Benjamin Sachs and Sharon Block: When Did Labor Law Stop Working?
Why would it take an Amazon worker, employed full time, more than a million years to earn what its CEO, Jeff Bezos now possesses? Why do the richest 400 Americans own more wealth than all African-American households combined? And how are these examples of extreme income inequality linked to the political disenfranchisement of the lower- and middle-income classes? The established “solutions” for restoring balance to economic and political power in the United States have been tax increases on the rich, on the one hand, and campaign-finance reform on the other. But in this episode, we’ll explore the idea that retooling labor laws for the modern economy may be the most effective way to address both these issues. Harvard Law School’s Kestnbaum professor of labor and industry Benjamin Sachs, together with Sharon Block, executive director of the school’s Labor and Worklife Program, explain. Read more in Harvard Magazine's print coverage of their Clean Slate initiative.
Transcript (the following was prepared by a machine algorithm, and may not perfectly reflect the audio file of the interview):
Jonathan Shaw: The 400 richest Americans now own more wealth than all African-American households combined. This is one measure of extreme income inequality. What if the solution to this problem is not redistribution of wealth through taxes, which few people like, but instead involves a means of ensuring that the people who do the nation's work get paid fairly for what they do? Welcome to the Harvard Magazine Podcast, Ask A Harvard Professor. I'm Jonathan Shaw.
We have two guests today. Benjamin Sachs, an expert in labor law and labor relations, is the Kestnbaum Professor of labor and industry at Harvard Law School, Faculty Co-Chair of the Labor and Worklife Program and co-founder of the blog, On Labor. Our second guest is Sharon Block, Executive Director of The Labor and Worklife Program at Harvard Law School. She previously served as Principal Deputy Assistant Secretary for Policy at the U.S. Department of Labor and as Senior Counselor to the Secretary of Labor. Welcome to you both.
Benjamin Sachs: Thanks. Thanks for having us.
Sharon Block: Thank you.
Jonathan Shaw: We're going to be talking today about reforming labor law, as a means of restoring balance to both economic and political power in the United States. Could you start by explaining how these two forms of power interact?
Benjamin Sachs: Sure. I mean they're intimately connected, and I think it's fair to say that the country's facing dual crises of political and economic inequality. So it's a cycle where the wealthy build economic power in the marketplace, and then export that into politics through campaign contributions, through lobbying expenditures and the like.
And then once they have political power, [they] use that political power to translate into greater economic wealth, and economic wealth then gets fed back into the political system. The political output is policies that favor the wealthy and it just goes on—it goes on and on and on—and the statistics are really remarkably stark. You gave one at the top of the program here. I like to talk about how long it would take an Amazon worker working full-time to earn what Jeff Bezos now possesses, and the answer is more than a million years of working full-time. That's just an outrageous figure.
On the political side, the numbers are just as shocking. The best political science today indicates that government policy simply doesn't respond to the preferences of the lower and middle-income classes of the country. It's exclusively responsive to the wealthy and that's a crisis.
Jonathan Shaw: You've considered other solutions to the problem of income inequality, such as campaign finance reform and found them wanting. Why do you believe that reform of labor law is the answer?
Sharon Block: I think we think about labor law as being the answer actually, to a lot of different areas, because it is the channel through which the vast majority of people in the country can assert their voice. And gives them the opportunity then through a re-invigorated either labor movement or system of organizations that can represent workers interests, to influence the political system, and so it has to come first so that everything else can work.
I mean, one example that we like to talk about is the connection—because it's counterintuitive—but the connection between labor law reform and dealing with the climate crisis. Workers really are bearing a lot of the burden of the climate crisis. Think about people who have to work outside when it's much hotter, increased pollution. These are things that people who have to go outside, work for a living, are dealing with.
But it's been very difficult for them to affect the political process in a way that gets companies to adopt policies that address their needs. Labor law reform would give them that avenue to getting their interests taken into account. So we really think it is the step that has to come first, that will help lead to all the other steps.
Benjamin Sachs: I just had a quick thought on that. The obvious or the most readily available means of dealing with the problem of money in politics is campaign finance reform. As your question suggests, that's what most of us think of when we think of how to solve the problem of money influencing politics, but there's two big problems with campaign finance reform. One is the Supreme Court.
The Supreme Court makes it very, very difficult even for a motivated Congress to try to control money in politics. The other problem is what's described very accurately as a hydraulic problem where campaign money is like water. And if you block one channel, the water, like the money, just finds another outlet for influencing politics.
So if you block contributions, people do independent expenditures. If you block independent expenditures, people spend the money on lobbying. If you block lobbying, they'll find another way to spend the money. And so it's almost like a whack-a-mole kind of thing with campaign finance reform.
Labor law reform is a fundamentally different approach to the problem of inequality, because it's not restricting the ability of the wealthy to spend money, which would be great but is extremely difficult. It's instead empowering low and middle-income people to countervail the power of corporations and the wealthy. And so it's a fundamentally different approach to this problem and we think a more promising one.
Jonathan Shaw: Briefly, what is the historical context for labor law in the United States?
Sharon Block: Sure. I can at least start. So our current labor law was passed as part of the New Deal and it has been in place since then with almost no changes. There were some changes that came into the law in 1947 that actually made it harder for workers to organize.
So if you think about in the 1930s when the Wagner Act or the National Labor Relations Act as it's officially known was passed, it was in its time, incredibly successful. You had a huge upsurge in workers represented by labor unions. You had the beginning of a period that's sometimes referred to as the Great Compression and that you had decreasing income inequality in the country.
In 1947 Congress pulled back a little bit on that. It was almost a little too successful in that those who saw their power waning, quickly got in and influenced Congress to pull back on some of that. But you still go into this period in the fifties and sixties where you saw incredible increases in workers represented by unions.So after 1947 though, we don't see any meaningful changes to the law. And so if you can imagine what the economy looked like, what our politics look like at that time. And imagine that a law that arguably fit at that time when we had a more industrial-based economy than we have now. We had a service sector that employed many, many fewer people. Where we didn't have a platform economy. We didn't have people working online.
Even if you could say the law fit at that moment—and there is some evidence that it did because of this increase in workers able to join unions—it seems almost self-evident that without any changes or adjustments that it would fall out of date. And that really is what's happened. The law that was written in the 1930s and 40s just doesn't fit and doesn't work anymore.
Benjamin Sachs: And one other thought about the history. As Sharon said, "The labor law we have today was passed in 1935." And some work by Ira Katznelson and others shows that the political compromise that led to the enactment of our labor law, had some deeply racist components and impacts. So to get some Southern Democrats, Senators to sign on to the law, was written into the statute exclusions for certain categories of workers, primarily domestic workers and agricultural workers who were workers of color. And that's a legacy that we live with to this day. And so part of the history of our labor law as progressive as it was in many ways, is a history of exclusion, which is plaguing us even in 2020.
Jonathan Shaw: What is the evidence that existing labor law is not working?
Benjamin Sachs: I think the best evidence is the contrast to what Sharon was just describing, about how the Wagner Act originally did work. I mean, this is a statute that's meant to intervene in the employment relationship and enable workers to choose to unionize. If you ask workers whether they want a union, many of them do. The numbers are a little variable, but something like 50, 60% of workers if just asked, would choose a union, but less than 7% of private sector workers have one. That's a failed legal regime.
If you have a law that's meant to enable unionization and that there's this vast disparity between the number of workers who want a union and the number of workers who get one, that's a failure. And a huge part of the explanation is that employers oppose unionization. They oppose unionization for a lot of reasons. One of those reasons is that historically and as an artifact of this law we've had since 1935, unionization in the United States is done at the level of the workplace.
It's done at, we call it enterprise bargaining. It means that if you get a union and you get a collective bargaining agreement, it's going to be between an individual union and an individual firm, or even a subgroup of workers within the firm. That means that unionization is going to create in management, a perception of competitive disadvantage. If I own a company and I unionize, I know that my wages that I have to pay my workers will go up, but the wages of my competitors' workers won't go up, so I'm going to fight unionization.
So the way that we structure unionization and collective bargaining in the country, the way we've done it since 1935, bakes in this anti-union animus into the system. That's not true in other places in the world, where unionization and collective bargaining is done at the level of the industry or the sector.
So that if instead if you imagine a union that represents the workers at the McDonald's on Mass. Ave, right? That's how we do it in the United States. If those workers unionize and they get better wages, that's just not going to work because that McDonald's will then be in a tough spot vis-a-vis other McDonald's.
If you bargain instead at the level of fast food and you raise the wages for everybody in the fast-food industry, nobody's at a competitive disadvantage and there's a far, far, far lower incentive for management to fight unionization.
And that's, I know we'll get into this later, but the project that Sharon and I had been working on, the Clean Slate Project, one of our primary recommendations is that in addition to doing work-side bargaining in the country, we need to move in the direction of sectoral bargaining.
Jonathan Shaw: Oh that's interesting.
Sharon Block: And just to add one more piece of evidence about how we know that labor law isn't working. In fact, the rate of unionization in the U.S. now is lower than it was before workers had a federally protected right to join unions. So when they were just out in the state of nature, employers could fire you for organizing a union. Workers were in fact more successful in being able to do that.
And as Ben mentioned, that's not about whether a decrease in their desire to have unions because there's been, Gallup has been tracking this number for many, many years and it's actually really on an upswing. And yet we have only a little more than 6% of the private sector workforce who are able to navigate this law to get what they want.
Jonathan Shaw: That's extraordinary.
In the age of the gig worker—a driver for Uber or Lyft for example—what is wrong with the National Labor Relations Act?
Sharon Block: So, a long answer because there's a lot wrong with it in that particular context. At this moment in time, what's wrong is that the National Labor Relations Board has slammed the door to union organizing for Uber and Lyft drivers at least as a matter of a federal right. Because the current majority in the National Labor Relations Board, or at least the general counsel who is acting on their behalf, has told those workers that they're not covered by the National Labor Relations Act because of a cramped reading of the definition of who's an employee. And the act only covers workers who are deemed to be employees under the statute.
So in a very narrow way, that's the problem, but it's really a much bigger problem because even if they were considered employees, you would imagine there would be an effort to organize them under the act. But again, as Ben was saying that the Act envisions a very different kind of workplace. If you think about Uber or Lyft drivers, they share no physical workplace. So imagining how you actually create that community, that really an organizing effort is, is really hard to imagine.
And so I think there are many ways in which you see in this example, that the law just doesn't fit this more modern workplace. So we need to find different ways for workers to connect with each other to better use technologies so that they can connect with each other, but also to treat this right. To come together and to have that countervailing power, to be able to exercise that in a way that doesn't require going from person to person to person, but creates more systems and structures to create that countervailing power.
Jonathan Shaw: Why is it more difficult now to enforce basic laws like minimum wage and overtime pay?
Benjamin Sachs: I think a huge part of this answer, and we owe a lot to David Weil for helping us understand this, a big part of this, the answer to that question is the decline of unions. I mean every worker in the United States, every employee in the United States is entitled to minimum wage and overtime pay, whether they're in a union or not.
So this is not an answer based on the law, but about enforcement. And what we know is that it's very difficult for individual workers to claim and enforce rights on their own behalf. When workers have a union or some kind of collective agent in the workplace, they're much better positioned, much better equipped to enforce their individual rights.
So it's an irony. You need a collective agent to enforce individual rights and unions have historically played that role. So with the decline of unions, you'd have fewer workers who have the capacity to enforce basic minimum protections like overtime pay and minimum wage.
Jonathan Shaw: You mentioned employers earlier, as opponents of labor laws. Are there other groups or people who oppose labor laws?
Sharon Block: Well, let's hope it's not all employers who oppose labor laws. I mean, to be serious, there are a lot of employers out there including some of our nation's biggest companies, that have very productive relationships with their unions and find it as a way to solve problems together.
I mean, often workers know the most about how the business runs and collective bargaining and the interchange that happens when you have an organized workforce really can make the business more productive. And there have been studies done, including by people here at Harvard, that have shown that organized workforces, that employees can be, are usually happier. Happier workers are more productive workers. So I always try to shy away from saying that all employers oppose functioning labor laws.
Benjamin Sachs: Yeah. And just to build on that, it depends on the labor law. So as we were saying before, if you have a labor law like we've had in this country since 1935, where unionization and collective bargaining takes place firm by firm by firm, unionization is going to create this perception of competitive disadvantage. That's going to give managers and incentive to oppose unions, to oppose a labor law.
If you change the labor law, so that unionization is done on the level of the sector or industry, I'm not Pollyanna about this. It's not that opposition is going to disappear, but it's going to become, it ought to become far less profound. And in fact, in countries with central bargaining, we see much less of the visceral anti-unionism that some US employers have.
Jonathan Shaw: What happened in the case of McDonald's and the Fight For $15 campaign?
Sharon Block: So it's a long story that has actually recently at least, come to a temporary end. So McDonald's and other fast-food workers and other minimum wage workers have spent almost the past 10 years organizing. Now they have been striving to organize a union but have not let the difficulty in navigating the National Labor Relations Act, to have their collective action officially recognized, stop them from coming together from undertaking collective action. Whether that's walking out or engaging in legislative campaigns to raise their wages and it's been an unbelievably successful campaign.
If you look at the number of legislative campaigns that have been successful that have raised wages, there's even evidence now recently, that if there is any narrowing of income inequality, it's because these Fight For $15 campaigns have raised minimum wages in so many places around the country. So it is this floor coming up, not any compression from above.
In some of these collective actions that the McDonald's, the Fight For $15 workers have undertaken, some of those workers were fired by their employers. And whether you have a union or not, it's unlawful for an employer to fire an employee for acting collectively. The law protects that, whether you have a union or not.
In litigating those cases, the McDonald's workers argued that in fact, their employer was the corporate entity that was McDonald's, not the particular franchise for which they worked. That issue became very, very confrontational between the union and the company.
McDonald's as a corporate entity fought very hard to not be deemed to be the employer of McDonald's workers. Even though I think all McDonald's workers obviously wear uniforms that say McDonald's on it. If you go in, I mean that's the McDonald's brand. You go into one McDonald's in one place, it is supposed to look exactly like a McDonald's in another place. That happens because McDonald's, the corporate entity, sets very specific standards for how McDonald's operate.
Despite that level of control, McDonald's corporate argued to the National Labor Relations Board that they should not be held liable or accountable for the actions, the way that their franchisees treat their workers. That issue was litigated before the board. There was a trial that went on for a long, long time. This happened during the Obama administration. Everybody thought that they were moving towards a resolution.
Then the case was settled abruptly without a finding. After the change in administrations, abruptly settled, on terms that did not answer the question about whether McDonald's was actually the employer or not, and what's called an administrative law judge—so not like a federal judge, but the people who act as the first-level adjudicators for cases under the National Labor Relations Act—actually rejected the settlement as being unfair.
That decision though, went to the current National Labor Relations Board, which has a majority Trump appointees. And they just recently overturned that judge's decision, accepted the settlement, and so now the NLRB has basically come out and it said that they are not—that McDonald's won't be held liable for the violations of the law that their franchisees commit.
Benjamin Sachs: Yeah. And this is another superb reason and inspiration for our belief that we need to move in the direction of sectoral bargaining. So as Sharon explained, the McDonald's position is that they are not the employer of anybody essentially. That the individual franchises are the employer, and so that McDonald's could never be required to collectively bargain an agreement.
If we move to a sectoral system where unions would represent workers and bargain an agreement across the fast food industry, it wouldn't matter who was the employer. Whether it was McDonald's, a franchise, both these distinctions which provides such legal ammunition to employers to avoid responsibility, would just fall away, because the collective bargaining agreement would apply to everybody in the sector.
Whether they worked for a franchise or a subcontract or were an independent contractor or whatever the case may be. If you are a fast food worker and there was a central bargaining agreement that said, "The minimum wage in the fast food industry was $15 or $20 an hour, that would be the minimum wage." And this would have enormously positive implications for workers obviously. And it would also take wages out of competition, so that that Burger King and McDonald's wouldn't compete over wages. They'd have to compete over quality and as I've said, reduce substantially the motivation to fight unions.
Jonathan Shaw: You are wrapping up an 18 month effort, the Clean Slate Project, that engaged more than 80 experts in labor law reform. Why is that such a complex task, how have you approached it, and what have you concluded?
Sharon Block: Well, I'll start with our overarching conclusion, which you can probably guess from the conversation we've had so far. And really one of the basic premises of why we even call it the Clean Slate Project is because we did conclude that the time is far past for tinkering around the edges of labor law reform and that we really do need to start from a clean slate.
So what we said is, "Let's look at if we were building a legal infrastructure to address our economy and our politics as we see them today. What would that legal infrastructure look like, that would truly allow workers to countervail power of corporations?" So that was the first big conclusion.
What we did then, is think about the best way to get the most innovative answers. And it wasn't for just the two of us to sit down, even though we've thought about these things for a long time and just say, "Here's what we think." What we've done is engaged more than 80 experts, activists, advocates, workers, students, economists, sociologists, labor law professors, all kinds of people who have thought about these issues, who shared our basic premise and really tried to create a process and a system where they could think innovatively about how to come up with a system that would really work better and it's been amazing.
They really, people have devoted an incredible amount of time to this. I think it was the right moment to do this as there's more and more recognition and acceptance of the fact that these dual crises as Ben referred to them at the beginning, have to be solved and that it will take really big, big ideas to solve these kinds of big problems.
I mean, why is it so complex? Because essentially what you're doing is rewriting the rules for the American economy and that is a complex undertaking. But we've been at times surprised but always engaged and gratified by the kinds of ideas that people have brought to us and that we've been able to develop in the project.
Benjamin Sachs: Right. So I think that the animating idea or an animating idea in the project is that the, an important solution to the crisis of political and economic inequality, which is in many ways the crisis of democracy, is figuring out how to enable working people. And when we say "working people," we're referring to the vast majority of the people who live in the country. To enable working people to build power that they can use to countervail the power of corporations.
And so what our proposals do is suggest ways that law could enable working people to build that power everywhere that corporate power is exercised. That means in the workplace and across industries as I've described. It means in the corporate boardroom and it means in our political system. So our recommendations would fundamentally transform mechanisms of worker representation at all of these levels.
And so the report is about 100 pages long. It's detailed and complex, but the animating idea is pretty simple. It's, we have this crisis of economic and political inequality. We need ways for working people to build mechanisms of power, to countervail corporations at all levels of the economy.
Jonathan Shaw: And is the path forward for implementing these ideas, a political path? A legal path? How does that proceed?
Sharon Block: I think ultimately it has to be a political pathway. We were talking about reforming the law. I think where we see ourselves fitting in, is really helping to build and lead a conversation about why this issue is so important. I think if you walked up to most people and said, "What's the most important political reform you could imagine?" Very few people would say, "Labor law."
I think that is one of the consequences of what has happened to the labor movement, is there are fewer and fewer people in this country who have experience with the power of worker collective organizations, which is what a union and a labor movement is. And so they don't even think about labor law being that path forward.
So one thing we're hoping to do is just spur that kind of conversation, to see where our conversation started. How labor law reform is really the key that can unlock fixing a lot of what's wrong with our democracy. So again, it's not our effort is not a lobbying effort, but it is an effort to inform a conversation about where our politics need to go.
Benjamin Sachs: Yeah. And part of our responsibility in shaping that conversation, which is a difficult one, but is to help people understand that these recommendations are not just about unions. That these recommendations are not just about the six point whatever percent of the population that currently is in a union. They're really about everybody.
And so for example, one of the things we talk about in our recommendations is how to protect people at work when they try to get a voice. And the first thing we recommend in that effort, is that we provide for every employee in the country, right to just-cause dismissal.
So right now we live in a system of what we call at-will employment, which means that unless you have a union, you can be fired for almost any reason or no reason at all and that creates a lot of fear among employees. Fear to ever contradict the employer, to ever do anything that the employer doesn't want you to do.
And obviously when it comes to building a worker organization or a union at work, there's going to be some conflict. And so to protect everybody in the country, we want everyone to have protection against dismissal unless there's a really good reason for it. So as Sharon said, our primary role is to shape this conversation, and hopefully to offer some recommendations that make sense to people. But part of that is in a country where only 6% of the population is in a union, to make it clear why all these things matter to people.
Jonathan Shaw: Great. Thank you for joining us today.
Sharon Block: Thank you for having us.
Benjamin Sachs: Thanks for having us.
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