The Future of Trade Unions

European Straits #16

Nicolas Colin

Dear all,

I have now written three quarters of the ‘HEDGE’ manuscript, of which you can have an overview here. Now comes the time to write the fourth part dedicated to discussing the future of liberalism in the Entrepreneurial Age. In the coming weeks, I will share related ideas and concepts which I hope will inspire thoughts and reactions.

One section of the book will discuss the future of trade unions and the new role they need to imagine if they want to effectively empower their members in the Entrepreneurial Age. One issue with technology is what I have elsewhere called “downward augmentation”: the fact that technology compensates for a lack of skills to execute most tasks. The more technology there is, the less educated you need to be to provide high quality services in a more productive way.

For less educated workers, this is good news indeed. It means that the barriers will be lower when they try to access the job market. And once they have a job, they’ll be able to deliver a higher output and will (in theory) be rewarded with an accordingly higher wage. But there’s a catch. With more people being able to occupy many jobs, technology also contributes to Karl Marx’s “reserve army of labor” becoming wider than ever. Thanks to technology, employers tend to have an infinite pool of job-seekers into which they can tap to replace those who have the nerve to organize and demand better working conditions.

How can trade unions restore their bargaining power in the presence of this infinite reserve army of labor? As is often the case, there are many lessons to be drawn from the past. The rise of assembly lines at the end of the 19th century was similarly seen as a threat for the well-being of workers. Since working on these assembly lines required less skills than traditional craftsmanship, factory bosses could maintain pressure on wages and force their employees into accepting degraded conditions. Union leaders answered by breaking with the corporatist approach of the old craft unions and organizing industrial workers no matter their skills or the industry they worked in.

To create a sense of shared destiny between their heterogenous members, these innovative union leaders had to inspire their troops with radical messages and, in some cases, revolutionary views. But above all, they designed a new value proposal: joining a union was not about entering a corporation of skilled craftsmen, but about taking a path towards inclusion in society. As a result, industrial unions were a preferred destination for minorities and immigrants as they provided their members with tailor-made services to cover critical risks and taught them the soft skills necessary to find their place in an otherwise adverse society.

As discussed in a recent exchange with Azeem Azhar, this is all why the cooperative model is bound to rise in the future as the most effective way to empower workers. My view is that in most industries we will witness a convergence between collective bargaining and professional training, in three steps:

  • workers will form modern guilds to bargain with corporate employers and platforms such as Uber and Deliveroo. These guilds will make the most of technology and networks and will function as what Balaji S. Srinivasan calls "cloud-based communities";

  • to strengthen their bargaining power, those networked guilds will invest heavily in professional training to attract and convert individuals willing to enter the profession. They will complement this activity with mutual insurance against critical risks such as illness and unaffordable housing;

  • finally, those guilds will operate their own gig economy platforms on the side (as explained in a December 2016 paper) to attract amateurs into their profession and grow the pool of future members willing to defend the collective interests of the profession.

While reflecting on the future, here is an overview of one of HEDGE’s most recently completed chapter: How Liberalism Shaped the Corporate Contract.

Also, as every week I’ve published two more notes about business strategy:

Warm regards,