Unions seek to organize workers and represent their interests. Unions are not just an issue for union companies; just ask Amazon and Starbucks. The Retail, Wholesale and Department Store Union (RWDSU) lost the election in 2021 to represent Amazon workers at the Bessemer, Alabama warehouse. The union ran on a platform of reducing work pressure and giving employees a voice in how their work pace and work environment is decided. However, the National Labor Relations Board (NLRB) has ruled that the election must be re-done because of the company’s conduct in interfering with the first election. The union described it as “intimidation and interference.”
Workers already in unions have become more active in pushing for better wages, benefits, and terms of employment. At John Deere, the United Auto Workers (UAW) union went on strike. UAW leadership negotiated a contract with John Deere; workers voted to reject it. The UAW then negotiated a better contract; workers again voted to reject it. The third time was finally the charm, with 61% of UAW members approving the 6-year contract. It includes an $8,500 signing bonus, a 20% increase in wages over the lifetime of the contract, including 10% this year, three lump-sum (bonus) payments of 3%, no change in healthcare benefits or costs, and the return of something that John Deere had eliminated in its UAW contracts in 2015: COLA (cost of living adjustment). A COLA like this uses a formula to increase wages in direct proportion to increases in the consumer price index (inflation). The strike and new contract came against a background of record-high profits at John Deere, an increase in pay for its CEO of 160% to $15.6 million (workers displayed signs asking for a similar 160% pay raise), and the company’s struggle to hire workers in a tight labor market. The COLA is especially notable because it results in increases to fixed labor costs over time, constraining labor cost flexibility on the part of John Deere (e.g., should profits/revenues drop). Another recent major strike and eventual contract settlement took place at Kellogg Co., with the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union.
Questions for Students
1. In what way are unions relevant to nonunion employers? At Starbucks, where employees voted for union representation, will employee wages and other conditions of employment immediately improve? Explain.
2. How much more will a worker make six years from now under the new contract? How did the union and workers it represents successfully negotiate with John Deere to get what looks to be a very good contract for them? Similarly, why did John Deere agree to this contract? Why did both sides agree to a relatively long contract period (6 years)?
Note to Instructors
Amazon and Starbucks are examples of nonunion companies devoting substantial resources to remain non-union. They do not wish to let a union “get its foot in the door.” Thus, there is much effort to preventing a “yes” vote for a union at any locations. Employee wages and other terms will not immediately improve. Winning union representation is a first step. The next step is to successfully negotiate a contract. That happens in only about one-half of cases where unions win the representation election. Firms need to raise wages to be able to compete for workers, at least for now. John Deere is making record profits. That is only possible if it can avoid disruptions in production (e.g., a strike) and/or poor labor relations and disgruntled workers. The six-year contract is acceptable to the union perhaps because of the COLA; the six-year contract is acceptable to the company perhaps because of its interest in avoiding the uncertainty of possible production disruptions and labor problems.
Sources: Tyler Jett. John Deere Employees Approve Third Contract Proposal, Ending Five-Week Strike. Des Moines Register, November 17, 2021; United Auto Workers. John Deere UAW Members Ratify a 6-Year Agreement with Substantial Gains. https://uaw.org/john-deere-uaw-members-ratify-6-year-agreement-substantial-gains/, November 17, 2021; Catherine Thorbecke. Kellogg Strike Ends as Union Workers Vote to Accept New Contract. Abcnews.go.com, December 21, 2021.
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