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Workers Strike Back Against Shareholder Primacy [1]

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Date: 2023-11-19  

The United Auto Workers’ (UAW) successful forty-five day strike against the Big Three Detroit automakers, G.M., Ford, and Chrysler-owner Stellantis, is one of the great moments of the last few decades. Over the last few decades, unions have been in steady retreat, their very right to exist not simply questioned, but treated as some sort of source of market inefficiency. Workers have risen up and said, no more, and they have shown the power of organized labor against enormous odds.

In a 1970 op-ed , the famed economist, Milton Friendman, said “The social responsibility of business is to increase profits." The Friedman doctrine absolved business from any need to consider worker welfare, or the impact of their operations on the community or other stakeholders. All that matters is increasing profits and rewarding shareholders. This doctrine remains in place, despite signaling by businesses that they are moving away from shareholder primacy to creating “An economy that serves all Americans”. This shift has not materialized because managers and shareholders have no real incentives to move away from the singular pursuit of profit. Within a decade of that op-ed, corporations had put what seemed the final nail on the coffin of unions. Forced to make concessions following Chrysler’s bailout in 1979 , their power was further weakened in 1981 when President Ronald Reagan crushed the Professional Air Traffic Controllers Organization (PATCO) by firing over 11,000 striking air traffic controllers . Since then, corporations have run rampant, faced with fearful unions that have retreated with every negotiation. Autoworkers have been particularly hard hit.

Once the best-paid workers in the country, today, their position is perilous. The usual answer is that this is in line with the decline in the Big Three Detroit automakers, and yet, CEO pay has skyrocketed. According to a study published in the Washington Post , in the early 1990s, rank-and–file auto workers earned an average of $43/hour in today’s dollars, the highest pay in any industry. Last year, the average pay was just $32.70/hour, 30% less than they did in their 2003 peak, and in the middle of the pay scale in comparable industries. This strike became necessary when the Big Three Detroit automakers announced their intentions to have their new generation of battery plants on lower wages than under existing UAW contracts. Not only that, these plants would be joint ventures with Korean and Chinese firms, who are outside the scope of these contracts. The president’s support was key, with him joining the picket lines, the first president in our nation’s history to do so. Furthermore, our shift to an industrial policy means that the president was able to exercise his influence to help auto workers in their struggle.

The UAW was able to win an historic tentative agreement that ensured a 25% base wage increase over the life of the contract and will cumulatively raise the top wage by 33% compounded with estimated cost-of-living adjustments (COLA), to over $42/hour. The starting wage will rise by 70% with estimated COLAs to over $30/hour. The deal also improved retirement benefits for current retirees, whether they have pensions or 401(k) plans. In addition, the tentative agreement reinstates benefits that ended in the wake of the Great Recession, such as COLAs, a three-year wage progression and it ends wage tiers in the union. Furthermore, the deal enshrines the worker’s right to strike over plant closures. Importantantly, the Big Three Detroit auto workers committed to including their new generation of battery plants within the master UAW agreement. Not only that, but the UAW forced Chrysler to reopen the Belvidere Assembly Plant, months after Chrysler had mothballed it.

These concessions are historic. The deal is still to be ratified by all the unions, and there is some indication that some rank-and-file autoworkers are against the deal , given its terms, it is likely to pass. The deal does show, however, that even now, if the deal goes through, auto workers will be earning a dollar an hour less than they did in the early 1990s. This is the extent to which they have fallen. That strike has been about just trying to recover a decades-long collapse in pay.

Whereas businesses have only signaled a desire to shift toward stakeholder primacy, auto workers have struck the first blow in ensuring that shareholder primacy is a thing of the past. The next fight is to unionize auto plants across the country. Without unionization, worker’s compensation and benefits will continue to be depressed. organized labor has shown that it can indeed win signal victories against corporations, and this will help it win over support.

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