Bears, Bulls, Chickens and Pigs: wOw’s Wall Street Weekly with Liz Peek (Week of 8/31) 

Editor’s Note: Liz Peek is a financial columnist and the author of wOw’s SHEconomics.

Labor Day is upon us, signaling the end of summer. While most of us look forward to firing up the grill and grabbing one last swim, some Americans will be celebrating the labor movement. A century ago the organization of workers in our country created a much-needed balance between industry and labor. Today, many view unions as having contributed to the problems besetting our manufacturing sector. Spotlighting the role of organized labor today are the pro-union sympathies of President Obama and today’s focus on jobs – the crucial ingredient for recovery.

This week’s jobs reports have been mixed. Earlier in the week ADP reported that private employment had declined more than expected, but thankfully the rate of losses dropped for the fifth straight month. Today the government reported that another 216,000 non-farm employees were cut in August. That was a better number than expected, but the unemployment rate rose to 9.7% – a 26-year high. Since the beginning of the downturn, some 6.9 million jobs have been lost, creating a giant hole in consumer income and confidence.

While President Obama attempts to raise the economy out of a deep recession by creating jobs, he is also beholden to Big Labor, which hopes that a supportive administration will help rebuild its ranks. Though the attention has been focused on health care of late, the demands of labor unions are only temporarily on the sidelines, and could ultimately endanger the country’s recovery prospects.

The first Labor Day was September 5, 1882, and was more protest than celebration. Some ten thousand workers took a day off from their seven-day-a-week jobs and marched in New York City to demonstrate against their harsh working conditions. The fractious movement must have jolted the robber barons of the times – men like John D. Rockefeller and Andrew Carnegie, who built giant fortunes as America industrialized and who ultimately poured their wealth back into some of our greatest universities and libraries. Ultimately, public outrage over worker abuses gave rise to the union movement, which represented a growing share of American workers until the mid-1950s when membership peaked.

Over time, labor unions garnered great power, becoming the strong political force they are today even as membership dwindled. Currently, labor unions claim only 12% of all of our workers, down from 20% in 1983 and 28% in 1954. A modest 8% of private sector employees belong to unions, as opposed to 37% of those working for the government.

A variety of influences have cut into their membership. Significant scandals and the recognition that workers are increasingly protected by legislation such as OSHA and minimum-wage laws have diminished their appeal. Also, corporations became more willing to fight back as competitive pressures arose from globalization. Membership numbers were reduced as the economy shifted away from a reliance on manufacturing, where unions still reign supreme, and toward service industries where organizing has been less fruitful. Think Wal-Mart, the nation’s largest employer, which has successfully fended off an all-out war waged by several unions.

As our economy creeps out of the valley of despair, labor unions face still-greater challenges. A slack jobs market tends to strengthen employers at the expense of workers. More important, Americans increasingly doubt that unions provide substantial advantages to members. According to one poll, while 47% of organized workers think that most people would like to join a union, only 9% of non-union employees think that joining up would be a good idea.

The popularity of organized labor has also taken a hit from the loss of market share suffered by U.S. corporations competing globally, such as our auto producers. The benefits wrested from management over several decades have left U.S. manufacturers struggling against huge embedded costs. This burden became all too visible earlier this year as both GM and Chrysler were forced into bankruptcy.