I’ll Have the Souffle
In March, nervous that the Employee Free Choice Act being introduced before Congress would depress Wal Mart’s earning potential, Citigroup’s research division lowered Wal Mart from a buy to a hold recommendation. The bill, also known as EFCA, would make it easier for employees to form unions, and is supported by the Obama Administration.
In the Trillium article Keeping the SRI in ESG, the efforts of some major Wall Street firms to incorporate environmental, social and governance (ESG) factors into their investment decision making are desribed. For a while, Citigroup also issued research advice from an ESG perspective, but that office was one of the first to go when Citi’s fortunes took a dive last year. Which is too bad, because I can’t help but think that Citi’s erstwhile ESG analysts would have understood how thoroughly the lowered Wal Mart rating embodies the one-sided and shortsighted thinking that ESG analysis is supposed to steer us all away from. Sure, Wal Mart and some other large retailers’ costs will rise if their employees unionize. Would EFCA be a net liability for Wal Mart in the long run if the buying power of workers is strengthened throughout the country?
If studies that link higher unionization rates with a larger, more stable middle class are correct, the answer is no. According to the Economic Policy Institute, declining union density largely explains the stagnation of average wages since the 1970s, despite a rise in productivity. More than half of the decline in the average wage of workers with no more than a high school education is attributed to the decline in union density.* Well before the current crisis, income inequality had been rising steadily for decades and is now greater, by many measures, than it has been since the 1920s, according to the New York Times. Citing an analysis by economists Emmanuel Saez and Thomas Piketty, the Grey Lady notes that the top 1 percent of earners in the U.S. made 19 percent of all income in 2005, up from 8 percent in 1975.
Never mind the bank bailouts – it should be obvious that our economy cannot fully recover until we revive the purchasing power of American working families. Consumer activity accounts for roughly 70 percent of the U.S. economy – and 100% of any retailer’s revenues.
It seems odd to me that a smart, even visionary man like Bernie Marcus doesn’t see how all of this fits together. Marcus, a co-founder of The Home Depot, moderated a controversial conference call about EFCA last fall, whose transcripts became public and revealed the panic in which the Masters of the Universe view the prospects of a resurgence in union membership. It was imperative, Marcus implored, that the business community donate hundreds of thousands, if not millions, to anti-EFCA forces to prevent America from turning “into France.” Such hysterical Francophobia brings to mind a scene from Woody Allen’s classic comedy Love and Death in which a Russian sergeant rallies his troops against Napoleon’s army:
Sergeant: Imagine your loved ones conquered by Napoleon and forced to live under French rule. Do you want them to eat that rich food and those heavy sauces?
Sergeant: Do you want them to have soufflé every meal
I suspect the average Home Depot worker would decline neither the soufflé nor the benefits EFCA would provide. The Act’s main provision would allow workers to choose to either hold a secret ballot election (the method currently provided by the National Labor Relations Board) to determine whether to unionize, or to have their union recognized if a majority signs authorization cards (“card check”). EFCA would redress the strategic advantages that employers enjoy as a result of the secret ballot election process (such as the ability to delay unionization for years), and stiffen the lax penalties for those who violate labor laws.
Also in March, Whole Foods, Costco and Starbucks floated a “compromise” proposal that would maintain management’s right to demand a secret-ballot election over card check and would leave out binding arbitration, offering instead a fixed period in which an election must be held, and stricter penalties for management and union violations. Labor and Big Business both rejected the proposal, but it found some sympathy from the middle ground-seeking Senator Arlen Specter (D-PA), whose recent defection to the Democratic Party should give EFCA some legs.
* “Are Unions Still a Threat? Wages and the Decline of Unions, 1973-2001,” Working Paper by Henry Farber, Princeton University, 2002.
To read more about the Employee Free Choice Act, visit AmericanRightsAtWork.org.