Just as Wall Street has started to become hopeful, if not giddy, about the potential for artificial intelligence to boost corporate America's productivity in inestimable ways and Hollywood has become despondent about the impact for what the technology might have on its "creatives," the organized labor movement in the United States seems to be having something of a renaissance. This is after the ranks of private sector union membership as a share of the total labor force has dropped steadily from the 1970s, when it approached 30%, to a mere 4.5% today. In fact, there are now more public sector union members (teachers, cops, firemen) in the U.S. than there are members of private sector unions.

Many people know who Randi Weingarten, head of the United Federation of Teachers, is but it would be shocking if more than one MBA in a hundred could name the head of one of America's largest labor unions. Given the stunning concessions Teamsters Union President Sean O'Brien just negotiated for his members with UPS, that may be about to change. (Mr. O'Brien will not hesitate to tell you that his initials are SOB).

In a forensic exercise to determine the sources of the resiliency of the American economy in the face of a rapid and forceful tightening of monetary policy, we came to the conclusion that companies were loath to lay off workers they had fought so hard to hire despite an erosion in profit margins. The absolute levels of corporate margins as measured by the S&P 500 and the National Income and Product Accounts remain near all-time highs. Still, one could be forgiven for believing that the salad days for the American management class are coming to an end, partly due to the changing nature of globalization that so benefitted it over the past 30 years.

The proximate cause of this change is the realization that "free trade," at least as it was conducted over the last three decades, has failed to live up to the promises of world peace and widespread American prosperity. Those who believe in the elegance of free markets are big fans of free trade.

Sadly, America's political and business elite were either too naïve or self-interested to realize or care that "free trade" is impossible with another country so blatantly and unapologetically fixing the value of its own currency. Even those who acknowledged the potential risks to the standard of living of America's middle and working classes justified this brave new world with the hope that globalization would render non-Western countries more Western in their attitudes towards commercial transparency, fair play, the rule of law, and human rights. China's conduct during the pandemic and Russia's expansionist ambitions put into stark relief the failed promises of globalization. These developments also led many to believe that we had become too reliant on other countries that might not have our best interests at heart.

A significant statistical decline in labor's share of corporate revenues occurred at almost precisely the same time China joined the WTO in 2001. In retrospect, that single event set in place one of the greatest transfers of wealth in history, greatly boosting the ranks of China's middle class while hollowing out our own. While there is a good chance the U.S. would have lost many of the smokestack jobs anyway over time, it is difficult to imagine this transformation happening as quickly as it did without the purposeful manipulation of China's currency.

This process also greatly reinforced the feeling among many American parents and their children that a college education was the only path to the American dream; the trades and other forms of skilled labor were relegated to the status of a consolation prize for those who lacked the money, interest, or motivation to earn a college degree. The process appears to now be coming full circle. According to the National Federation of Independent Business, 89% of those companies who want to hire workers are reporting few or no qualified applicants for the positions they are trying to fill.

The current move toward "on-shoring" may very well be a boon to the American labor movement. While as Americans we should all look forward to productive greenfield additions to plants as promised by "Bidenomics," one wonders where the U.S. might source the labor to build them, much less operate them, in the years to come.

Perhaps artificial intelligence or super-computing will relieve us of the reality that more reliable supply chains are likely to result in a significant and persistent increase in corporate costs. In the end, it is not difficult to see that organized labor's recent gains may just be the beginning. After nearly 30 years in the wilderness, Labor's Day may finally be at hand this Labor Day weekend.

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Posted: September 4, 2023 Monday 08:00 AM