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Chapter 1
A Union Town
On the edge of a typical Minneapolis coal yard in the 1930s was a wooden shack known as a doghouse. It was where the coal yard’s truck drivers spent time while they waited for local families and businesses to phone in orders for coal to fill their furnaces. Once an order arrived, a driver would load his truck with coal and deliver it. The drivers spent a lot of time in the doghouse, because the coal companies insisted that one of them be available whenever an order came in. Six-day workweeks, with ten-hour shifts, were common.
But the drivers were not paid for many of those hours. The coal companies instead paid them by the delivery, which meant that the drivers earned nothing while they waited. It was just one of the ways that the economic risks of the business fell on the drivers rather than the companies. A driver was responsible for paying for his own gasoline and truck—typically a Ford with an extra transmission to generate enough power to haul the coal. In many cases, a driver hired a helper, a strong young man who could carry the coal into houses. Coal work was also seasonal, falling off during the spring and summer, when drivers had to find other work.
In today’s terms, the drivers could be considered gig economy workers. They lived on the edge of poverty, with constant uncertainty. They had little control over their working lives. Across Minnesota at the time, the same was true of most workers.
Minneapolis had sprung up as a frontier city, the capital of the vast stretch of resource-rich land beyond the Great Lakes known as the northwest empire. Lumber, wheat, and ore would flow into Minneapolis via the Mississippi River and then be sent out into the world. The region’s frontier history had contributed to an individualist culture, dominated by aggressive, savvy businessmen. These executives understood that their success did not depend only on economic forces like supply and demand. It also depended on political power. Minneapolis embodied the power imbalance in the American economy of the early twentieth century and the highly unequal economy that resulted from that imbalance.
Political power explained why the city’s truck drivers spent so much time sitting in a coal yard doghouse without being paid. They had little alternative. The city’s business executives had amassed tremendous power. Leading politicians, from both parties, were their allies. Daily newspapers were reliably deferential to business, publishing press releases almost verbatim. Most important, the executives had prevented workers from forming labor unions that could have counterbalanced the influence of business.
The executives had formalized their hold on power by creating a group called the Citizens Alliance of Minneapolis. It had grown out of the business community’s united effort to defeat a 1901 strike by local machinists. The executives had portrayed the machinists’ would-be union as an illegitimate representative of the workers and had recruited replacement workers to keep their factories running. The effort was a total success: The strikers went back to work without accomplishing any of their goals—no wage increase, no nine-hour workday, no extra pay for overtime work. Emboldened, the executives created the Citizens Alliance with the goal of keeping unions out of other local industries. By the early 1930s, it was able to boast that every local strike since World War I had “failed utterly due to the assistance rendered by the Citizens Alliance.”
The workers of Minneapolis remained scattered, unable to exercise power. The city’s business leaders were united.
The disparity shaped the local economy. In many industries, wages were about one-third lower than in other Midwestern cities, like Chicago, Cleveland, and St. Louis. In the federal government’s statistical tables of economic data for different cities, Minneapolis almost seemed to be an extension of the American South. It resembled cities like Birmingham, Little Rock, Memphis, and New Orleans, where wages were low and profits were high. In Minneapolis, rough-and-tumble capitalism dominated, and the American dream was out of reach for many families.
In the winter of 1933–34, however, dissent began to build in the doghouse of one Minneapolis coal yard. A Swedish immigrant named Carl Skoglund told his fellow drivers that they did not need to meekly accept low wages and unfair working conditions. Skoglund, then in his late forties, had a broad build that his friends teasingly compared to an outhouse—or, as one said, “a little brick shit-house.” He walked with a limp, the result of a tree that had crushed his foot when he was working for a logging company in northern Minnesota years earlier. As he spoke, in a Swedish accent, he sometimes twirled one of the bushy eyebrows that hung over his blue eyes. The other drivers called him Skogie or the Old Swede, and he kept repeating the same message to them: Only a labor union could give them the power to change life in the coal yard. Secretly—“on the Q.T.,” a then popular code word for quiet—Skoglund and a small group of other activists began holding nighttime meetings at his home to explain the benefits of a union to their colleagues.
Skoglund had spent much of his life trying to organize unions, and he had repeatedly failed. In 1922, while working as a railroad mechanic, he participated in the Great Railroad Strike, which ended in defeat for the workers after President Warren Harding intervened on behalf of employers. It was a common story in the early twentieth century. Business owners were gaining power, and workers were losing it. Judges invalidated workplace regulations, allowing companies to operate as they wished. Presidents and governors halted strikes. Union membership declined in the 1920s. A visiting Australian journalist, trying to explain the United States to his readers, wrote, “America is an employer’s paradise.” Inequality, as a result, was growing. The share of income flowing to the richest 1 percent of households nearly doubled between the 1870s and 1920s. Most Americans were not receiving their fair share of the country’s economic bounty.
This chapter tells the story of how workers in Minneapolis gained enough political power to reverse that trend and how they contributed to a larger shift across the rest of the country. Their success eventually helped to create an economy in which living standards rose rapidly for the rich, middle class, and poor.
Economic theory might seem to suggest that political power should not have such a big effect on the economy. According to the laws of supply and demand, market forces dictate economic outcomes. Companies pay workers what they are worth, based on a combination of a worker’s productivity, the number of available workers, the strength of the business, and the health of the overall economy. A company that underpays its workers will lose them to rival businesses that do pay market wages. A company that overpays its workers will lose money and go out of business.
Yet the world does not operate as elegantly as some economic theories suggest. It is messier. One reason is that few workers know the exact worth of their contributions to their employers. Employers themselves are often unsure. A mid-twentieth-century economist named Richard Lester coined a phrase for this uncertainty: the “range of indeterminacy.”
To understand the concept, it can help to look at other areas of economic life. A wage is a kind of price—the price that workers can charge for their labor—and prices often vary for reasons unconnected to an item’s true value. Hospitals charge wildly different prices for the same procedure. Gas stations, sometimes on the same street, charge different amounts for a gallon of gas. Home sellers obsess over the list price of their house, rather than trusting that an efficient market will dictate the ultimate value. The sale price of these items and many others can vary widely, depending on a host of factors, including the relative knowledge, patience, and leverage of the buyer and seller.
In the case of wages, the range of indeterminacy helps employers more often than employees because employers have some natural advantages. They have more knowledge—about how much money different workers make and how productive each is. Employers also have more leverage. Companies employ many workers, and losing one of them is usually manageable. For most workers, by contrast, quitting over a pay dispute can create financial hardship.
These dynamics can cause a worker’s pay to settle on the low end of the range of indeterminacy. In the relationship between an employer and an individual employee, the employer has more power. But there is an important adjective in that previous sentence: individual. When employees band together, they can reduce the power imbalance. They can share information with one another and can exert some of their own leverage. A business that can afford to lose one worker over a pay dispute may not be able to lose dozens of workers.
There is a name for a group of workers who come together to increase their bargaining power. It is a labor union.
