Look for the Union Label: A Labor Day Special

The Labor Movement in America and the Rise of Alternative Organizations in Web3.

From time to time, everyone is allowed to indulge in a conspiracy theory.

And here’s mine: anti-Union activists engineered the timing of Labor Day.

Every year growing up, we marked Labor Day. But the holiday meant something different than a picnic with neighbors or the triumph of the working class to me. It meant that summer was over. It meant that the school year was starting. It meant that freedom, warm weather, and all the other good things were now over.

So like I said: well played, capitalists.

Where I grew up, this ambivalence about Labor Day (and the Labor Movement) were common sentiments. The 1990s were not exactly a great era for Unions. Membership had been declining for decades. Ronald Reagan changed the game. When the President fired striking Air Traffic Controllers in 1981, he had a full 59% of Americans approve of the strike-breaking.

I also had a personal connection to Unions. I grew up in the Lehigh Valley of Pennsylvania. My hometown gave birth to Bethlehem Steel. Once a symbol of America’s global manufacturing leadership, the company had shuttered around the time I was born.

As foreign firms innovated and employed younger workers, Steel was locked in the past. Its hands tied by generous pensions and benefits it had promised to an aging generation of workers when its dominance had been assured. It could not invest in new technology. It could not pay lower market wages.

It could not compete. So it died. And my hometown fell into rustbelt ruin for a decade.

This cemented how I thought of Unions. They were bloated, bureaucratic institutions. They were more obsessed with protecting their members’ short-term interests than helping their workers compete in a global economy. They were a paleolithic institution in a rapidly modernizing world.

Except here’s the thing. The story that I just told – like many Clinton-era neoliberal fables – is only half true.

Here are the facts. Unions do slow down the work of a company. They are, as currently constructed, inefficient. But that inefficiency has a pretty sweet fringe benefit.

Just look at this graph:

Now, correlation doesn’t imply causation. But various studies attribute roughly 10% of widening inequality to the decline of union membership.

So the question that we have to reckon with is can we have the good without the bad. Can we have unionized firms that outperform traditional firms AND effect a more equitable allocation of wealth?

We’re going to look at how technology might be able to help here, but before we get there we need a little economic theory.

Let’s say I run a firm selling televisions. I’m willing to sell this television for any price over $100. The consumer is willing to buy it for any price under $200. I decide to sell it for $150.

When this happens, the consumer gets a net consumer surplus of $50 because they value the TV at $200 but get it for $150. Meanwhile, my company gets a producer surplus of $50 since we would have sold the TV for $100. I’m a mega-capitalist so I keep 80% ($40) of that surplus and give 20% ($10) to my workers. But then they unionize. They demand that I pay them $20 per TV sold.

Hm… now one of three things can happen:

1. I can tell them to go fuck themselves and then I have to bet I can hire new workers.

2. I can agree to share money with the Union. This means I have less money for myself, and I have less money to invest in better future TVs.

3. I can raise prices to pay them $20 but keep myself rich. But then I risk being undercut by other firms.

What usually happens, in the event of unionization, is some combination of 2 and 3. Prices go up for consumers. We invest less in the future and become less competitive. But the good news is that, at least in the short run, we have more equitable wealth distribution.

The question for today’s labor innovators is: can we balance all these needs? Can we keep prices lower, encourage future investment and get an equitable distribution of wealth?

That’s a question as old as industrial capitalism.

A New Era for Labor

The funny thing is, in the long-term, the interests of employees, shareholders and consumers should be aligned.

Consumers want cheap and innovative products. Shareholders want to produce those products as cheaply as possible so that they can maximize profits. Employees want their employers to be dominant so that they can have secure jobs and have a chance to make a large share of wealth. It need not be a zero-sum game.

But the current system has lots of distortions. Capitalists want to extract short-term profits. Consumers want artificially cheap goods. Labor often wants to extract maximum wage for minimum work. Those misaligned incentives lead to broken trust. That broken trust makes the modern economy feel like a zero-sum duel to the death between consumers, capitalists and labor.

But we can fix that!

And the timing couldn’t be better. We are undergoing a shift in the economy at a scale not witnessed since the Industrial Revolution. In the 19th Century, Americans left the farm for full time factory work. Today, Americans are leaving the factory for the information firm, or better still, leaving the firm altogether.

16% of Americans have earned money on a gig platform. That number goes up to 20% for Black workers and 30% for Hispanic. 36% of Americans are independent contractors – and many depend on large platforms for generating their work.

That’s rife ground for a labor revolution. As is this: Americans views of Unions are nearing an all-time high.

The last time approval was this high, LBJ was in the White House.

But Union membership remains stubbornly low. Reinvigorating that will take adapting to a new era to meet workers where they are. That means new industries and new tools for engagement.

Fortunately, a new wave of tools should make organizing and engaging easier. And, in a more revolutionary vain, Web3 might make realigning the incentives of capital and labor easier than ever before.

Organizing Online

One consequence of a shift in the way Americans work is that the old ways of Unionizing might be too slow.

The traditional union organizing campaign works like this:

1. A group of employees is interested in forming a union.

2. They reach out to a National Union.

3. The National Union gets involved and helps collect “union cards.” These are essentially a petition to create a Union that is presented to the state or national government.

4. Once approved, a Union election is scheduled and a contentious campaign results.

5. If the Union wins the election, the National Union can begin negotiating contracts on behalf of the local chapter. In exchange, employees pay dues to the national organization (usually 1-2% per month).

This model worked well during the 20th Century.

But it feels outmoded for a digital-first world. And it introduces liabilities that:

1. limit union growth,

2. offer targets for anti-Union campaigns.

Contracts are negotiated on a firm-by-firm basis (rather than industry-wide). So unions often choose to focus on just the largest or splashiest unionizations. Since the current economic shift is happening as Americans move to be more independent, the old Labor system is leaving many behind.

Next – national organization dues are not cheap. They cost 1-2% of an employee’s compensation. That funding goes to distant national organizations. It rarely creates visible, on-the-ground change for communities. This, of course, forms the backbone of anti-Union campaigns. Corporations claim that “outsiders” – the national organization – will interfere in employees day-to-day jobs while siphoning their wages. The merits of this critique are dubious. The success of the critique, however, is clear.

New models of organizing, though, might resolve these problems.

Frank, a startup based in Chicago, has developed a platform that feels like a cross-between Slack, Blind and Salesforce. The platform allows employees to organize securely and anonymously. It allows leaders to track progress with recruiting new union members. In this way, it fills an important void. Companies often try to limit socializing at work to prevent union recruiting. But digital tools, especially those that are privacy aware, provide a necessary sanctuary.

A Bloomberg Beta backed venture founded by MIT-alums, Unit flips the national organizing model on its head. Unit provides tools for employees of firms to organize by themselves without a national affiliation.

The approach helps to under-cut two anti-Union talking points. It keeps unionization in-house. And it keeps control over dues in the hands of local employees.

It also, critically, allows union chapters to operate autonomously on policy and company issues. This can help fight back against attempts to paint the labor movement with a broad brush.

Shareholder Socialism: New Industries, New Movements

But what’s even more exciting – especially for emerging industries– is the possibility of an entirely new structure of organization. A company whose incentives are structured correctly from day one will not need a different organization to separately represent employee interests. They will represent employees by the structure of their governance.

After all, if employees are shareholders then their interests are inherently more aligned with ownership. A 2002 study showed that early ESOP (Employee Stock Ownership Plans) led to massive gains in worker productivity. More recent work by one of the authors, Joseph Blasi, found that,”workers at ESOP companies tend to earn 5-12 percent more in wages than those at traditionally owned companies, have retirement accounts that are 2.2 times larger, and are far less likely to be laid off during economic downturns.”

Of course, administering these kinds of plans is costly. Especially in a world of platform economies. But achieving a greater share of collective ownership of platforms is not just a Silicon Valley fantasy.

It’s showing up in reports of the International Labour Organization. (humble brag: my first internship was cleaning data in Excel for the ILO in Geneva. I know. I’m a big deal.)

The ILO points to digital worker-owned co-ops as one of the most promising trends in labor rights. The idea is simple – by banding together, freelancers around the world can unite to set standards for their craft, set minimum prices and provide member benefits.

Of course, in some ways this is just replicating the “agency” model that has long formed the bedrock of contract gigs.

But what’s unique in the web3 world is the ease of allocating ownership. Rather than completing contracts for a wage, web3 technologies make it easy to offer equity compensation. No contracts are required. No complicated stock purchase plans. Tokenized ownership can be distributed as easily as cash. It makes running a co-op as easy as running a firm is today.

Even more compelling, this ease of sharing ownership means that it is not just full-time employees who can receive ownership. Our world is moving toward more independent workers. So it's critical that these flexible relationships can also support shared ownership. DAOs are already leading the way here.

DAOs like VectorDAO and Llama are compensated for their consulting services in ownership shares of their contracting firms. They aligning their incentives and their laborer incentives with their clients. This helps build wealth, and grants labor greater control over the firm's policies. It is the most effective technical solution for gradually changing who owns the means of production. Marx, eat your heart out.

It has the potential to be revolutionary for today’s platform labor.

Today, platform workers live and die by the decisions of giant web2 firms. But as workers continue to organize in digital spaces, their increased leverage over labor supply will shift this balance. With new options, platform workers will be able to negotiate preferential terms from their existing platforms. Failing that, they will be able to launch competing platforms that more equitably reward labor.

It’s a brave new world for renegotiating the relationship between capital and labor. Our moment allows for exploration and reinvention on a scale not seen in the industrial relationship. And, maybe, just maybe – we can even get Labor Day at a better time of the year.