Labor Day represents an opportunity to celebrate the accomplishments of the labor movement on behalf of the American worker. Since this day became a national holiday in 1894, labor unions and their members have eliminated child labor, established the eight-hour workday and widespread employer based health care, improved wages, retirement benefits and working conditions, and passed the family and medical leave act, which guarantees unpaid protected leave. These achievements have drastically improved the lives and economic prosperity of American workers over the last century.
However, Labor Day is also an appropriate time to consider how this collective bargaining model will fare in tomorrow’s dynamic economy and labor markets. The truth is that while we should celebrate the enormous accomplishments of the labor movement, the way workers should promote their interests has changed. While collective bargaining used to produce large gains for workers, entrepreneurship is now a worker’s most powerful tool for long-term career success and financial prosperity.
There are a few key dynamics at play in today’s economy and labor market that will increasingly diminish the labor movement’s ability to secure attractive professional opportunities for American workers.
First, size matters. Union participation in the private sector has been on a steady decline since a peak in union density in 1940 of almost 44 percent. Today, private sector union membership accounts for less than 7 percent of employment and less than 8 million workers. Including the public-sector unions, which have substantially higher participation, still only results in total union participation of about 11 percent. This drastic decrease in size means unions have less bargaining power, influence and impact on the national employment picture.
Not only are labor unions shrinking, but they are fighting powerful secular headwinds that will be difficult to overcome during the 21st century. Union membership skews disproportionately older (14 percent participation among workers age 45 to 64) at the expense of younger members (just 4 percent among 16 to 24-year-olds), which means union contracts often skew benefits to the majority of the members. For example, union leadership may protect benefits for existing or tenured members, while agreeing that future members will take a lesser deal. Unions are also more common in slow and no-growth industries such as steel, auto and electrical trades, and more states are enacting right to work laws that allow individuals to opt out of union membership and dues. With these headwinds, union membership and clout will continue to diminish.
Decreasing size and growth prospects aside, the economic benefits of unions are not as attractive as they once were. Union representation isn’t free; dues range from 2 to 4 percent of annual member income. With these funds, unions attempt to negotiate better pay, retirement benefits and job security with benefit distribution often reflecting member seniority. However, this has proven challenging in today’s stagnant wage market, with recent median union wage growth of approximately 1 percent. To compound these challenges, the poor financial stability of many union pension plans combined with increasing job mobility has caused the youngest members to question the value of these retirement benefits.
Labor unions remain important, but given that these challenges will severely impact their future efficacy, Americans are well advised to adopt an entrepreneurial mindset when it comes to their career interests. This doesn’t mean you have to actually start a business. Simply shift your image of yourself from an employee to a business owner, where your labor — your skills, energy and time — is the product you are “selling” in the marketplace. When you view yourself as a business owner, you can employ the principles of entrepreneurship to inform your career decisions. Here are eight key principles to guide your decisions as you manage the business of you.
Maximize lifetime compensation over annual compensation: As a business owner, your goal is not to maximize your income this year, but rather to maximize income over your entire career. Take the long view, and make decisions that increase compensation, employability and longevity to maximize your lifetime career earnings.
Compensation comes in many forms: Employees often focus on cash compensation such as salary, bonus or commission and underappreciate other forms of compensation. Jobs also offer valuable training, skills, experiences and relationships. Make sure to select jobs that offer the most “total” compensation.
Build your brand: Business owners build brands for their companies. Consider how your professional choices impact your skills, experiences and network to complement your brand.
Improve your labor through investment: Business owners consistently reinvest in their business to improve their products and value to their customers. Investing in yourself early and often through activities like continuing education and participation in professional associations will ensure your skills, capabilities and brand remain in high demand.
Sell your labor in a growing market: Business owners pursue growing markets because finding fertile grounds is the easiest way to grow their business. This same principle applies to labor markets; industries and geographies that are growing generally offer higher rates of employment, better compensation and professional development opportunities.
Identify good business models: Investors pay more for high-quality companies that demonstrate consistent growth, high profits and good barriers against competition. Employees are well served by pursuing employment at companies that possess these same characteristics.
Plan for failure: In a dynamic labor market, periodic failure is expected. Employees can minimize the cost of job loss by pursuing careers in large industries and urban areas — which offer a high concentration of good jobs — and pursuing careers skills that are applicable in many businesses such as sales, human resources or finance. Choosing a career with these characteristics will make it easier for you to secure new opportunities quickly and minimize the cost of failure when it occurs.
Use your capital to hire yourself: Buy combining your own money with your highly-developed labor resulting from the recommendations above, you are well-positioned to become your own boss as a small business owner. This choice often offers the best financial return on both your labor and capital, as well as giving you a great sense of accomplishment and more autonomy.
So which holiday will you celebrate — Labor Day or Entrepreneurship Day? Do you prefer to pay someone else to negotiate on your behalf and others of varying talent, goals, prospects and work ethics? Or do you prefer to manage your career and investments and control your own destiny?
I, for one, will be wishing you a happy Entrepreneurship Day.