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Labor Standards
Economists attribute some of America's economic success to the flexibility of its labor markets. Employers say that their ability to compete depends in part on having the freedom to hire or lay off workers as market conditions change. American workers, meanwhile, traditionally have been mobile themselves; many see job changes as a means of improving their lives. On the other hand, employers also traditionally have recognized that workers are more productive if they believe their jobs offer them long-term opportunities for advancement, and workers rate job security among their most important economic objectives.
     The history of American labor involves a tension between these two sets of values -- flexibility and long-term commitment. Since the mid-1980s, many analysts agree, employers have put more emphasis on flexibility. Perhaps as a result, the bonds between employers and employees have become weaker. Still, a wide range of state and federal laws protect the rights of workers. Some of the most important federal labor laws include the following.

• The Fair Labor Standards Act of 1938 sets national minimum wages and maximum hours individuals can be required to work. It also sets rules for overtime pay and standards to prevent child-labor abuses. In 1963, the act was amended to prohibit wage discrimination against women. Congress adjusts the minimum wage periodically, although the issue often is politically contentious. In 1999, it stood at $5.15 per hour, although the demand for workers was so great at the time that many employers -- even those who hired low-skilled workers -- were paying wages above the minimum. Some individual states set higher wage floors.
   
• The Civil Rights Act of 1964 establishes that employers cannot discriminate in hiring or employment practices on the basis of race, sex, religion, and national origin (the law also prohibits discrimination in voting and housing).
   
• The Age and Discrimination in Employment Act of 1967 protects older workers against job discrimination.
   
• The Occupational Health and Safety Act of 1971 requires employers to maintain safe working conditions. Under this law, the Occupational Safety and Health Administration (OSHA) develops workplace standards, conducts inspections to assess compliance with them, and issues citations and imposes penalties for noncompliance.
   
• The Employee Retirement Income Security Act, or ERISA, sets standards for pension plans established by businesses or other nonpublic organizations. It was enacted in 1974.
   
• The Family and Medical Leave Act of 1993 guarantees employees unpaid time off for childbirth, for adoption, or for caring for seriously-ill relatives.
   
• The Americans With Disabilities Act, passed in 1990, assures job rights for handicapped persons.

Pensions and Unemployment Insurance
In the United States, employers play a key role in helping workers save for retirement. About half of all privately employed people and most government employees are covered by some type of pension plan. Employers are not required to sponsor pension plans, but the government encourages them to do so by offering generous tax breaks if they establish and contribute to employee pensions.
     The federal government's tax collection agency, the Internal Revenue Service, sets most rules governing pension plans, and a Labor Department agency regulates plans to prevent abuses. Another federal agency, the Pension Benefit Guaranty Corporation, insures retiree benefits under traditional private pensions; a series of laws enacted in the 1980s and 1990s boosted premium payments for this insurance and stiffened requirements holding employers responsible for keeping their plans financially healthy.
     The nature of employer-sponsored pensions changed substantially during the final three decades of the 20th century. Many employers -- especially small employers -- stopped offering traditional "defined benefit" plans, which provide guaranteed monthly payments to retirees based on years of service and salary. Instead, employers increasingly offer "defined contribution" plans. In a defined contribution plan, the employer is not responsible for how pension money is invested and does not guarantee a certain benefit. Instead, employees control their own pension savings (many employers also contribute, although they are not required to do so), and workers can hold onto the savings even if they change jobs every few years. The amount of money available to employees upon retirement, then, depends on how much has been contributed and how successfully the employees invest their own the funds.
     The number of private defined benefit plans declined from 170,000 in 1965 to 53,000 in 1997, while the number of defined contribution plans rose from 461,000 to 647,000 -- a shift that many people believe reflects a workplace in which employers and employees are less likely to form long-term bonds.
     The federal government administers several types of pension plans for its employees, including members of the military and civil service as well as disabled war veterans. But the most important pension system run by the government is the Social Security program, which provides full benefits to working people who retire and apply for benefits at age 65 or older, or reduced benefits to those retiring and applying for benefits between the ages of 62 and 65. Although the program is run by a federal agency, the Social Security Administration, its funds come from employers and employees through payroll taxes. While Social Security is regarded as a valuable "safety net" for retirees, most find that it provides only a portion of their income needs when they stop working. Moreover, with the post-war baby-boom generation due to retire early in the 21st century, politicians grew concerned in the 1990s that the government would not be able to pay all of its Social Security obligations without either reducing benefits or raising payroll taxes. Many Americans considered ensuring the financial health of Social Security to be one of the most important domestic policy issues at the turn of the century.
     Many people -- generally those who are self-employed, those whose employers do not provide a pension, and those who believe their pension plans inadequate -- also can save part of their income in special tax-favored accounts known as Individual Retirement Accounts (IRAs) and Keogh plans.
     Unlike Social Security, unemployment insurance, also established by the Social Security Act of 1935, is organized as a federal-state system and provides basic income support for unemployed workers. Wage-earners who are laid off or otherwise involuntarily become unemployed (for reasons other than misconduct) receive a partial replacement of their pay for specified periods.
     Each state operates its own program but must follow certain federal rules. The amount and duration of the weekly unemployment benefits are based on a worker's prior wages and length of employment. Employers pay taxes into a special fund based on the unemployment and benefits-payment experience of their own work force. The federal government also assesses an unemployment insurance tax of its own on employers. States hope that surplus funds built up during prosperous times can carry them through economic downturns, but they can borrow from the federal government or boost tax rates if their funds run low. States must lengthen the duration of benefits when unemployment rises and remains above a set "trigger" level. The federal government may also permit a further extension of the benefits payment period when unemployment climbs during a recession, paying for the extension out of general federal revenues or levying a special tax on employers. Whether to extend jobless-pay benefits frequently becomes a political issue since any extension boosts federal spending and may lead to tax increases.

The Labor Movement's Early Years
Many laws and programs designed to enhance the lives of working people in America came during several decades beginning in the 1930s, when the American labor movement gained and consolidated its political influence. Labor's rise did not come easily; the movement had to struggle for more than a century and a half to establish its place in the American economy.
     Unlike labor groups in some other countries, U.S. unions sought to operate within the existing free enterprise system -- a strategy that made it the despair of socialists. There was no history of feudalism in the United States, and few working people believed they were involved in a class struggle. Instead, most workers simply saw themselves as asserting the same rights to advancement as others. Another factor that helped reduce class antagonism is the fact that U.S. workers -- at least white male workers -- were granted the right to vote sooner than workers in other countries.
     Since the early labor movement was largely industrial, union organizers had a limited pool of potential recruits. The first significant national labor organization was the Knights of Labor, founded among garment cutters in 1869 in Philadelphia, Pennsylvania, and dedicated to organizing all workers for their general welfare. By 1886, the Knights had about 700,000 members, including blacks, women, wage-earners, merchants, and farmers alike. But the interests of these groups were often in conflict, so members had little sense of identity with the movement. The Knights won a strike against railroads owned by American millionaire Jay Gould in the mid-1880s, but they lost a second strike against those railroads in 1886. Membership soon declined rapidly.
     In 1881, Samuel Gompers, a Dutch immigrant cigar-maker, and other craftsmen organized a federation of trade unions that five years later became the American Federation of Labor (AFL). Its members included only wage-earners, and they were organized along craft lines. Gompers was its first president. He followed a practical strategy of seeking higher wages and better working conditions -- priorities subsequently picked up by the entire union movement.
     AFL labor organizers faced staunch employer opposition. Management preferred to discuss wages and other issues with each worker, and they often fired or blacklisted (agreeing with other companies not to hire) workers who favored unions. Sometimes they signed workers to what were known as yellow-dog contracts, prohibiting them from joining unions. Between 1880 and 1932, the government and the courts were generally sympathetic to management or, at best, neutral. The government, in the name of public order, often provided federal troops to put down strikes. Violent strikes during this era resulted in numerous deaths, as persons hired by management and unions fought.
     The labor movement suffered a setback in 1905, when the Supreme Court said the government could not limit the number of hours a laborer worked (the court said such a regulation restricted a worker's right to contract for employment). The principle of the "open shop," the right of a worker not to be forced to join a union, also caused great conflict.
     The AFL's membership stood at 5 million when World War I ended. The 1920s were not productive years for organizers, however. Times were good, jobs were plentiful, and wages were rising. Workers felt secure without unions and were often receptive to management claims that generous personnel policies provided a good alternative to unionism. The good times came to an end in 1929, however, when the Great Depression hit.

Depression and Post-War Victories
The Great Depression of the 1930s changed Americans' view of unions. Although AFL membership fell to fewer than 3 million amidst large-scale unemployment, widespread economic hardship created sympathy for working people. At the depths of the Depression, about one-third of the American work force was unemployed, a staggering figure for a country that, in the decade before, had enjoyed full employment. With the election of President Franklin D. Roosevelt in 1932, government -- and eventually the courts -- began to look more favorably on the pleas of labor. In 1932, Congress passed one of the first pro-labor laws, the Norris-La Guardia Act, which made yellow-dog contracts unenforceable. The law also limited the power of federal courts to stop strikes and other job actions.
     When Roosevelt took office, he sought a number of important laws that advanced labor's cause. One of these, the National Labor Relations Act of 1935 (also known as the Wagner Act) gave workers the right to join unions and to bargain collectively through union representatives. The act established the National Labor Relations Board (NLRB) to punish unfair labor practices and to organize elections when employees wanted to form unions. The NLRB could force employers to provide back pay if they unjustly discharged employees for engaging in union activities.
     With such support, trade union membership jumped to almost 9 million by 1940. Larger membership rolls did not come without growing pains, however. In 1935, eight unions within the AFL created the Committee for Industrial Organization (CIO) to organize workers in such mass-production industries as automobiles and steel. Its supporters wanted to organize all workers at a company -- skilled and unskilled alike -- at the same time. The craft unions that controlled the AFL opposed efforts to unionize unskilled and semiskilled workers, preferring that workers remain organized by craft across industries. The CIO's aggressive drives succeeded in unionizing many plants, however. In 1938, the AFL expelled the unions that had formed the CIO. The CIO quickly established its own federation using a new name, the Congress of Industrial Organizations, which became a full competitor with the AFL.
     After the United States entered World War II, key labor leaders promised not to interrupt the nation's defense production with strikes. The government also put controls on wages, stalling wage gains. But workers won significant improvements in fringe benefits -- notably in the area of health insurance. Union membership soared.
     When the war ended in 1945, the promise not to strike ended as well, and pent-up demand for higher wages exploded. Strikes erupted in many industries, with the number of work stoppages reaching a peak in 1946. The public reacted strongly to these disruptions and to what many viewed as excessive power of unions allowed by the Wagner Act. In 1947, Congress passed the Labor Management Relations Act, better known as the Taft-Hartley Act, over President Harry Truman's veto. The law prescribed standards of conduct for unions as well as for employers. It banned "closed shops," which required workers to join unions before starting work; it permitted employers to sue unions for damages inflicted during strikes; it required unions to abide by a 60-day "cooling-off" period before striking; and it created other special rules for handling strikes that endangered the nation's health or safety. Taft-Hartley also required unions to disclose their finances. In light of this swing against labor, the AFL and CIO moved away from their feuding and finally merged in 1955, forming the AFL-CIO. George Meany, who was president of the AFL, became president of the new organization.
     Unions gained a new measure of power in 1962, when President John F. Kennedy issued an executive order giving federal employees the right to organize and to bargain collectively (but not to strike). States passed similar legislation, and a few even allowed state government workers to strike. Public employee unions grew rapidly at the federal, state, and local levels. Police, teachers, and other government employees organized strikes in many states and cities during the 1970s, when high inflation threatened significant erosion of wages.
     Union membership among blacks, Mexican-Americans, and women increased in the 1960s and 1970s. Labor leaders helped these groups, who often held the lowest-wage jobs, to obtain higher wages. Cesar E. Chavez, a Mexican-American labor leader, for example, worked to organize farm laborers, many of them Mexican-Americans, in California, creating what is now the United Farm Workers of America.

The 1980s and 1990s: The End of Paternalism
Despite occasional clashes and strikes, companies and unions generally developed stable relationships during the 1940s, 1950s, and 1960s. Workers typically could count on employers to provide them jobs as long as needed, to pay wages that reflected the general cost of living, and to offer comfortable health and retirement benefits.
     Such stable relationships depended on a stable economy -- one where skills and products changed little, or at least changed slowly enough that employers and employees could adapt relatively easily. But relations between unions and their employees grew testy during the 1960s and 1970s. American dominance of the world's industrial economy began to diminish. When cheaper -- and sometimes better -- imports began to flood into the United States, American companies had trouble responding quickly to improve their own products. Their top-down managerial structures did not reward innovation, and they sometimes were stymied when they tried to reduce labor costs by increasing efficiency or reducing wages to match what laborers were being paid in some foreign countries.
     In a few cases, American companies reacted by simply shutting down and moving their factories elsewhere -- an option that became increasingly easy as trade and tax laws changed in the 1980s and 1990s. Many others continued to operate, but the paternalistic system began to fray. Employers felt they could no longer make lifetime commitments to their workers. To boost flexibility and reduce costs, they made greater use of temporary and part-time workers. Temporary-help firms supplied 417,000 employees, or 0.5 percent of non-farm payroll employment, in 1982; by 1998, they provided 2.8 million workers, or 2.1 percent of the non-farm work force. Changes came in hours worked, too. Workers sometimes sought shorter work weeks, but often companies set out to reduce hours worked in order to cut both payroll and benefits costs. In 1968, 14 percent of employees worked less than 35 hours a week; in 1994, that figure was 18.9 percent.
     As noted, many employers shifted to pension arrangements that placed more responsibility in the hands of employees. Some workers welcomed these changes and the increased flexibility they allowed. Still, for many other workers, the changes brought only insecurity about their long-term future. Labor unions could do little to restore the former paternalistic relationship between employer and employee. They were left to helping members try to adapt to them.
     Union membership generally declined through the 1980s and 1990s, with unions achieving only modest success in organizing new workplaces. Organizers complained that labor laws were stacked against them, giving employers too much leeway to stall or fight off union elections. With union membership and political power declining, dissident leader John Sweeney, president of the Service Employees International Union, challenged incumbent Lane Kirkland for the AFL-CIO presidency in 1995 and won. Kirkland was widely criticized within the labor movement as being too engrossed in union activities abroad and too passive about challenges facing unions at home. Sweeney, the federation's third president in its 40-plus years, sought to revive the lagging movement by beefing up organizing and getting local unions to help each other's organizing drives. The task proved difficult, however.

The New Work Force
Between 1950 and late 1999, total U.S. non-farm employment grew from 45 million workers to 129.5 million workers. Most of the increase was in computer, health, and other service sectors, as information technology assumed an ever-growing role in the U.S. economy. In the 1980s and 1990s, jobs in the service-producing sector -- which includes services, transportation, utilities, wholesale and retail trade, finance, insurance, real estate, and government -- rose by 35 million, accounting for the entire net gain in jobs during those two decades. The growth in service sector employment absorbed labor resources freed by rising manufacturing productivity.
     Service-related industries accounted for 24.4 million jobs, or 59 percent of non-farm employment, in 1946. By late 1999, that sector had grown to 104.3 million jobs, or 81 percent of non-farm employment. Conversely, the goods-producing sector -- which includes manufacturing, construction, and mining -- provided 17.2 million jobs, or 41 percent of non-farm employment in 1946, but grew to just 25.2 million, or 19 percent of non-farm employment, in late 1999. But many of the new service jobs did not pay as highly, nor did they carry the many benefits, as manufacturing jobs. The resulting financial squeeze on many families encouraged large numbers of women to enter the work force.
     In the 1980s and 1990s, many employers developed new ways to organize their work forces. In some companies, employees were grouped into small teams and given considerable autonomy to accomplish tasks assigned them. While management set the goals for the work teams and monitored their progress and results, team members decided among themselves how to do their work and how to adjust strategies as customer needs and conditions changed. Many other employers balked at abandoning traditional management-directed work, however, and others found the transition difficult. Rulings by the National Labor Relations Board that many work teams used by nonunion employers were illegal management-dominated "unions" were often a deterrent to change.
     Employers also had to manage increasingly diverse work forces in the 1980s and 1990s. New ethnic groups -- especially Hispanics and immigrants from various Asian countries -- joined the labor force in growing numbers, and more and more women entered traditionally male-dominated jobs. A growing number of employees filed lawsuits charging that employers discriminated against them on the basis of race, gender, age, or physical disability. The caseload at the federal Equal Employment Opportunity Commission, where such allegations are first lodged, climbed to more than 16,000 in 1998 from some 6,900 in 1991, and lawsuits clogged the courts. The legal actions had a mixed track record in court. Many cases were rebuffed as frivolous, but courts also recognized a wide range of legal protections against hiring, promotion, demotion, and firing abuses. In 1998, for example, U.S. Supreme Court rulings held that employers must ensure that managers are trained to avoid sexual harassment of workers and to inform workers of their rights.
     The issue of "equal pay for equal work" continued to dog the American workplace. While federal and state laws prohibit different pay rates based on sex, American women historically have been paid less than men. In part, this differential arises because relatively more women work in jobs -- many of them in the service sector -- that traditionally have paid less than other jobs. But union and women's rights organizations say it also reflects outright discrimination. Complicating the issue is a phenomenon in the white-collar workplace called the glass ceiling, an invisible barrier that some women say holds them back from promotion to male-dominated executive or professional ranks. In recent years, women have obtained such jobs in growing numbers, but they still lag significantly considering their proportion of the population.
     Similar issues arise with the pay and positions earned by members of various ethnic and racial groups, often referred to as "minorities" since they make up a minority of the general population. (At the end of the 20th century, the majority of Americans were Caucasians of European descent, although their percentage of the population was dropping.) In addition to nondiscrimination laws, the federal government and many states adopted "affirmative action" laws in the 1960s and 1970s that required employers to give a preference in hiring to minorities in certain circumstances. Advocates said minorities should be favored in order to rectify years of past discrimination against them. But the idea proved a contentious way of addressing racial and ethnic problems. Critics complained that "reverse discrimination" was both unfair and counterproductive. Some states, notably California, abandoned affirmative action policies in the 1990s. Still, pay gaps and widely varying unemployment rates between whites and minorities persist. Along with issues about a woman's place in the work force, they remain some of the most troublesome issues facing American employers and workers.
     Exacerbating pay gaps between people of different sexes, race, or ethnic backgrounds was the general tension created in the 1980s and 1990s by cost-cutting measures at many companies. Sizable wage increases were no longer considered a given; in fact, workers and their unions at some large, struggling firms felt they had to make wage concessions -- limited increases or even pay cuts -- in hopes of increasing their job security or even saving their employers. Two-tier wage scales, with new workers getting lower pay than older ones for the same kind of work, appeared for a while at some airlines and other companies. Increasingly, salaries were no longer set to reward employees equally but rather to attract and retain types of workers who were in short supply, such as computer software experts. This helped contribute even more to the widening gap in pay between highly skilled and unskilled workers. No direct measurement of this gap exists, but U.S. Labor Department statistics offer a good indirect gauge. In 1979, median weekly earnings ranged from $215 for workers with less than a secondary school education to $348 for college graduates. In 1998, that range was $337 to $821.
     Even as this gap widened, many employers fought increases in the federally imposed minimum wage. They contended that the wage floor actually hurt workers by increasing labor costs and thereby making it harder for small businesses to hire new people. While the minimum wage had increased almost annually in the 1970s, there were few increases during the 1980s and 1990s. As a result, the minimum wage did not keep pace with the cost of living; from 1970 to late 1999, the minimum wage rose 255 percent (from $1.45 per hour to $5.15 per hour), while consumer prices rose 334 percent. Employers also turned increasingly to "pay-for-performance" compensation, basing workers' pay increases on how particular individuals or their units performed rather than providing uniform increases for everyone. One survey in 1999 showed that 51 percent of employers used a pay-for-performance formula, usually to determine wage hikes on top of minimal basic wage increases, for at least some of their workers.
     As the skilled-worker shortage continued to mount, employers devoted more time and money to training employees. They also pushed for improvements in education programs in schools to prepare graduates better for modern high-technology workplaces. Regional groups of employers formed to address training needs, working with community and technical colleges to offer courses. The federal government, meanwhile, enacted the Workplace Investment Act in 1998, which consolidated more than 100 training programs involving federal, state, and business entities. It attempted to link training programs to actual employer needs and give employers more say over how the programs are run.
     Meanwhile, employers also sought to respond to workers' desires to reduce conflicts between the demands of their jobs and their personal lives. "Flex-time," which gives employees greater control over the exact hours they work, became more prevalent. Advances in communications technology enabled a growing number of workers to "telecommute" -- that is, to work at home at least part of the time, using computers connected to their workplaces. In response to demands from working mothers and others interested in working less than full time, employers introduced such innovations as job-sharing. The government joined the trend, enacting the Family and Medical Leave Act in 1993, which requires employers to grant employees leaves of absence to attend to family emergencies.

The Decline of Union Power
The changing conditions of the 1980s and 1990s undermined the position of organized labor, which now represented a shrinking share of the work force. While more than one-third of employed people belonged to unions in 1945, union membership fell to 24.1 percent of the U.S. work force in 1979 and to 13.9 percent in 1998. Dues increases, continuing union contributions to political campaigns, and union members' diligent voter-turnout efforts kept unions' political power from ebbing as much as their membership. But court decisions and National Labor Relations Board rulings allowing workers to withhold the portion of their union dues used to back, or oppose, political candidates, undercut unions' influence.
     Management, feeling the heat of foreign and domestic competition, is today less willing to accede to union demands for higher wages and benefits than in earlier decades. It also is much more aggressive about fighting unions' attempts to organize workers. Strikes were infrequent in the 1980s and 1990s, as employers became more willing to hire strikebreakers when unions walk out and to keep them on the job when the strike was over. (They were emboldened in that stance when President Ronald Reagan in 1981 fired illegally striking air traffic controllers employed by the Federal Aviation Administration.)
     Automation is a continuing challenge for union members. Many older factories have introduced labor-saving automated machinery to perform tasks previously handled by workers. Unions have sought, with limited success, a variety of measures to protect jobs and incomes: free retraining, shorter workweeks to share the available work among employees, and guaranteed annual incomes.
     The shift to service industry employment, where unions traditionally have been weaker, also has been a serious problem for labor unions. Women, young people, temporary and part-time workers -- all less receptive to union membership -- hold a large proportion of the new jobs created in recent years. And much American industry has migrated to the southern and western parts of the United States, regions that have a weaker union tradition than do the northern or the eastern regions.
     As if these difficulties were not enough, years of negative publicity about corruption in the big Teamsters Union and other unions have hurt the labor movement. Even unions' past successes in boosting wages and benefits and improving the work environment have worked against further gains by making newer, younger workers conclude they no longer need unions to press their causes. Union arguments that they give workers a voice in almost all aspects of their jobs, including work-site safety and work grievances, are often ignored. The kind of independent-minded young workers who sparked the dramatic rise of high-technology computer firms have little interest in belonging to organizations that they believe quash independence.
     Perhaps the biggest reason unions faced trouble in recruiting new members in the late 1990s, however, was the surprising strength of the economy. In October and November 1999, the unemployment rate had fallen to 4.1 percent. Economists said only people who were between jobs or chronically unemployed were out of work. For all the uncertainties economic changes had produced, the abundance of jobs restored confidence that America was still a land of opportunity.