The Strike That Changed U.S. Labor : The Indicator from Planet Money The 1937 union agreement between GM and the United Auto Workers union ushered in a period of strength for organized labor. Today, labor is nowhere near as powerful as it used to be. What happened?

The Strike That Changed U.S. Labor

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This week marks a truly significant economic anniversary. Back in 1937 this week, General Motors signed the very first contract with the United Auto Workers Union. It was the culmination of weeks of drama. GM did not want its workers to unionize, so workers staged a sit-in strike inside the GM factory. Production ground to a halt.


UNIDENTIFIED REPORTER #1: An historic strike began when GM workers barricaded themselves in the automobile assembly plants for 44 days. They provided their own entertainment, slept in and ate in while the work stoppage cost GM $1 million a day.


Officials did try everything to stop the strike. They even turned off the heat in the factory. And, remember; this is winter in Michigan.

VANEK SMITH: At one point, a riot broke out, and this standoff was just captivating the world.


UNIDENTIFIED REPORTER #2: What observers describe as the most crucial battle in American labor history, involving nearly 100,000 men, has practically shut down the entire American motor industry. From Michigan, where the strike started, we bring you these acute pictures of a riot in progress. What happens when a crowd of strikers goes crazy, when destruction becomes the order of the day?


GARCIA: In the end, though, GM's CEO signed a contract with the United Auto Workers union.


UNIDENTIFIED REPORTER #3: And that handshake means the strike that shook a nation is over.

VANEK SMITH: Labor and the auto industry would never be the same. Chrysler and Ford followed suit, signing union agreements of their own. This is THE INDICATOR from Planet Money. I'm Stacey Vanek Smith.

GARCIA: And I'm Cardiff Garcia. Today on the show - what this major union victory meant for workers, what it meant for the auto industry and why unions over time kind of lost their mojo.


UNIDENTIFIED REPORTER #3: After six long weeks of idleness, it's home today and back to work tomorrow.


VANEK SMITH: That moment when the auto industry shook hands with the union, U.S. business was forever changed.

HARLEY SHAIKEN: Without question, a historic milestone.

VANEK SMITH: Harley Shaiken is a labor economist at Berkeley.

SHAIKEN: That modest contract, one page, was labor's Magna Carta.

GARCIA: In the decades after that contract was signed, the UAW bargained for things like pensions and health care benefits and paid vacation and famously high salaries. That's according to Gary Burtless, an economist with the Brookings Institution.

GARY BURTLESS: U.S. auto workers were among the princes of industrial labor in the United States. They received very high wages, very good fringe benefits.

VANEK SMITH: A union job became a ticket to the middle class. And those high union wages spread out across the economy. People had more purchasing power. The U.S. economy grew. Companies got wealthier. More of them unionized. Unions were riding high. And everybody wanted to be a union worker.

GARCIA: Yeah. More and more workers started up unions in their industries. Unions spread across the country, and by the mid-1950s, more than a third of all U.S. workers were in a union. That is today's indicator - more than a third.

VANEK SMITH: And then the oil crisis descended. It was the early 1970s. Gas prices spiked, and suddenly, everybody wanted a small, fuel-efficient car. U.S. automakers were not so good with the small, fuel-efficient cars. And foreign competitors like Volkswagen and Toyota started to get a foothold in the U.S. market - a market that the Big Three U.S. automakers had just totally owned before then.

BURTLESS: And consequently, the Big Three lost a lot of sales, lost a lot of profitability. And without those huge profits, Ford, GM and Chrysler just could not afford to pay such outsized wages to their workers.

GARCIA: Suddenly, Americans were actually buying a lot of foreign cars, and those foreign cars cost less, partially because they weren't dealing with the high salaries and benefits that the Big Three were dealing with. The good deals that unions had negotiated when times were good started to drag on U.S. automakers.

BURTLESS: Manufacturers and their unions could not turn on a dime. They couldn't change the arrangements.

VANEK SMITH: Oh, they were less nimble in a way.

BURTLESS: Yes, exactly. They were less nimble in responding to the demands of the market.

VANEK SMITH: After that, labor in the U.S. just kind of lost its mojo, all over the country, says Gary. And this happened for a couple of reasons. First, companies across the U.S. watched this thing unfold in the auto sector, and they thought, we don't want to deal with that. They started fighting unionization like never before, sometimes intimidating workers or firing workers who tried to unionize, even though that was not legal, and also lobbying hard against unions, pushing through legislation to weaken them.

GARCIA: Companies in all kinds of industries were also seeing more competition from overseas, just like the automakers had experienced. And companies were starting to equate unions with an inability to compete.

BURTLESS: And so they fought unions much, much harder using much stronger methods - some would say coercive methods.

VANEK SMITH: At the same time, says Gary, workers themselves started to back away from unions and from trying to organize employees in the companies they worked for. This happened both because companies could be so vicious to workers who tried to unionize and also because, in some cases, unions were seen as cumbersome to workers with these sort of onerous regulations that would just drag a company down.

BURTLESS: Industry in the United States is very dynamic. We always have companies that are growing, expanding, becoming more profitable. And at the same time, we have businesses like Sears whose operating model has proven to be less successful. And it happens that in a lot of the shrinking industries, unions have been very important. And businesses have been much more fierce in resisting unionization than their counterparts were in the 1950s and '60s when it was very plain that unions, and very successful unions in many growing industries, were not an impediment to companies being very successful and expanding. But nowadays, I think in many workers' minds and in many businessmen's minds, the notion that you would be both unionized and growing and flourishing seem to be incompatible.

GARCIA: Politically, in the time after the oil crisis, the way people and companies saw unions had just shifted. Today, says Gary, there are more retired members of the United Auto Workers than working members.

VANEK SMITH: Right now, the labor market is strong. The unemployment rate is low, and companies are having to compete for workers. That gives workers more leverage to do things like unionize. Still, says Gary, that is just not happening at the rate you might expect. In fact, last year, union membership dipped to its lowest level since that contract was signed between the UAW and GM in the '30s. According to the Labor Department, just over 10 percent of U.S. workers are unionized. And in fact, Cardiff, we should probably say that you and I are both in a union.

GARCIA: Yeah, full disclosure.

VANEK SMITH: Yeah. So a lot of workers at NPR are in SAG-AFTRA.

GARCIA: And cue the old-timey audio.


UNIDENTIFIED SINGERS: (Singing) When they smile and say, no raise in pay, sit down, sit down. When you want the boss to come across, sit down, sit down

VANEK SMITH: This episode of THE INDICATOR was produced by Darius Rafieyan, edited by Paddy Hirsch, and our intern is Willa Rubin.


UNIDENTIFIED SINGERS: (Singing) Sit down, sit down.

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