May 30, 2017

Private: Managerial Power, Financial Power, and Worker Power


2017 ACS National Convention, Brishen Rogers

*This piece is part of the ACSblog Symposium: 2017 ACS National Convention. The symposium will consider topics featured at the three day convention, scheduled for June 8-10, 2017. Learn more about the Convention here

by Brishen Rogers, Associate Professor of Law, Temple University Beasley School of Law and Visiting Professor, Spring 2017, Washington University in St. Louis and European University Institute, Florence Italy

The rise of platform economy firms such as Uber, Lyft and TaskRabbit have drawn public attention to the fact that more and more workers today are financially insecure, lack even basic statutory employment rights and have little or no job security. While this public attention is welcome, these issues are not new.  They are rooted in the long-running shift of power in the economy away from workers and unions and toward large corporations and financial firms. 

Take the fissuring of employment. This has resulted from a set of conscious choices to reorganize firms or production strategies so as to economize on labor costs. And the incentives to take such steps have increased dramatically in recent years. An individual commercial building owner with only a bank mortgage to service may be perfectly happy to collect marginally lower profits in exchange for a harmonious relationship with her janitors and security guards. A real estate investment trust with dozens or hundreds of buildings and external shareholders has different priorities, and may seek to keep wages down or — failing that — to outsource and de-unionize the workforce. 

Many low-wage sectors have such dynamics today, particularly where firms have few options to enhance labor productivity. This is the case in logistics (where FedEx drivers and warehouse workers in Walmart’s supply chain are often independent contractors or temps); in fast food (where workers are often employed by McDonalds and Burger King franchisees rather than parent companies); in hospitality (where individual Marriotts and Hiltons are independently operated, sometimes with subcontracted services); and of course in the platform economy, where Uber drivers and Handy workers are misclassified as independent contractors. 

Of course, if we were to magically change all fissured workers into employees, their lives would not improve markedly. Walmart workers are unambiguously employed by Bentonville, and therefore entitled to minimum wages, overtime and collective bargaining rights. But they still often allege wage theft, and the company bitterly resists unionization efforts. 

Indeed, even unionized workers are not immune from such pressures. Last month, after American Airlines announced pay raises for its pilots and flight attendants, the financial sector pushed back. Several firms downgraded American’s stock. “This is frustrating,” a Citi analyst wrote to investors. “Labor is being paid first again. Shareholders get leftovers.” Res ipsa loquitor.

To summarize, egalitarians today are worried about three interrelated problems: the extreme power of financial firms and the wealthy; market concentration in many sectors of the “real” economy; and the atomization of workers, either formally (because of fissuring) or informally (because of our voluntary and decentralized collective bargaining regime). 

What to do? The first is the easiest to deal with in theory, if not in practice: we need to reduce incentives to accumulate vast fortunes and pass them on to one’s children, and to re-establish boring banking. That means policies such as a new Glass-Steagal, absolute limits on bank size, sharply higher marginal income tax rates and far higher taxes on wealth, especially inherited wealth. Or, more ambitiously, community-based banking and cooperative financial institutions. 

Unfortunately, we do not have perfect models from history to address the second and third issues. The New Deal and postwar strategy was to basically accept corporate concentration, but to create a bilateral monopoly via unionization and peak bargaining. That leads to wage compression and more avenues for worker participation in the economy. But it also tends to encourage further monopolization on the corporate side. In turn, corporations that dominate an economy may disregard consumers, thwart innovation and capture regulators or governments. The New Deal strategy was also based on a mass-production industrial economy that is no longer our economic reality.

What we really need is a far more democratic model of economic governance, one in which power is broadly distributed within the economy. A new antitrust policy is one element there, especially if today’s mega-firms — the tech giants, food chains, retailers and logistics companies — are making it harder for smaller businesses to develop and innovate. 

A revamped collective bargaining scheme is another element, perhaps one in which the state encourages or even requires companies to deal with unions in their sectors, while encouraging robust democratic choice among bargaining representatives and democratic processes within unions. Unlike collective bargaining systems in many other G20 countries, we do not guarantee workers the right to bargain collectively, but rather force them to put their livelihoods at risk merely to begin the bargaining process. We then often restrict bargaining to the worksite level rather than the firm- or even sectoral-level. We should reverse both presumptions, making unionization a matter of right — which, as I have argued elsewhere, need not conflict with constitutional commitments to freedom of association — and extending labor law duties up supply chains to whatever firms enjoy power over working conditions.

What’s more, as others have begun to elaborate, some of these strategies can be developed and implemented at the local and regional level, where progressives have both power and public goodwill today. 

This will not work in all sectors, of course. Tech, energy, hospital chains, and perhaps transportation may require more utility-type regulations to limit their political-economic power. And many low-wage workers are actually in the public sector or adjacent to it — viz., home care, elder care, child care, much education — so that increasing their income and wealth is a matter of public finance and taxation as well as unionization. In the heart of the private sector, however, greater economic equality requires new models of unionization together with substantial limits on corporate power and the power of finance.