Toward a National Labor Policy

I

A TROUBLED employer recently came to my office holding a copy of the National Labor Relations Act before him. He insisted upon reading aloud, in mocking tones, those first words of the Act which state its objective as being ‘to diminish the cause of labor disputes burdening or obstructing interstate and foreign commerce.’ The grievance of this employer was that the Act, and the way it is administered, have not minimized labor disputes, but have caused them. His sincerity could not be questioned when he placed squarely upon the new labor policy full responsibility for the strikes and dissension that had come to his own plant.

Since such an attitude prevails rather generally among employers and others, one cannot brush lightly aside their insistence upon the need for drastic revision.

A proper appraisal of the National Labor Relations Act, and of the work of the administering Board, cannot be made solely on the basis of initial difficulties encountered in effectuating the Act. It is, moreover, essential to probe beneath current criticisms of the administrative procedures and policies of the Board. There is no doubt that a state of flux and uncertainty will characterize these phases for years to come. Beneath the gusty surface movements, however, is a much more significant ground swell. Past concepts of industrial relations will be substantially changed if the defined purpose of the National Labor Relations Act to ‘encourage collective bargaining’ is carried out in fact.

That we must have a constant and critical appraisal of procedure no one will deny. Certainly there has been no ‘pulling of punches’ thus far. Early in 1938, the Senate Judiciary Committee acted under Resolution 207 to investigate such serious allegations as that the Board (1) showed partisanship for the industrial form of union; (2) permitted intimidation of witnesses; (3) improperly canceled labor agreements that had been made with bona fide labor organizations; (4) encroached upon freedom of speech and of the press; and (5) stirred up industrial dissension. That these particular charges were adequately answered is attested by the fact that the Judiciary Committee unanimously agreed to proceed no further with the investigation after representatives of the Board testified.

The most recent crises faced by the Board resulted from a ruling of the Supreme Court that the Department of Agriculture had used ’fatally defective’ procedure in the Kansas City stockyards case. It was assumed that, under this ruling, the National Labor Relations Board also followed an improper procedure in a number of cases in which the trial examiner did not prepare an intermediate report of the evidence he had taken. After a period of confusion, this issue was clarified by a Supreme Court ruling which held that the procedure in question did not necessarily deny a ‘full and adequate hearing to the employer’ where oral argument was had and where the employer understood the issues and was provided an opportunity to rebut the complaint. Are there sound reasons for believing that individual bargaining is defective as a means of providing the best possible terms of employment and of maintaining employee satisfaction? There can be no doubt that any concern employing relatively large numbers of workers cannot bargain individually and separately with every one. Individual bargaining means, almost universally, that the terms of employment are at best the result of a unilateral determination by the employer. The prerogative of an employee is limited to taking or leaving a job on the terms that are offered. If jobs are scarce, he takes the job, since the alternative is no work. Nor is the essential nature of the process changed, in most instances, by going through the motions of negotiation with a company union. Exponents of the so-called independent unions must recognize the impotency of these organizations to engage in genuine collective bargaining unless they negotiate with the employer on equal terms and possess the power to refuse conditions that are offered. Only to the extent that they have such power can independent unions play an important role in the working out of the new national labor policy. If collective bargaining can really provide advantages to employees, how can one explain the reluctance of American workmen to join labor unions? Many employees want nothing to do with the labor union or unions operating in their industry. While they may lack confidence in employer policies, — and this is by no means universal, — they often have even less confidence in union leadership. There have been many bitter experiences of lost jobs arising from poorly designed union programmes. Strikes have been called more frequently than they have been settled, and unduly high rates exacted by a union have often led to relocation of equipment. In some cases employees have been ‘beaten up’ so many times in the process of being educated to the benefits of unionism that they are now conscientious objectors.

From such issues it may be argued that a new labor law is gradually evolving which will properly encourage collective bargaining. From the heat of criticism, a sounder and stronger administrative mechanism is gradually being forged to encourage collective bargaining in an acceptable manner. Experience with the shortcomings of the Act provides an understanding of changes or amendments that may be required to encourage the kind of collective bargaining that is in the public interest. The really important point is that we have embarked upon a national labor policy which contemplates the general adoption of collective bargaining in a country where individual bargaining has long been the most common way of determining the conditions of labor.

The essence of the National Labor Relations Act is that industrial peace in a democracy can best be assured when conditions of employment are established with the genuine consent of employer and employees. It has been declared that dealings between management and individual workers, or between management and a company union, generally result in the imposition of terms by employers rather than in their acceptance by employees. The Act is obviously designed to minimize the underlying grievances that are inherent in individual bargaining. Disputes that ultimately develop from these grievances can threaten not only industrial peace but the common acceptance of our present economic and political institutions. My own notebook of cases arbitrated includes any number of instances where accumulated grievances have made brick throwers out of employees who have much the same ideals and aspirations as ‘you and I and the man in the elevator.’ The National Labor Relations Act, therefore, approves collective bargaining as the process by which conditions of work should be determined, and requires the Board to follow through ‘ by encouraging the practice and procedure of collective bargaining and by protecting the exercise by workers of full freedom of association . . . for the purpose of negotiating the terms and conditions of their employment.’

Two broad but distinct phases arise in the transition from so-called individual bargaining to collective bargaining. Organizing for collective bargaining is the first phase, and that with which the National Labor Relations Act is particularly concerned. The development of genuine collective bargaining is the second. It is in the organizational stage, where contrary philosophies struggle for dominance, that labor conflicts have always been most intense. Pitched battles like that which recently occurred at the South Chicago plant of the Republic Steel Company are often fought just to settle the issue of whether there is to be collective bargaining. Announcement of the intention of the CIO to organize the employees of the Ford Motor Company for collective bargaining quickly resulted in a ‘call to arms’ by the union and the company. They prepare for the test of strength which is to determine the philosophy of industrial relations that is to prevail. Labor disputes on this issue have usually been fights to the finish.

The wage policy of an employer depends to a large extent upon competitive factors. Differences between the hourly earnings or piece rates paid by concerns within a given labor market indicate, however, that employers have considerable latitude in determining a wage policy. Even though competitive factors directly influence the wages that are offered, this is seldom the case for many important conditions of employment. These include freedom from capricious discharges, equitable sharing of work, promotions, and a host of similar conditions. The classic personnel programme of the foreman who ‘fired one a week to keep the fear of God in their hearts’ is still in use at more plants than where it is acknowledged.

Employees are undoubtedly convinced, in some instances, that all these interests receive better protection when the terms of employment are established by the employer instead of through negotiations by a union. Such a confidence does not just naturally happen. It must rest upon a deep-seated conviction that wages and other conditions of work are voluntarily set by the management at the highest standards that are compatible with the well-being of the concern. In addition, the employees must feel that certain of their primary interests will be protected even though this may increase cost of operation.

A lack of employee confidence in management cannot always be attributed to the ‘undermining activities’ of union organizers. The employer who speaks with emotion of the loyalty of his workers who are ‘just one big happy family’ is too frequently deceived by his own wishful thinking. He often confuses docility with satisfaction. How can the employee have confidence in a management that pays low wages but high dividends and high executive salaries? In other cases the occurrence of layoffs, principally because a management chooses to sacrifice volume of sales to maintain prices, cannot fail to make employees doubt the wisdom of accepting management policies. The prevalence of numerous conflicting interests of these types almost inevitably gives rise to an interest in outside unions.

Much may be said for the point of view that industrial peace in a democracy can be developed with greatest assurance through an agreement reached with the consent of parties having equal bargaining power. Employees are then in a position to evaluate whether they are getting the best possible conditions. By participating in the determination of the wage contract they can give real consent to the terms of employment.

Aside from the beneficial results of actual participation of employees in the making of the labor contract, the framers of the National Labor Relations Act apparently concluded that collective bargaining will ordinarily provide better terms than have resulted from individual bargaining. Thus, a portion of the Act reads: ‘The inequality of bargaining power between employees who do not possess full freedom of association or actual liberty of contract, and employers . . . tends to aggravate recurrent business depressions, by depressing wage rates and the purchasing power of wage earners in industry and by preventing the stabilization of competitive wage rates and working conditions within and between industries.’

On the other hand, employees have been subjected to the severest kind of pressure from employers who seek to coerce or cajole them into remaining outside of union ranks. Chapter XII of the second annual report of the National Labor Relations Board includes an amazing inventory of the varied devices that have been used by employers to forestall unionization. These range from the carefully planned offensive on numerous fronts, which has been termed the ‘Mohawk Valley Formula,’ to apparently casual but derogatory remarks of a foreman. Most of these efforts are directed at the worker’s fear that he may lose his job.

Discrimination need not be so obvious as a discharge based upon reports obtained through an espionage system. It can be as effective, and much more difficult to prove, if it is judiciously related to layoffs, promotions, sharing of work, allocation of jobs that pay well or poorly, and numerous other aspects of employment. In combating the employer offensive, most unions have developed their departments of war more carefully than the departments of state. In being forced to fight for their existence in the past, unions have naturally elected militant leaders. Many of them have not yet been able to revise their tactics to conform to new conditions. There is ample evidence in the experience of such well-established unions as the Amalgamated Clothing Workers that industrial statesmen will be called to union leadership once the battle of organization is over and genuine collective bargaining begins.

II

A proper appraisal of the activities of the National Labor Relations Board can only be made by recognizing that the recent surge of labor-union activity, stopped rather short by the decline of business activity, has been organizational in nature.

In order to operate as an effective bargaining unit, a union faces the necessity of becoming the sole bargaining agency within an entire competitive area. Unless standard union conditions are substantially applicable in all plants, directly competing with each other, the establishment of relatively high standards in a few plants can lead merely to short-time employment or even to relocation of the industry. On the other hand, employers frequently insist that they are willing to pay higher rates ‘if everyone else does.’ They may even offer assistance to the union in extending its organization throughout a competitive area as the one means of establishing higher standards without penalizing a few unionized concerns. Like manufacturers, unions are concerned about the competition from low-rate concerns.

Within the past several years, certain CIO unions in highly organized industries have attributed their lack of bargaining power to the low wages paid in unorganized industries. An increased labor cost could not be ‘passed along’ in higher prices because of a lack of general purchasing power or the availability of substitute products to the consumer. This point of view has been an important factor behind the drive to organize the large numbers of relatively unskilled workers and those in the mass-production industries. If collective bargaining can be made effective for them, union officials believe that wage increases will raise purchasing power in most instances, and also equalize the cost of production between competing products. Employers have generally resisted the development of the majority-rule principle on the ground that it ignores the rights of the minority to participate in determining the conditions of employment. Yet some of the same employers extol individual bargaining, which gives little or no bargaining rights to any employees. Such a position is somewhat incongruous, and these employers could build a much more convincing case by avoiding indirection and emphasizing the many defects of collective bargaining.

The reasons for calling strikes may be widely different from the factors that cause people to strike. This is particularly true of the organization strike. Such a strike is not primarily based upon the grievances of the employees directly affected, although existing grievances will be mobilized, but upon the union necessity of securing complete organization of a competitive area. Collective bargaining leads inevitably to the development by the union of an industry or a market labor policy. It is this factor that makes collective bargaining so different from the unilateral determination of wages by a single employer.

The most vexing problems of industrial strife centre about the organization drive. The National Labor Relations Act is not responsible for this situation unless it is held to account for the fact that more organization drives have resulted because of the use of restraints against the coercive tactics of employers. On the other hand, the Act has made a significant step toward eliminating industrial strife in organization drives through the election device, which will later be considered in greater detail.

Why does the organization drive represent such a difficult problem? To begin with, most of the employees who are called upon to strike may not be fully sold on the idea and may even resist it. Whatever the reason for their reluctance to fight for union recognition, union officials consider it to be essential to organize them for the maintenance or improvement of general working standards. The tactics used by both sides are frequently coercive. This was true before the passage of the National Labor Relations Act, and is still true.

In organizing a plant, the union has often faced the necessity of making effective the expression of a minority of the employees. Such strikes as that run last summer by the American Federation of Hosiery Workers at the Apex Hosiery Company indicate how the organization drive is often an issue that is resolved by the sheer power of the contending parties. If a peaceful method of handling the issues in an organization strike can be evolved, a notable step will have been taken toward minimizing violence in industrial disputes.

There is a means provided by the National Labor Relations Act for handling the problem of organizing for collective bargaining in a civilized way. The secret election among employees represents a peaceful way of determining the choice of a collective-bargaining agency. If we are able really to learn how to use that device, which is still experimental, we shall have moved far in the direction of eliminating industrial strife without a sacrifice of democratic principles.

The possibilities of the election are readily visualized by contrasting the manner of handling the recognition issue at the Republic Steel Company and at the Jones and Laughlin Company. A battle was fought at Republic over organization and recognition. On the other hand, some 24,000 employees of the Jones and Laughlin Company went to an office of the National Labor Relations Board to settle the same kind of dispute by voting ‘yes’ or ‘no’ on the question of whether they desired to be represented in collective bargaining by the CIO. The use of the election is obviously based upon a willingness to abide by the will of the majority.

The election, with the majority-rule principle, is a resounding challenge to union officials. With the use of elections, unions are given an inducement for getting a majority of employees to ‘sign up’ by peaceful means, instead of depending upon the strength of minorities to secure recognition. The elimination of employer coercion has already resulted in the avoidance of the pressure organization strike by some unions which depend upon a peaceful election to secure recognition. Since a new kind of organizing tactics must be used to develop fully the possibilities of the election, it is not surprising that old devices also persist.

Especially when the organization drive becomes a tug of war between employer and union, the wage-rate structure can be thoroughly disorganized. It is next to impossible to combine genuine collective bargaining with the organization drive. The start of such a drive is often the signal for an employer to provide a wage increase and other adjustments as a form of union insurance. Then, if the union is successful anyway in securing recognition, it must get further ‘concessions’ to maintain a newly gained status with the employees.

There can be no criticism of the adjustments that represent a delayed meeting of prevailing standards or that can equitably be borne by the employer. Any kind of straight thinking about the problem, however, will lead inevitably to the conclusion that wage setting cannot soundly be based upon what will keep a union out of a concern or what will keep it in. The setting of labor costs is a problem in economics, and not one of management and union politics.

After the recognition issue is settled, the parties must then undertake the real task of determining conditions of employment on a new kind of basis. This stage was quickly reached at the United States Steel Company, where the bitterness and fury of an organization strike were avoided. Only when this stage is reached can there be a test of whether the underlying philosophy of the National Labor Relations Act is sound. Genuine collective bargaining can only result when there is no further threat to the continued existence of the union. The signing of labor agreements in many instances does not signify that the organization drive is over, but that it has started ‘on the inside’ instead of continuing on the outside of the plant. Agreements may be conceived by the employer as a temporary capitulation and by the union as one step in the organization of employees.

Genuine collective bargaining involves the assumption of responsibilities by the union, even though they are unpopular with the rank and file. It has little chance of developing unless the status of the union is secure with the employer and unless the large majority of the employees have confidence in the union. A union can usually establish an assured status with employees if it is able to improve rates and working conditions, but difficulties are often faced if economic conditions preclude advances or necessitate a retreat. The closed shop is sometimes demanded, since it is a quick means of establishing the union.

It is apparent that under many recent agreements the organization tug of war continues between employer and union. Such contracts may be termed organization agreements, under which tactics and demands centre around the question of whether collective bargaining is to prevail. The terms or administration of such agreements can scarcely be satisfactory, and the efficacy of the collectivebargaining process cannot be appraised from experience with them.

III

If the fundamental objectives of the National Labor Relations Act are to be attained, management and unions must learn to make collective bargains that are economically sound and not based solely upon economic strength or political necessities. The National Labor Relations Board is not charged with responsibility for this phase, but there is no use organizing for collective bargaining unless we are able to undertake collective bargaining properly.¹

It is no easy task to make collective bargaining work. The terms of the agreement for any concern take account, not only of its own needs, but of the maintenance of market standards. It is this aspect of the process that is often most difficult for employers to accept. In numerous cases, individual concerns appear unable to operate at the same labor costs borne by their competitors. Whether this results from inefficient management, a weak financial structure, or other factors, a union may have to choose between lower labor rates and the maintenance of standard rates, which may jeopardize the existence of the company and of jobs.

This problem and many others of a similar nature frequently cause genuine collective bargaining to become a plan for union-management coöperation. Insistence upon the maintenance of standard rates and conditions is often combined with programmes for waste saving or for a complete revision of production processes. The Amalgamated Clothing Workers and other unions have even provided financial assistance to employers. While collective bargaining gives rights and power to unions, it involves obligations that cannot be avoided if collective bargaining is to work.

There is need for a realization on the part of employees generally, as well as of inexperienced labor leaders, that the right to collective bargaining does not necessarily mean an inexhaustible succession of wage increases and continuous improvement of conditions of work. Collective bargaining is a process for determining these conditions on an equitable basis, with assurances to employees from their own representatives that the terms on which they work are the best possible ones. Cur industrial and social problems would be minor ones indeed if the real income of wage earners could be universally and substantially increased through collective bargaining over wage rates.

It may be granted in many industries and trades that the substitution of collective bargaining for individual bargaining will properly result in higher wages and better conditions of work. But will the results of sound collective bargaining generally prove to be satisfactory to employees? Even the staunchest supporters of labor unionism must admit that, in making contracts, economic considerations often influence labor leaders less than the political necessities of the union and of their own positions. Collective bargaining conducted solely on such a basis is apt to react to the detriment of employees and employer.

Some unions are so strong that they can exact whatever terms of employment they demand. Collective bargaining then becomes a different kind of unilateral determination than under individual bargaining — the employer has the choice of taking or leaving the contract offered by the union. Under such circumstances, equality of bargaining power is not attained. This has led unions, honestly desirous of making collective bargaining work, to assist in the formation of strong associations of employers in order that there might be a balancing of power and that bargaining might be between equals. Some observers see a place for the independent union in some industries as a possible means of offsetting the monopoly power of outside unions. There is still much to be done in developing genuine collective bargaining to the point where it is conceived and operated as an economic process. Fortunately a number of well-established unions have already pointed the way. The programme of the Amalgamated Clothing Workers in bringing a measure of stability to the men’s clothing industry is an outstanding achievement. The American Federation of Hosiery Workers has made significant strides in this direction, and at a time when substantial reductions in profits and wages in the industry could not be avoided. The writer has assisted in the administration of agreements made by this union with seamless-hosiery mills under which increases in hourly earnings have been dependent upon the ability of union officials to effect cost savings in the operation of the plant. These officials have become experts in plant management. Many similar experiences could be cited to indicate that bargaining can be soundly built upon a knowledge of pertinent facts applied jointly for the development of an industry policy for labor relations. Genuine bargaining is developed in such cases by emphasizing, not the horse-trading aspects of joint bargaining, but the economics of each situation. This means that the determination of a wage scale must be based upon comprehensive data for wages, profits, prices, elasticity of demand, and similar facts necessary to the making of an important business decision.

Dire consequences have come to individual concerns and to industries where unilateral contracts imposed by unions have set uneconomic wages or conditions of work. The policy of ‘no retreat’ that was followed after 1920 by the United Mine Workers undoubtedly encouraged the development of nonunion mines and the increased use of substitute products; it contributed to the widespread unemployment among union members. The uneconomic collective agreement often arises from a lack of knowledge of the bargaining process on the part of labor leaders. One frequently encounters their sincere demand that ‘it is the right of organized workers to get substantially higher rates than those who are unorganized.’ Or an informed leader may act against his better judgment when under pressure by the rank and file. Real union strength in collective bargaining lies, not in sheer power to exact demands, but in a knowledge of what is a sound wage policy and in an ability to make members realize the limitations of collective dealing.

An appreciation of its fundamental objectives leads to a realization that the National Labor Relations Act intends to place responsibility upon labor unions for one of the most crucial phases of supporting existing democratic institutions. It implies that individual determination of the labor contract can only lead to temporary submission, to the accumulation of grievances, and ultimately to serious conflict. In eliminating this cause of labor disputes, the first plank in a national labor policy is set forth as the substitution of collective for individual bargaining. There is considerable evidence that the rank and file are frequently no better satisfied with what their union officials get for them than they are with the terms voluntarily offered by employers.

If individual bargaining is really a threat to our institutions, then we have truly placed an important task upon unions in expecting them to satisfy the desires of the employees by what can be secured through collective bargaining.

There comes a time in some industries when the organization strikes and drives are over and when the union is both strong and responsible. Employers are then not only willing but anxious to work out conditions of employment with the representatives of employees. Under such circumstances, the National Labor Relations Act contemplates little or no reason for industrial disputes. Certainly there will still be differences of opinion between employer and employee over terms of future contracts or over interpretations and administration of existing contracts. Unlike the issues of organization and recognition, however, disputes over contract terms are arbitrable. Furthermore, seldom is there such a wide difference of opinion as would justify either side in engaging in conflict. Voluntary arbitration is readily accepted as the way to settle most difficulties that arise.

If such an approach to collective bargaining is taken, the need for strikes can be minimized almost to the vanishing point. When intelligent men consider the same set of facts, they have differences of opinion, but not within a wide range. It is difficult to see how many issues could be so weighty as to induce either party to engage in a strike, especially when arbitration is available. There is also evidence to support the view that the rank and file are ready to support the union policy if they are sufficiently informed as to the facts behind it.

It is important to recognize that if the National Labor Relations Act results in the replacement of individual bargaining by collective bargaining there are further steps necessary for the development of a national labor policy. Provision must be made so that facts and assistance are available to enable the contracting parties to develop collective bargaining as an economic process. A far-reaching and carefully developed system of mediation and arbitration services must then be readily available should the parties choose to use them. Workers must be educated in the nature of the collective-bargaining process and its true place in the labor movement.

Unions have already learned, in many industries and trades, that none but small gains can be soundly secured through collective bargaining. Such unions are expanding their programmes to include activities in legislative and political fields. The extent to which the labor movement broadens its base depends largely upon how much can be secured by collective bargaining.

As long as the primary objective of the labor movement in the United States is the securing of rights of collective bargaining, there is assurance that employees conceive their interests to be best protected by a continuance of the present form of economy. The collective agreement assumes the existence of an employer-employee relationship and has been developed in response to a wage system under which employees are paid by employers from the proceeds of the sale of goods. Anyone who has had any experience at all with genuine collective bargaining knows that the satisfactory use of the process requires the maintenance of profits.

One must realize that collective bargaining can work only within the framework of a capitalistic economy and a democratic society. Our governmental policy is obviously to raise collective bargaining to the status of a social institution in accordance with the belief that this process provides the best procedure for assuring employee satisfaction with wages and conditions of work. We have thrown upon trade-unions a task of tremendous importance which they cannot avoid if they are to make collective bargaining work. We have given a vexing task to the National Labor Relations Board in requiring it to administer an Act which aims to assist in organization for collective bargaining. Appraisal of its work should be based upon the exact place of its efforts in the development of a national labor policy. Criticism of its work should be confined to the duties it is expected to perform, not directed toward those that lie beyond its jurisdiction.