitarian catastrophe that further austerity measures would bring.

But there is no reason why the Fed should have to wait for a crisis to take such action. It should do so, on a regular basis.

Unions should join organizations like the Fed Up campaign that are pushing the Fed to lend directly to state and local governments to save taxpayers billions of dollars and help combat the transfer of wealth that takes place when cities and states have to pay banks to borrow money from them in order to fund services or infrastructure improvements.

In areas where it is not possible to bring financial services in-house, the ReFund America Project has called on cities and states to band together and use their leverage as customers of Wall Street to collectively bargain for better deals and fairer terms.

The market rate is what it is because a small number of large financial institutions dominate the municipal finance landscape and, over time, they have established industry norms that are driven by their profit motive.

Cities and states can push against their power by adopting guidelines for an efficient municipal finance system with caps on fees and interest rates, prohibitions on predatory practices, transparency and disclosure requirements, and requirements that bankers exercise a fiduciary responsibility to citizens.

And they should collectively refuse to do any business at all with any bank that refuses to abide by those guidelines. In this way participating cities and states would be able to use their collective economic leverage to negotiate better terms with Wall Street.

Just the three largest cities in the country and their related governmental units and pension funds do nearly $600 billion of business with the financial sector every year. That is bigger than the gross domestic product of Sweden.

If they came together and flexed their muscles, they could be remarkably effective at limiting the public dollars flowing from cities to Wall Street. Public-sector unions could play a role in demanding their employers collectively bargain with Wall Street and in helping to establish a mechanism for so doing.

Finally, cities and states should establish public banks that are directly owned by taxpayers. Public banks can provide a range of services and provide capital to state and local governments that could be used to provide local economic stimulus, invest in the local community, or plug budget deficits.

Depending on local needs, revenue from these banks could be used to bolster affordable housing developments, early childhood education programs, infrastructure upgrades, green energy retrofitting programs, or other capital-intensive projects. These banks can ensure that public capital is serving the interests of the general public instead of serving the financial sector.

North Dakota already has a thriving state-owned bank that returns an annual profit and helped the state weather the Great Recession relatively unscathed. Unions can fight for the establishment of public banks at the state, county, or city levels.

A Movement To Challenge Finance

There are a growing number of unions that are starting to make this shift. They are following the money to identify the financial interests at the top of the food chain. Three good examples of this are: AFT’s Hedge Clippers campaign, which focuses on how billionaire hedge fund managers drive political and economic inequality; the Communications Workers of America’s bank worker organizing campaign through the Committee for Better Banks, which connects unfair sales goals for workers and the selling of predatory products to consumers; and the recently launched Take on Wall Street Campaign, focused on federal regulation and legislation with the goal of reining in and limiting the power of Wall Street.

These and other campaigns like the Bargaining for Common Good campaign are building relationships with community partners around a shared analysis about what it takes to build power by weakening Wall Street. They are taking their demands directly to the doorsteps of the bankers and billionaires that wield economic and political power in their cities and states.

Instead of hunkering down on narrow contract campaigns, they are aiming big, waging campaigns to win control over capital and curtailing the power of the financial sector.

In doing so, they are planting the seeds of a movement grounded in the reality of how the economy is now organized and a vision of winning change for workers and the communities in which they live.

Saquib Bhatti is the director the ReFund America Project and a fellow at the Roosevelt Institute. Stephen Lerner is a fellow at Georgetown University's Kalmanovitz Iniative for Labor and the Working Poor. He is also the architect of the Justice for Janitors campaign.