On September 16, 2015, Thom Hartmann writes on The Thom Hartman Program:
It’s official, unions are still very, very good for workers. According to not one, but two new reports, collective bargaining is the best way tool we have to raise wages and increase opportunity for workers.
The first report was released by The Center for American Progress on Wednesday, and it focused on economic mobility and “the ability to improve upon the economic situation of one’s birth.”
The authors of that study found, “a strong relationship between union membership and inter-generational mobility.” In other words, children who grew up in union households were more likely to lead a better life than their parents.
The other analysis, which was released Friday by the AFL-CIO’s Center for Strategic Research, draws a clear line between union membership and higher wages.
Separately, and together, these reports show how important it is to protect our collective bargaining rights, and why we should celebrate when workers declare a victory.
According to the AFL-CIO report, in the first half of 2015, workers who bargained for new contracts saw an average wage increase of 4.3%. And, despite the Right’s best efforts, even more employees will fight to form unions in the upcoming year.
Richard Trumka, president of the AFL-CIO, said, “This report provides clear evidence that joining a union and bargaining with your employer is the most effective way to give workers the power to raise their own wages.” He added, “When working people speak with one voice, our economy is stronger, and all workers do better.”
The Republican war on unions hasn’t stopped people from organizing, but we need to fight hard to make sure our collective bargaining rights don’t disappear.
http://www.thomhartmann.com/blog/2015/09/data-unions-work-very-very-well-workers
Labor Unions need to transform into Ownership Unions. This would expand the mission of unions (whose private-sector membership has been steadily shrinking) to reach out to and represent all shareholders, including worker-owners of corporations. An Ownership Union is designed to work collaboratively with management to secure financing of advanced technologies and other new capital investments through Capital Homestead Accounts for all citizens. It is intended to represent a growing constituency of worker- and citizen-owners on governance rights issues as well as to help lower all barriers to accelerated and sustainable rates of growth, particularly green growth, in a more democratically accountable corporate and financial sectors. Ultimately, Ownership Unions will shift the source of worker incomes from inflation-inducing wage and benefit increases, to widespread distribution of growing profit and equity incomes to worker- and citizen-owners. This will enable American companies to become more cost-competitive in global markets and to reduce the outsourcing of jobs to workers willing or forced to take lower wages.
One of the proven financial mechanisms to transform workers from labor-only income to dividend-earning income is the powerful ownership-expanding technique, known as the Employee Stock Ownership Plan (ESOP). An ESOP provides widespread access to capital credit to each employee in an incorporated company on a systematic basis. Technically, the ESOP uses a legal trust that is “qualified” under specific U.S. tax laws encouraging employee ownership. Fortunately, these laws are extremely flexible, so that each plan can be tailored to fit the circumstances and needs of each enterprise, and deficiencies in the design of an ESOP can easily be corrected.
Over twenty U.S. laws have passed Congress since late 1973 to make ESOPs more attractive to workers and owners. More are on their way. While less than a dozen ESOPs existed in the United States in 1965, today over 10,000 companies, mostly highly profitable small and medium-size firms, have already adopted the ESOP in one form or another, creating over 11 million employee-owners. A number of Fortune 500 companies have adopted ESOPs, including Proctor & Gamble, Texaco, General Mills, Hallmark Cards, and American Standard, thus planting the seed for significant expansion of worker ownership within the giant multinationals.
Overcoming the initial skepticism of organized labor toward employee ownership, the United Steelworkers, the Air Line Pilots Association and the Amalgamated Clothing Workers have strongly endorsed the ESOP concept, and have initiated several model ESOP buyouts.
Walter Reuther, President of the United Auto Workers, expressed his open-mindedness to the goal of democratic worker ownership in his 1967 testimony to the Joint Economic Committee of Congress as a strategy for saving manufacturing jobs in America from being outcompeted by Japan and eventual outsourcing to other Asian countries with far lower wage costs: “Profit sharing in the form of stock distributions to workers would help to democratize the ownership of America’s vast corporate wealth, which is today appallingly undemocratic and unhealthy.
“If workers had definite assurance of equitable shares in the profits of the corporations that employ them, they would see less need to seek an equitable balance between their gains and soaring profits through augmented increases in basic wage rates. This would be a desirable result from the standpoint of stabilization policy because profit sharing does not increase costs. Since profits are a residual, after all costs have been met, and since their size is not determinable until after customers have paid the prices charged for the firm’s products, profit sharing [through wider share ownership] cannot be said to have any inflationary impact on costs and prices.”
Unfortunately for democratic unionism, the United Auto Workers, American manufacturing workers, and American citizens generally, Reuther was killed in an airplane crash in 1970 before his idea was implemented.
An ESOP combines many elements into a single package. It is an employee benefit program. It is an incentive and productivity program for all employees. It is a retirement program. It is a reward system, working best when a modest base salary is supplemented with cash bonuses and equity shares, linked to the proceeds of the operation. It is a two-way accountability and communications system between management and non-management employees. It is a means for workers to participate both as workers and as stockholders in corporate direction. It is an in-house tax-exempt stock exchange, for both new equity issuances and repurchase of outstanding shares. It is a tax-deferred means for workers to accumulate equity. It can offer workers a source of current dividend incomes. An ESOP is all of these and more; but one of its most unique features is that it is a basic innovation in corporate finance.
An ESOP is so far the only tool in the world of investment finance that can generate new sources of capital credit for corporate growth or transfers of ownership, insulate its eventual owners from direct personal risk in the event of default, and allow repayment of its entire debt in pre-tax corporate dollars.
How The ESOP Works
The leveraged ESOP channels capital credit through a trust representing employees, from the same sources and subject to the same feasibility standards and corporate guarantees as direct loans to the corporation. The loan funds are used to buy stock for the workers, either from present owners (a leveraged buyout) or for financing expansion or modernization of the corporation. The ESOP can be used to purchase existing shares from present owners using credit, which is wholly secured by and repaid from future profits.
Normally, the workers make no cash outlay from payroll deductions or their savings, and none of their present savings is at risk. Shares of stock are allocated to the individual accounts of workers only as blocks of shares are “earned,” i.e., the company contributes cash out of future pre-tax profits to the trust. The cash, which is treated as a tax-deductible employee benefit, is used to repay the stock acquisition loan. Whereas traditional uses of leveraged corporate credit work only for present owners, the ESOP uses corporate credit to convert its workers into stockholders. Thus, the magic of self-liquidating capital credit can be used to lift more individuals into an expanding ownership system.
A well-designed ESOP clarifies subtle distinctions between “ownership,” “management,” and “worker participation.” Operationally under an ESOP, day-to-day control would remain in the hands of professional managers who, under a carefully designed system of checks and balances, would simply become accountable to a broader shareholder base, including other workers, and a more broadly representative board of directors. Employee stock ownership, therefore, would involve balancing continuity and efficiency of the firm with justice and accountability for the workers.
