From the end of World War II until the Reagan administration, powerful American labor unions regularly demanded wage and fringe-benefit increases that were regularly granted.
Increased labor costs were simply passed on to consumers. However, the spiral eventually spun out of control, and consumers turned to cheaper foreign products such as cars, electronics, and cameras.
Some companies closed their domestic factories and moved to countries that had no unions and low labor costs. Banks, as might be expected, suffered from a a loss of business.
Unrealistic Demands
Ultimately, unions proved to be their own worst enemies, pricing themselves out of the marketplace. Their demands had grown increasingly unrealistic, their strikes and slowdowns the last gasps of self-destructiveness
During the 1980s, union membership decreased, more and more companies opened factories either in other countries or nonunion ones in the United States, and consumers benefited from high-quality, low-priced products. The unionized worker had been made superfluous by selfish and overzealous unions.
Now there is an effort to turn the clock back and repeat the mistakes of the past, to tilt the playing field to the benefit of organized labor as Secretary of Labor Robert Reich has stated he would like to do.
To effect that tilt, President Clinton, Secretary Reich, and the AFL-CIO are all pushing Congress to pass a ban on permanent replacement workers.
Harmful to Recovery
As one who regularly negotiates the settlement of management-labor disputes and contracts on behalf of banks and others, I believe that the legislation would significantly undermine the nation's economic recovery and ability to compete in a global economy.
The new legislation, in fact, will give labor a powerful new weapon to be used against employers in collective bargaining.
Workers will rightly feel that they can strike at will and bring banks to their knees, because they can go on strike and feel that their jobs will not be replaced by permanent new workers.
In addition, banks will find it more difficult to operate during a strike, because temporary workers will be unwilling to cross picket lines for jobs that will end when the strike ends.
Finding it difficult to operate during strikes, banks will have to capitulate to union demands. Knowing that, striking workers will have an even greater incentive to strike again and again for more and more money.
Spur to Strikes
Richard Lesher. president of the U.S. Chamber of Commerce, warned that the adoption of the permanent striker replacement ban "would guarantee this country would experience many more strikes in the future." The bill will "tilt the current level playing field in favor of organized labor."
Not only will labor strife increase, but the intensity and destructiveness of that strife will wreak havoc on the financial well-being of management and labor alike; indeed, I believe that we will see a new era of labor-related violence, a return to the blood-in-the-streets activities that perverted the labor movement during the 1920s and 1930s.
In addition, the passage of the ban will be a body blow to America's ability to respond competitively to German, Japanese, other country's companies. And that will have a negative effect on the entire banking industry.
Exodus to the Third World
Rather than benefiting from an economic resurgence of American business, we will be helpless spectators to the exodus of American corporations into Third World countries. Those countries will welcome investments that will drain out of American banks, while they provide an affordable labor pool.
The products those workers will manufacture will be affordable to American consumers, but of no help to their economic well-being.
The alternative, of course, would be for American companies to go along with union demands, pay ever-increasing wages and benefits, pass the costs of to consumers who will refuse to buy those high-priced goods, and then go out of business.
One need only look at the vast number of American companies that were thriving in the 1950s and then went out of business during the 1970s.
A Delicate Balance
Edwin L. Harper, president and chief executive officer of the Association of American Railroads, roads, said that a ban on the use of permanent striker replacements "would upset the carefully crafted and long-standing balance" that exists in collective bargaining.
"Just as the law permits workers to withhold their labor in an effort to secure favorable results," added Mr. Harper, "employers are permitted to keep their business going during such work stoppages by offering permanent positions to workers hired to replace strikers."
Mr. Harper further pointed out that the scales are already tipped disproportionately in labor's favor, since the Supreme Court's 1987 decision (Burlington Northern Railroad Co. v. Brotherhood of Maintenance of Way Employees) to uphold the legality of secondary boycotts against railroads and airlines.
Incentive to Relocate
In effect, this bill is not only a company buster, but it provides a unique incentive to American companies to locate within the borders of countries that are known for being favorable to the interests of business. If American manufacturers choose to operate on foreign soil, the banking industry will shrink as a natural consequence.
American companies need all of the help they can get to compete successfully. The ban on permanent worker replacements is an economic kick in the teeth.
Mr. Cabot is chairman of the labor relations department of the law firm of Harvey, Pennington, Herting & Renneisen, Philadelphia.
