Summary: Labor’s Leaders - What’s up with Chicago? Some people look at the Chicago strike and see the echoes of a labor movement that is regaining some traction. Others see push-back after five years of public-sector concessions due to the recession and its aftermath. But I see evidence of global competition. To me, the Chicago teachers’ strike is an example of what we haven’t seen for a while: labor unrest. Strikes have been rare recently, especially in contrast to the ‘60s and ‘70s, when workers frequently struck, demanding better pay and improved working conditions. But unions face a tough climate today. Membership has declined from 27% of the workforce in 1973 to just 11% today, so management has a lot more options when faced with a labor dispute. Moreover, it seems that most workers recognize that their jobs and compensation now depend on the success of their companies. With 401(k)s and profit-sharing plans becoming more widespread, employees often benefit directly when their employer is more profitable. And with global competition affecting just about every industry, profitability is more important than ever. Labor and management both have an interest in keeping their businesses competitive. But unions tend to grow when they are part of a monopoly—when labor and management really are on opposite sides of the table. That was the case in the late 19thcentury, as American business grew into a patchwork of petty fiefdoms until government action broke them up. And it’s true now: the most active unions are in the public-sector, where government enjoys a monopoly or near-monopoly when it provides services. It’s telling that one of the demands of the Chicago teachers is that the City put more restrictions on charter schools, a principal competitor to public schools. And note that charter school teachers aren’t on strike this week. So the Chicago strike illustrates, by contrast, how globalization affects everyone. No one knows how this strike will be resolved, but one way or another, competition will continue to grow. Douglas R. Tengdin, CFA Chief Investment Officer Follow me on Twitter @tengdin
