	Generational Dynamics
	Forecasting America's Destiny ... and the World's

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Generational Dynamics Web Log for 27-Jul-05
Historic labor split will mean near-extinction of AFL-CIO and rise of service unions

Web Log - July, 2005

Historic labor split will mean near-extinction of AFL-CIO and rise of service unions

As General Motors and Ford themselves approach near-extinction, their historic "enemy/collaborators" in the labor union are going the same way.

At the 50th anniversary celebration of the AFL-CIO at its convention that opened in Chicago on Monday, two major labor unions, the 3.2 million members of the International Brotherhood of Teamsters and the Service Employees International Union left the AFL-CIO's 13 million former members, and joined a dissident group, the Change to Win Coalition.

Four other unions are expected to defect as well.

Just two months ago, S&P changed its ratings of General Motors and Ford bonds to "junk" status, briefly threatening an international financial crisis as international hedge fund positions started to unravel.

Things appear to have settled down now in the hedge fund world, but the long-term decline of both American manufacturing, including GM and Ford, and American labor unions.

These are both examples of what I've been calling the "Crusty Old Bureaucracy" pheonomenon. During the 1930s Great Depression, the vast majority of the old businesses went bankrupt, and were eventually replaced by new businesses.

When a new business starts out, especially when it's trying to survive after the Depression, it has a "lean and mean" corporate culture, where every employee scrambles to work hard to make the business succeed. As time goes on, many employees become stale in their jobs, and the business develops an entrenched "crusty old bureaucracy."

This has been happening to the country as a whole since the 1930s. All the "lean and mean" new 1930s and 1940s new businesses are today, for the most part, sluggish and crippled from bureaucracy.

And not just businesses. The same thing has happened to government agencies, educational institutions, non-profit institutions, and, of course labor unions.

The symptoms of this are the massive outsourcing of manufacturing jobs to China and service jobs to India that's occurred in the last few years.

The collapse of the AFL-CIO also signals continued change for the national political parties, since the AFL-CIO has been among the party's largest fund-raisers. Both political parties will be blown apart just as much as businesses and other institutions will.

That's why Generational Dynamics predicts that we're entering a new 1930s style Great Depression that will force a similar massive round of business closings.

The AFL-CIO has been losing membership steadily for decades. In 1955, at its peak membership, one out of three workers belong to a labor union. As recently as 1983, 20% of American workers belonged to labor unions. Today, that figure is 12.5%. Money always talks, and the loss of membership has meant loss of dues, and then the loss of political power for the AFL-CIO.

Howevr, not all labor unions have been losing members. The leader of the defection is Andrew L. Stern, president of the Service Employees International Union, one of the two unions that walked out on Monday.

"We're not trying to divide the labor movement - we're trying to rebuild it," he says. "We have to do everything in our power to help workers. But when you're going down a road and it's headed in the wrong direction, and you know where the road ends, you got to get off the road and walk in a new direction where there is hope."

Stern can afford to take a different road because, more and more, he's the man with the money. The SEIU is also one of the few labor unions that's been growing in size. Thus, not only did the AFL-CIO lose 25% of its membership on Monday, it lost the portion of its membership that's growing in size. That's why the AFL-CIO may not be long for this world, at least in its current form.

It's been well-publicized that the cost of building a General Motors car today includes $1,500 just to pay the pensions for retired GM workers. That $1,500 per car has frozen everyone in place. GM promised to pay those pensions when times were better, and can't afford to do the research and development necessary to develop new car models to replace the increasingly unpopular SUVs. The AFL-CIO also depends on the $1,500 per car for its own credibility and income. (I need to fact-check this, but I believe that the AFL-CIO manages its members' pension funds and depends heavily on the derived income.)

The point is that innovations are out of the question, thanks to the heavy bureaucracy created around that $1,500 per car.

But Stern's SEIU is not nearly so bound up. Service industries are, for the most part, much younger than heavy manufacturing industries, and so the pension burden is much smaller. Furthermore, Stern has vowed to make "fundamental changes," including integration with global industries and a positive approach to outsourcing.

It's impossible to predict what the new "lean and mean" businesses will be formed during this coming crisis period, and it's impossible to predict what kinds of "lean and mean" labor unions will arise. But Stern's appears to be willing to adapt the SEIU to the rapidly changing world, while the AFL-CIO does not. (27-Jul-05) Permanent Link
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Generational Dynamics Web Log for 27-Jul-05 Historic labor split will mean near-extinction of AFL-CIO and rise of service unions

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Generational Dynamics Web Log for 27-Jul-05
Historic labor split will mean near-extinction of AFL-CIO and rise of service unions