The NY Fed’s Denis Hughes: ‘Not your Grandfather’s Labor Union’

Is organized labor gaining power in the U.S. or are its leaders being co-opted by the federal government and corporate America?

The question is at the heart of today’s appointment of Denis Hughes, the New York state AFL-CIO president, as chairman of the Federal Reserve Bank of New York.

It is believed to be the first time that a union boss has been named chairman of a Federal Reserve bank. While Hughes has served as a N.Y. Fed director since 2004 and currently is the bank’s acting chairman, the appointment still carries symbolic importance. Hughes will sit atop the N.Y. Fed’s nine directors, including General Electric Chief Executive Jeffrey Immelt and J.P. Morgan Chase Chief James Dimon. Directors influence monetary policy by setting discount rates and appointing the bank’s president.

Hughes’ chairmanship comes after the Union Auto Workers gained both a seat on the General Motors’ board and a large ownership stake in the re-organized auto giant.

Deal Journal asked Gary Chaison Professor of Industrial Relations Clark University in Worcester, Mass., what these recent moves say about the influence and strategy of organized labor in the U.S.

Deal Journal: What’s the significance of labor unions taking these powerful positions in the financial and business establishment? Gary Chaison:The labor movement is maturing. In the old days, labor was on the outside looking in. Now parts of the labor movement want to be on the inside. They are searching for relevancy and realizing that collective bargaining does not solve all problems. They want their hands on the levers of economic decision making. They see this as having greater appeal to unorganized workers. They are trying to show, this is not your grandfather’s labor union. Unionization used to be thought of as that movie ‘On the Waterfront.’ This is a new face.

DJ: Does that mean an end to union marches and strikes? Chaison: There are essentially two faces of unionization in America. The SEIU (Services Employees International Union) is still focused on organizing the fringes of the workforce. But then there are other parts of the labor movement, like the AFL-CIO and the auto workers who have been battered by recession and globalization who is saying let’s participate in the economic decision making and try to save jobs.

DJ: Has this ever happened before? Chaison: Yes, union members sat on the boards of steel companies in the 1960s and 1970s.

DJ: How could this strategy backfire for the unions? Chaison: If there’s a feeling that the decisions being made are not helping workers and jobs continue to be lost, the unions could be blamed. Once you participate in the decision making your name is on the decision. People will think that labor should be more arms length and union bosses will be criticized for being bought out.

DJ: Does having a Democrat in the White House and a Democrat-controlled Congress helping these labor leaders secure these positions? Chaison: It does help. I don’t think that the Employee Free Choice Act is going to happen. It’s asking too much from Congress. (The bill would make it easier for workers to unionize.) But labor got out the vote in the election and they will expect the Democratic Party to deliver and this is part of that.

DJ: What do you think Wall Street’s reaction will be? Chaison: It’s also going to worry some people that having a labor rep as chair of the Fed will bring the union agenda to the Fed and there will be questions about hedge fund profits and salaries.

DJ: Are those concerns legit? Chaison: The union doesn’t run the fed. [The appointment] is more symbolic.

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