DAO-nions: The Future of Labour Unions

Labour unions are one of the oldest examples of bottom-up, collaborative attempts by the average worker to govern themselves. But unions are failing. Importantly, Decentralized Autonomous Organizations (DAOs) may serve as a perfect mechanism to transform unions into truly effective players in their markets. Some of the greatest issues with unions---inflexibility, corruption, and an inability to organize---are problems that DAOs can theoretically solve. Ultimately, unions may be a thing of the past, but if workers want them to be a tool in the future, they first need to start using the technology of the future---DAOs.

NOTE: I know there are many issues with unions, and critics would argue they only limit economic growth. While that may be true, they have also served as a potent means for workers to improve their livelihoods. Many of the problems anti-union advocates have are not necessarily with the concept itself---they are instead issues with how unions operate in practice. Either way, unions serve as an interesting case-study to discuss a real-life, future application of DAOs.

DAO Refresh:

Decentralized Autonomous Organizations are a tool to coordinate human activity, governed by code, and built on a blockchain network. No individual has hierarchical control over the organization or is required to facilitate the organization’s administrative processes, while all members work collectively to propose and vote on decisions. This bottom-up organizational structure is the decentralized part. The DAO’s underlying ‘smart contract’ outlines how to join, voting procedures, and other processes which are immediately executed when the conditions in the contract are met---the autonomous part. Essentially, DAOs are organizations governed by 'smart constitutions.' If you are curious, you can learn more here.

A Brief History of Labour Unions in North America:

Before diving into the applications of DAOs in a union context, it is first important to discuss the history of labour unions, the benefits they have provided their members, and their greatest problems today. In 1794, the first known labour union formed in the US---the Federal Society of Journeyman Cordwainers. The Federal Society represented shoemakers and sought to improve wages and working conditions for its members through collective bargaining. By having a shared voice, the Federal Society was able to have more leverage at the negotiating table, demand better conditions from employers, and improve the livelihoods of its members.

Throughout the Industrial Revolution union membership continued to grow, peaking in the 1950s when 1/3rd of America’s workforce were card-carrying members. Unions did not only improve aspects of life related to work, but they also advanced equity. Unions were active supporters of the Civil Rights Movement, and the United Farm Workers Organization in California was one of the first ways marginalized immigrants of colour were able to push back against their mistreatment.

However, unions were not without their issues. Many unions were (and still are) rife with corruption, embezzlement, and the centralization of power. In the 1980s, the FBI launched Operation Hofstra, which led to the conviction of several top International Brotherhood of Teamsters officials on charges of extortion and embezzlement. While corruption began to turn members away from these organizations, so too did an active effort on the part of employers to weaken unions and prevent their employees from organizing. The Bureau of Labour Statistics reports that union density in the private sector dropped from around 30% in the 1950s, to around 6% in 2020.

So there are a few clear benefits of Unions:

1. Improved wages and benefits for workers
2. Improved working conditions
3. Greater worker power and representation

But there are also many detriments:

1. Increased labour costs for employers
2. Top-down decision-making
3. Reduced flexibility for companies in their operations
4. Corruption within the organizations

If a local union was to organize through a DAO, it may not only solve the problems identified, but it could also lead to the creation of addition value for all stakeholders.

The DAO-nion

???????????In the previous essay, some of the key benefits of DAOs were identified. To reiterate them in a union context:

• Decentralization: No single individual holds control over a DAO, instead all members play an equal role (unless specified otherwise in the DAO’s ‘constitution’.) This mitigates risks of corruption.
• Transparency: The voting procedures, rules, and transactions of a DAO are all easily viewed by any member, so there is no opportunity for misuse of funds, embezzlement, or confusion around how it operates.
• Coordination: Any member can create a proposal, be it how to allocate funds from the treasury or even to strike on the job. Through public discussion, debate, voting, and coordination, the DAO process facilitates buy-in from its members.

These are just a few of a DAO’s benefits, and they align perfectly with some of the challenges labour unions create today. For example, an issue is that unions are relatively inflexible, using their leverage to hold back changes to a firm’s operations. DAOs on the other hand are flexible by nature. As a company’s practices change, members could vote on ways to adjust the policies they want to negotiate or how they want to organize to fit these new operations. Obviously, there will still be slowness on the part of workers to support changes to the way they work---that is a problematic reality of the human condition in most aspects of life. People don’t like change.

However, a DAO-nion would not be held back by a few older workers who have centralized control of the organization refusing new practices. Instead, opposition to organizational changes would have to come from the bottom-up, with younger, newer workers also disagreeing with the practice. In those contexts, it is possible disagreement is beneficial, and may lead to better outcomes for both workers and employers.

An example of this is the current issues with the Ontario Secondary School Teachers’ Federation (OSSTF). There is a higher level of support for changes to the way the OSSTF negotiates contracts among newer teachers. Rather than a seniority-based system, younger teachers are often in favour of compensation policies tied to better performance and student outcomes. Unsurprisingly, the union is controlled by senior teachers who benefit from the old policies.

Through a Teachers DAU-nion and the decentralization of power, better outcomes for teachers can be more easily secured, with the policies the union pushes being debated and voted on by all members. The final policy package put forward to the Ontario government would come from the bottom-up, reflecting the interests of all members rather than just those in control of the union.

An even more critical issue is the problem of corruption. Almost all unions require members to pay ‘dues’---regular payments required to finance a union’s activities. These dues are one of the central sources of irritation for most workers as they can be hundreds of dollars per year and there is no visibility into how these funds are spent. Countless cases over the past decades have cemented the idea that these funds are often embezzled or used in corrupt ways. At the same time, these funds are used to pay the salaries of those who organize the union and manage its activities. Just this past month, the Ontario Public Service Employees’ Union has launched a $6M lawsuit against three former executives, who they claim used funds for “significant compensation” they were not entitled to.

In a DAO, the unnecessary overhead and the opportunities for corruption are negated. A DAO’s treasury is transparent to its members, and any use of funds must first be approved through member voting. This doesn’t only prevent embezzlement, but it also enables bottom-up, innovative uses for union funds to be proposed and discussed by the members.

Interestingly, even greater opportunities for disruption are created by the possibilities for organizing workers across the world. DAOs more easily empower users to coordinate activate regardless of geography. Workers of multinational corporations could join a DAO-nion, vote on proposals, and use their strength in numbers and wide-reaching impact to draw concessions from their employer they would never have been able to as individual, local unions.

While the benefits of a DAO in a union context are clear, there are still important limitations. DAOs are a new technology used by tech-savvy, blockchain-literate users. Until DAOs become accessible and their use widespread, facilitating buy-in from the average worker will be almost impossible. At the same time, union leaders have historically been known to use intimidation tactics to ensure worker support or prevent limitations on their activities. Removing these leaders’ power through the use of a DAO may be an even bigger challenge. There are countless union organizers who have devoted their existence to improving their workers livelihoods. If their goal is truly to improve worker outcomes, then they should not be threatened by a DAO, but instead welcome the discussion.

Unions serve as an interesting example of where a DAO may be used in the next decades. Before the transition to governance-by-DAO can ever occur, we first need to debate and discuss potential use-cases and how they would work in practice.

This was a fast and dirty description of DAOs and unions, two things I am no expert in. If you read this, please feel free to comment any issues you identify with this analysis, opportunities for expansion, or other potential DAO use-cases you think are compelling.

Next up: The future of voting---the wonderful world of DAO voting procedures