CAPITALISM is struggling but organised labour shows no sign of profiting from its mistakes. American union membership hit a 96-year low last year. In the rich countries of the Organisation for Economic Co-operation and Development (OECD), the unionised proportion of paid workers nudged down from a low base of 17.8% in 2008 to 17.5% in 2011 (the latest figures available). In the large OECD economies most exposed to globalisation—America, Britain, Germany, France and Japan—unions’ share of the workforce has dropped steadily to roughly half its level in 1980 (see chart below).

In America membership has fallen furthest in “right-to-work” states (where unions cannot oblige workers to join)—which now include even Michigan, a bastion of the United Autoworkers Union and organised labour in general. In California, however, membership has remained roughly stable since 1990 and grew by 110,000 in 2012. Blue-collar regions such as New York state, England’s north-east and Quebec in Canada are still more heavily unionised than others. Since 1990 membership has steadily declined in Italy but fluctuated—at a much lower level—in Spain.

Richard Trumka, boss of the AFL-CIO, America’s labour federation, insists that union leaders will not just “tidy up the offices, lock the doors and turn out the lights”. But he accepts that his movement is in vertiginous decline: “the numbers give us all the proof we need.”

Unions face what is, in effect, a threat to their business model. One problem is costs. Organising workforces is labour-intensive. Dues have to be high to cover fixed costs (particularly when these are shared among a shrinking pool of members). If he earns $12 per hour, a member of America’s largest private-sector union, the Teamsters, must pay $360 in annual fees, for example.

Members expect value in return: better rights, wages and working conditions. But unions are finding it harder to provide these. Since 1995, for example, the wage premium for British union members has fallen from 26% to 18%. That is partly because employers can threaten to move jobs abroad. American data from the 1980s and 1990s, and more recent research in Germany, show a correlation between foreign direct investment, outsourcing and lower union-wage premiums. The shift from manufacturing to services is another blow: workers who have honed a specific welding technique have more bargaining power than generalist computer programmers or hotel cleaners. Service workers are easy to replace when short-term contracts and casual work are common. They are harder to enlist, too. When work and capital flow freely across borders, battles against outsourcing put different national movements at odds. South Korean unionists threatened to “wage a war” in January 2012 when General Motors touted a deal with a German union to move production to Europe. Culture is shifting too. Johan Jarvklo, the chief employee representative at Scania, a Swedish vehicle manufacturer, says new employees used to join automatically, “but now the kids look at the cost and ask: why?” In the past, if a new employee did not join the union, fellow workers would shun him in the lunch break, he recalls. “But the younger generation is more individualistic.” Many of Mr Jarvklo’s members are uncomfortable at modest union donations to the Social Democratic Party; “so I refund them their contribution to the red team!” he exclaims, whipping a coin out of his pocket. Indeed, “post-material” identities—race, gender, sexuality and age—make better spurs for collective action than job, class and workplace, says Michael Piore of the Massachusetts Institute of Technology. Labour-market “outsiders” such as women, immigrants and the low-skilled have found other political avenues. Tellingly, Barack Obama’s second inauguration speech nodded to them, but not to the unions. In the debate on health-care reform, for example, it was not labour but the apolitical Families USA which was most influential.

Power to the people

Some unions, however, are adapting. Scandinavian ones start with an advantage; as in some other European countries, they administer unemployment insurance. But they also shun the confrontational approach of unions in places such as America. Mr Jarvklo’s thriving outfit, IF Metall, is one such example: its success comes from “caring deeply about Scania’s competitiveness”, he declares. Indeed, 67.7% of Swedish workers belonged to a union in 2011 (the same figure as in 1970)—one of the highest levels in the OECD. Karl-Petter Thorwaldsson, president of the blue-collar labour organisation, LO, is confident that it will rise in the coming years. He also plans to bring together Sweden’s businesses and unions to reaffirm their commitment to co-operate, known as the Saltsjobaden Agreement, on its 75th anniversary this year.

Sweden’s labour relations, says Christer Agren of Svenskt Naringsliv, the employers’ group, are a competitive advantage. Unions understand the value of free trade and globalisation. Downsizing rarely brings rows; even the more truculent unions are moving “in the right direction”.

That means appealing to a more consumerist audience. The fast-growing Unionen lets its white-collar members opt in to any of a range of protections and benefits. It markets its services through witty television adverts. It offers insurance and courses for members who want to be retrained. It resolutely avoids party politics. Its success, reckons Mr Agren, is that it “stands alongside its members, it doesn’t interpose itself between them and their employers.” Mr Jarvklo praises this style, too, and trains his shop stewards to communicate with prospective and existing members accordingly.

More than most, Sweden’s unions know the difference between protecting a fixed job and protecting the long-term interests of their members. To keep Scania competitive in the economic maelstrom of 2008, for example, IF Metall agreed to redundancies and “time banking” of unworked hours which can be paid back when demand picks up. Erik Ljungberg, a senior vice-president, says that unions help create an innovative environment. The firm made three trucks per employee year 20 years ago. Steadily shaving seconds off production processes through methods spread with the help of shop stewards has raised that to eight. Through such practices, says Hakan Tribell of a free-market think-tank, Timbro, they have wisely made themselves “indispensable”.

Unions also want to break into new markets, by recruiting labour-market “outsiders”. For example, LO is working with the government and business to create training places for unemployed youths. In return for paying a lower wage, employers will provide new recruits with formal training, easing them into the workforce. In New York state, by contrast, a new attempt to improve the pay of fast-food workers is led by community groups, not unions.

Even fans of the Swedish model concede that it is not perfect: the consensus between unions and bosses can inhibit entrepreneurship. It relies on a costly welfare state to bridge social fissures. But it works. The contrast between this happy picture and that of most other rich-country union movements is striking. It shows that if unions want to prosper, they need a modern, consumer-friendly approach. As any good boss knows, that means following the customer, finding new markets, offering choice and acknowledging that economic change will not just go away.