The most interesting aspect of the "Perils of Pauline" progress of the latest free trade bill through Congress is the split between the President and nearly all members of Congress from his party. While the President begs the Congress to support his signature Trans-Pacific Partnership initiative, and the large majority of Republicans support him, something like 80 to 90 percent of Democrats oppose. It's clear that the labor movement is pulling out every last stop to try to block the bill. Kimberley Strassel in today's Wall Street Journal provides some of the background of what happens to a Democrat who supports the bill:
Big Labor waged an unprecedented hit job on this crew, pummeling them with TV ads in their districts. Months ago dozens of unions affiliated with the AFL-CIO instituted a freeze on campaign contributions, making clear that the coffers would only reopen after a fast-track vote, and only to those members who opposed it.
But why would this be such a critical priority for Big Labor? Isn't their private sector membership almost all gone by now anyway?
To get an idea of why Big Labor is so focused on this, it helps to look in depth at one particular industry. So I've collected today some statistics from the steel industry.
Back when I was in high school in the 60s, the big steel companies were among the great icons of American industry. Names like U.S. Steel, Bethlehem Steel, and National Steel had comparable positions in the U.S. economy to the likes of Apple and Google today. Jobs at these industrial powerhouses were avidly sought by top business school graduates. According to this piece in Wikipedia, the steel industry in the U.S. employed 521,000 people in 1974. The majority of those employees were union members.
It's been nearly all downhill since then. Bethlehem Steel and National Steel went into terminal bankruptcies in the early 2000s, and what wasn't closed got sold off in pieces. U.S. Steel has been shrinking for decades. Its annual reports show a string of losses for years. In March, the Washington Post reported that "U.S. Steel plants are on a layoff spree," attributing that to a world steel glut and burgeoning imports.
A website called unionstats.com has statistics for employment and union membership in the steel industry in the U.S. since the early 80s. Its categories are not fully comparable to what Wikipedia called the "steel industry" above, but with that caveat, it is clear that employment in this industry has been gradually shrinking, and union membership plummeting, during this 30+ year period. In 1984 in a category called "blast furnaces, steel works, rolling and finishing mills," they have 371,000 employees and 211,000 union members. By 1994 it's 356,000 employees and 175,000 union members. In 2004 the category has changed to "iron and steel mills and steel product manufacturing"; there are 282,000 employees and 91,000 union members. Of course, that decade is when the likes of Bethlehem and National, along with other smaller players, closed their doors. In 2014, employment in the category has recovered some to 303,000, but union membership is down to 71,000. Over 30 years employment fell about 15%, but union membership fell almost 70%, much of that drop caused by major unionized entities going out of business.
Yesterday's Wall Street Journal has a big article comparing what it calls the country's "two remaining major steel producers," U.S. Steel and Nucor. The huge difference between the two is that U.S. Steel is unionized and Nucor is not. At two nearby plants outside Birmingham, Alabama, the two produce about the same amount of steel -- but Nucor has only about a third the number of workers. The article includes the following chart:
Although the two are close in size, non-union Nucor produces substantially more, generates more revenue, and has much more capacity, all with fewer employees. And also, Nucor had seven times the profits last year. As it says in the chart, U.S. Steel "is now taking steps to imitate its rival." But after a long string of losses and then eking out a profit of only $102 million last year, U.S. Steel is at great risk from any prolonged downturn in the industry. If a shakeout puts one of the two out of business, clearly it will be U.S. Steel.
Frankly, I don't believe that the labor movement will ultimately be able to block the Trans-Pacific Partnership. But suppose they do. It's still the case that downturns and shakeouts periodically hit the manufacturing industries where private sector unionism is concentrated. And when the next downturn or shakeout hits, the unionized companies are in the weaker position and far more likely to get taken down. Gradually, the unions put their employers out of business. They're asking the rest of us to give up the benefits of free trade in order to save the unsaveable.