Labor’s Social Compact: A Conversation on Labor in a Modern Age

Steven Greenhouse is a veteran New York Times reporter who started working in September 1983. Greenhouse’s early career consisted of covering the economics in the Midwest of the United States, European economics, the European Union and the collapse of communism in Eastern Europe, but he has spent the last nineteen years as a labor and workplace correspondent. He has covered the role of labor in presidential elections since 2000, and has reported on the Fight for 15 movement and labor conditions in the United States and abroad. After leaving the New York Times in 2014, Greenhouse has been working on a book about the past, present and future of American workers and unions, as well as freelancing for several publications. He is also the author of The Big Squeeze: Tough Times for the American Worker, which was awarded the Sidney Hillman Prize for a nonfiction book that works towards social justice. As a Spring Fellow at the University of Chicago Institute of Politics, Greenhouse spoke with the Gate about the history of American labor unions, labor’s role in the 2016 election, and prospects for workers in the age of automation.

The Gate: Can you talk about why and how the implied social contract between corporations and their employees has disintegrated?

Greenhouse: I wrote a whole chapter about it in my book, The Big Squeeze. In my view, the social contract developed between American corporations and American workers after World War II. And at that time American companies, the American economy, really dominated the world because European and Japanese economies turned sideways flat on their back. American companies are really prosperous, and American workers and labor unions, were still feeling terrific coming out of the Depression. So with the war over, the workers’ unions said, “Corporations are going gangbusters after the war, and we want our share.”

So there were these big strikes involving the United Auto Workers and the Steelworkers Union, where they really pushed the predominant companies in the country in the late 1940s through the early ‘50s: General Motors, Chrysler, Ford, United States Steel, Bethlehem Steel. And that created a social contract through labor contracts, and we really had middle-class wages. People used to be able to support families on one salary. There were good pensions, and there was good health coverage that resulted somewhat, because during the war there were wage freezes and you weren't allowed to give raises, so companies, instead of giving raises, gave better fringe benefits.

So this whole social contract formed when companies were much more tolerant of labor unions when they weren't feeling the heat of globalization or international competition yet. So there was this feeling that we should share prosperity. I think there was more social solidarity between folks on top and other folks. There was this implicit social contract—plus we were fighting communism. And I think that was a reason that companies and conservatives were much more tolerant of labor unions, because we didn't want workers or the left becoming pro-communist, so we wanted to make sure they were treated pretty well. That's my preface.

So in the 1970s, from the ‘50s, ‘60s, ‘70s, there really was this social compact. Some common-sense stories and historians say that it wasn't really a social compact, that it was all exaggerated. I disagree.

But in the ‘70s, there were the oil shocks of 1973 and 1979 which really strained the economy—inflation really increased. At the same time unemployment was high (that was unusual) but there were really strains on corporations and corporate profits and 1981-82 was a horrible, horrible recession. At the same time, US companies, some of the big companies I just mentioned, were feeling huge pressure from foreign competition for the first time in autos and steel. So a lot of companies said, hey, we really have to cut down our costs. Some of them were really close to going bankrupt. So they got much tougher towards their workers and towards the unions, and I think globalization, the recession, globalization of foreign imports really helped weaken and dissolve the social compact.

In 1981 there was the strike by thirteen to fourteen thousand air traffic controllers. It was an illegal strike and really angered President Reagan. He fired 11,500 controllers, saying they had broken the law. And that was seen as giving a green light to private-sector employers generally to get tougher on unions. Some people say that was another ratcheting-up of the destruction of the social contract.

Gate: Do you see this social contract as something that can be brought back?

Greenhouse: I'm going to add one more thing to the previous answer. With respect to the concept of corporations and who corporations are supposed to serve, then I think going into the early 1990s, and in the ‘60s, ‘70s, ‘80s, there was a more of a sense that corporations serve not just their shareholders, but they have several stakeholders: society, workers, customers. And then with Michael Jensen's Harvard Business School in the 1990s, there was much more of a sense that corporations focus on one audience—that is, their shareholders—and that means training to maximize profits and maximize share price. And I think that also went far to weaken the social contract.

Now do I think a social compact can be rebuilt? I think it would be very hard right now because unions have grown quite weak and some people say they have been largely marginalized in the private sector. When John F. Kennedy was elected president, about one in three workers was in a union. Now, it's one in ten workers are in a union, and in the private sector it's one in sixteen workers are in a union.

So there has been a big effort within corporate America to marginalize unions, not to accept unions, to fight them, and weaken them, and hobble them as best they can. The Republican Party, as we've seen with Scott Walker in Wisconsin, as we're seeing with Governor Rauner here in Illinois, is trying very very hard to weaken unions further. Plus, we have globalization remaining very strong, automation is a big force that's weakening the bargaining power of workers: the leverage of workers. Many Americans are not familiar with labor unions. So when asked if we were to re-establish a social contract, where is that going to come from? Unions are weaker now, and generally unions, which have plenty of faults, are the folks who lead an effort to re-establish a social compact. So with unions very weak and with corporations in the driver's seat, with conservatives like Scott Walker or Rauner trying to weaken unions, where's the impetus going to come from to re-establish the social compact?

Having said that, I think Donald Trump saw that there's huge discontent, that workers felt huge discontent. He spoke mainly to the white workers, but among Hispanic workers and African-American workers, there's lots of discontent too. And I think one of the reasons is because the social compact has been deteriorating. Wages have largely been stagnating. Benefits have gotten worse. Regular pensions are on the decline, and they are replaced by 401(k)s, which aren't nearly as good as traditional pensions. Many workers of worth have lost health coverage over the years. That's one of the reasons why it was important to pass the Affordable Care Act: because an increasing number of Americans do not have health coverage.

So I think there is a concern among typical Americans, middle-class moderate-income, low-income, that they want to somehow re-establish some type of social compact, but they don't know how to go about doing it. The institutions that would lead the way to re-establish a social compact—labor unions—have grown weaker, and one party—the Republicans, the dominant party right now—and business just don't want to work with unions. But perhaps as we have more automation, more artificial intelligence, and more robots, workers get even more marginalized. And the 1 percent, which—I use a Marxist phrase—owns the “means of production,” they will do very well thanks to automation, globalization, artificial intelligence. And workers, many of them will lose out.

There might be some backlash saying "Hey folks, this sucks!" That was sort of a backlash in this past election. But can that backlash be turned into the recreation of a social compact? You know, that would be hard, but I think at some point, those on the bottom might say, things are really going poorly for us. The top 1 percent has gone from like 10 to 12 percent of national income to 21, 22, 23 percent of national income, and we in the bottom 50, 60, 70 percent have stagnated. We have to do something, but when individuals like the Koch brothers are spending tens or hundreds of millions of dollars in the election, it's hard for typical Americans, middle-class Americans, to get the political voice they need to try to re-establish a social compact.

Gate: You mentioned that blue-collar workers were a target group for Trump. What is your take on why blue-collar workers supported Trump? Among blue-collar workers, was there a divide, along racial or other lines, and how was that explored in the election?

Greenhouse: I think the genius of Donald Trump is that he could see the grievances that Hillary Clinton didn't see or didn't recognize or didn't articulate. He saw a lot of workers, and he was gearing himself for white blue-collar workers—not African-American blue-collar workers, not Hispanic blue-collar workers—but white blue-collar workers, and he saw they were unhappy about globalization, they were unhappy about wage stagnation, and he really directed his campaign, in many ways, at them. I think Clinton was much more, "I'm going to get the African-American vote, the Hispanic vote, the gay vote, the young mothers who care about parental leave vote, the women over age fifty who identify with me.” And she was going to get these five, six, seven pieces and put them together to get 51 or 55 percent of the vote, forgetting about the largest demographic in the country: whites who don't have college educations.

I think she would have been much more successful if she had a broader, more universal message for Americans, like Bernie Sanders, who had the idea of free college tuition. That's an expensive proposal, but many working-class people, white, African-American, Hispanic, care about the lack of mobility for kids. The idea of free college is important to them because they have a really hard problem affording college, and they want their kids to have mobility, so Bernie recognized some of the problems that that I think Hillary was having. Hillary finally came out with a proposal on that, but she wasn't leading the way on that.

So Trump—and this is touching the third rail, so to speak—but, you know, some of the white coworkers are racist. And Trump's appeal was, some say it was racist: when you say “make America great again,” what does that mean? Does it mean return to a largely white America, when we didn't have an African-American as president, when we didn't have as many Hispanic immigrants? I think when you try to deconstruct the phrase “make America great again,” I think it had definite racial connotations.

And that appealed to the white working class who feels that they have lost jobs to Hispanics, they have lost jobs to people coming in—Indians coming in on H-1Bs. So Trump is very clever in appealing to the white working class, and he came across as very macho too, and I think that also attracted them. And Hillary, she never campaigned in Wisconsin, she campaigned too little in Michigan. And when she campaigned in Pennsylvania, she was often campaigning in Philadelphia to go after the African-American vote. And I think the white working class, white blue-collar workers, felt, she doesn't care about us, she's hardly even reaching out to us.

Gate: You spoke about automation in detail. How do you think automation will require us to rethink the role of government in providing for citizens?

Greenhouse: So there is a huge debate among economists, who are far smarter and have thought far more about this than I have, about whether we are experiencing a new, more sophisticated wave of artificial-intelligence automation robots that will render a large, sizable portion of the workforce unnecessary. And other people say no, even with new robots and automation, we are going to need as many workers as ever. They say, yes, some workers will be laid off, but we will need them to take care of the elderly, or a mow a lawn, or do some sort of work in the latest iteration of Starbucks, or Pinkberry’s, or whatever.

I personally haven't done the economic equations and I don't have a doctorate in economics, but I worry that this new wave of automation really may leave millions of workers redundant. The question is, what do we as a society do for them? Do they just hope that they can be reabsorbed into the economy? These maybe five million professional drivers, truck drivers, taxi drivers, delivery drivers might be replaced by driverless technology—hopefully they can be retrained and get other jobs. But now we see this huge crisis in retailing, where a lot of retail workers are being laid off.

If there's this new great wave of artificial intelligence of robots, and as a result ten million people lose their jobs, what should government do for them? Some people say we should have universal basic income, if once you get ten to fifteen thousand dollars a year, you know ...  but good luck trying to live in Chicago or New York on ten to fifteen thousand dollars a year.

And people want to work for dignity, to give them something to do. People say if ten million people, twenty million people, or five million people lose their jobs to automation, and if there aren't new jobs for them, well let's just redistribute income to them. I think it would be smarter to redistribute work hours to them—even during the Great Recession in 2007-2009, in some states, people, and many, many workplaces went from a five-day week to a four-day week, or even a three-day week to share the work. So instead of 25 percent of your workforce being laid off, you have some people work three or four days a week at partial unemployment, and so everyone could remain employed. Instead of people working forty hours a week, maybe we should go to a thirty-two hour week. I know corporations will say that will be too expensive, but these are just ideas. If as a result of increased automation, we see that we only need 130 million workers rather than 150 million workers, we now have a society.

This interview has been edited for content and clarity.