Economists and politicians have different attitudes toward Wagner’s famous American law. Some attribute it to the most advanced and call it the pinnacle of liberal labor law. Others consider this law to be one of the reasons for the unsuccessful fight against the brutal unemployment that reigned in the USA in the 1930s. One way or another, the historical context and the emergence of Wagner's law on labor relations is an interesting managerial case, which is quite suitable for study in economic schools.
Historical clarifications
In business literature, the expression "Wagner's law of 1935 in the United States" often appears. This is no coincidence. If you search simply for “Wagner’s law”, you will most likely find another law - German. It also refers to the economic sphere and describes the growth of national production. The author of German law, issued in 1892, was called Adolf Wagner. The American senator who proposed Wagner's law in 1935 was called Robert Wagner.
It all started with the Great Depression
The adoption of new legislative initiatives related to the social sphere is best seen in the context of the historical context. Wagner's law was passed in the United States in 1935. This date explains a lot: in the country was the peak of the Great Depression - the strongest global economic crisis of the 30s of the last century.
Three years earlier, Franklin Roosevelt was the first to take over the presidency, having won US elections on the crest of promises to take urgent measures to eliminate the most serious social and economic upheavals. At that time, only 47% of the total able-bodied population was unemployed in the country. Roosevelt and his team announced the launch of the extensive New Deal anti-crisis program, of which Wagner’s law was a part.
The New Deal by Franklin Roosevelt
The anti-crisis program included many parallel actions in the economy and social sphere. The National Administration for the Restoration of Industry was created, which was engaged in the development of fair competition, quotas for output, market prices, wages, etc.
The banking system underwent the most severe reforms: for example, the artificial devaluation of the dollar, the ban on the export of gold and the complete closure of small banks.
Changes in the social sphere were started as preventive measures in potential conflicts and unrest of workers in enterprises. The authors of the Wagner law counted on an increase in average income and the cessation of numerous protest rallies. The reconciliation of the two sides with the help of trade unions as intermediaries has become the main "behavioral" idea.
The essence of Wagner's law
The official name of the act is “Labor Relations Act”. The main goal of the authors was to minimize the mass conflicts of workers with their employers. Against this background, even a new federal body was established to monitor and control workers' claims - the National Labor Relations Office. The decisions of this body had the force of law - new officials had enough authority.
Subsequently, however, it turned out that the main goal was not achieved in the end. But in any case, the law has changed a lot.
First of all, he gave the workers the right not only to organize their trade unions, but also allowed to hold strikes, pickets and other protests to defend their interests. In addition to this, the law prohibited employers from dealing with people outside the union system.
By the way, Wagner's law bypassed the railway and aviation industries. He also did not apply to public servants.
What did the unions get
The unions have a real holiday. They got the right to choose models of contracts and terms of work contracts to dictate them to entrepreneurs.
According to the authors, Wagner's law (1935) regulated the inequality between workers who were not members of any professional associations. The new practice of collective bargaining agreements has become mandatory for all companies. Now they concluded them only with independent trade unions. Moreover, no one had the right to interfere in the work or criticize the activities of the latter. If a union member was not hired, it was considered discrimination with the corresponding penalties under the new law.
What did entrepreneurs get
Surprisingly, Wagner’s law was unprecedentedly tough on entrepreneurs. Socialist parties around the world applauded the Roosevelt administration for its adoption.
Employers have now been severely punished for “dishonest labor behavior,” a new concept introduced by law. It included violation of workers' rights, prosecution of trade unionists, invitation to strike strikers, etc. The National Labor Relations Office was in charge of monitoring and determining penalties.
Companies were now forced to negotiate with unions about wages, medical care, pensions and other social issues. They suffered a boycott and a new type of strike - “legal”: when unions invited workers to a strike organized by other enterprises.
Employers did not have the right to hire non-union people. Unions began to rule the ball for real.
Entrepreneurs switched roles with workers: now they began to protest. Their protests were not expressed in street rallies, but in lawsuits and the hard work of corporate lawyers. Two years after the law was passed, a group of steel companies filed a lawsuit over Wagner’s incompatibility with the US Constitution. The lawsuit was lost.
Criticism of the law
In the US, Wagner’s law was criticized not only by entrepreneurs. The American Federation of Labor, the largest trade union organization in the country, has charged the main agency for implementing the law, the National Labor Relations Administration. The officials were accused of lobbying the interests of a new competitive organization - the Congress of Production Unions, formed on the wave of the implementation of new installations and, as a result, became its main beneficiary.
Many economists called Wagner's law the main obstacle in the fight against unemployment during the crisis. However, not only this act is criticized, but also the entire Roosevelt New Deal. Many people reasonably believe that the Great Depression of the 30s ended not thanks to the presidential anti-crisis program, but to the Second World War that began in 1939.
It all ended WWII
By 1943, the economic situation in the United States had changed in a most fundamental way. GDP growth, falling unemployment and other indicators of well-being have reversed the needs and principles of labor relations. Some amendments were made to Wagner's law, in particular, restrictions on the actions of trade unions were introduced. Most of all, these restrictions applied to workers in the military industry, which was understandable.
And in 1947, when the United States became the dominant economic power, Congress passed the new Taft-Hartley Act, which virtually eliminated Wagner’s action. In the socialist world, the new law was called the “anti-worker.”
The rights to strike were limited, and against public servants they were completely banned. The argument "threat to national security" could cause significant restrictions or postponement of major strike events.
Finally, the rules of the “closed shop” were abolished, which forbade the employment of workers who were not members of the trade union. The reference to freedom of speech now allowed company representatives to criticize unions in full voice.
How to relate to the law in the end, depends on the point of view. In any case, this is a great example for studying managerial actions that are closely related to the historical context. “Everything has its time” - this is perhaps the most suitable summary for Wagner’s law, an interesting episode in the fight against the global crisis.