Lamentation about the declining power of labor unions in the United States frequently appears when the problem of increasing inequality and stagnating wages for workers are discussed. If one considers the numbers, there is a legitimate reason to conclude that the organizational power of labor unions is declining in American society. According to the Bureau of Labor Statistics, one in five workers was a union member in the early 1980s but union membership has significantly shrunk over time. In 2021, only 10.3% of US workers belong to a union. As the share of income going to individuals in the top income bracket increases, the usual framework of the conflict between capitalist versus workers seems unequivocally to favor the capitalists.

In Labor in the Age of Finance, Sanford Jacoby challenges this dichotomous conflict line between capital versus labor and documents the journey unions have travelled in the capital market as an opportunity to harness and restore labor’s strength through shareholder power in the age of finance. Although union membership has gradually declined—mostly driven by shrinking private-sector unions—membership in public-sector unions still hovered at more than 35% in 2021. Pension assets coming from more than 14 million workers, from both the private and public sectors, and their investment in corporate stock have provided great leverage for labor unions to voice their discontents about firms’ policies affecting workers. American capitalism is often characterized as giving the shareholder primacy—“that shareholders owned the corporation and that their interests should be paramount” (p. 2)—and Jacoby thoroughly documents the history of how labor union leaders have reckoned with this fact and influenced corporate governance through shareholder activism.

Jacoby shows that labor unions’ journeys to find a place to voice workers’ rights in the age of finance was spearheaded by the most important actor in the movement: the California Public Employees’ Retirement System (CalPERS). Founded in 1932 and headquartered in Sacramento, California, CalPERS represents more than 1.6 million California public employees and retirees and manages pension assets on behalf of its members. Today, CalPERS is the largest public pension fund in the United States and its asset value was reported to be $481.8 billion as of January 31, 2022. Its Public Employees’ Retirement Fund (PERF) Monthly Update for January 2022 shows that 48.5% of its $481.8 billion assets ($233.4 billion) is invested in public equity and 10.2% ($49.4 billion) is invested in private equity. Jacoby provides a detailed account of how CalPERS transformed itself into an active shareholder with increasing equity holdings in the 1980s. CalPERS published its core principles of corporate governance and its investment strategies in 1994. According to Jacoby, this “cookbook,” and specific “recipes” in the cookbook, have provided the guiding principles for other public pension funds and labor funds.

An important contribution of this book is its meticulous account of various strategies that union leaders have devised to increase their power vis-à-vis corporate management from the 1970s to the aftermath of the Dodd–Frank legislation. Many of the strategies that labor pursued received attention from the public and politicians. Examples include corporate campaigns urging consumers to boycott products from firms that violated, or were alleged to violate, labor laws, or publishing the pay ratio of a company’s chief executive and median employees. Jacoby provides rich anecdotes about competition between labor unions and business interests, and political conflicts among Congress, the Security and Exchange Commission (SEC), and unions in pursuit of these strategies. Simultaneously, Jacoby provides an account of how unions have formed coalitions with other key investors in the market such as the Council of Institutional Investors. In doing so, he introduces a few key players in the labor unions into the story to highlight the strategic and savvy tactics devised by leaders in the labor movement. For example, John Sweeny who became the president of the AFL-CIO in 1995, aggressively embraced the role of labor unions as activist shareholders.

To most political scientists who view labor unions’ power as mainly derived from their political power through mobilizing their members to elect labor-friendly candidates and donating to candidates and parties that support their cause, the power that labor unions wield in corporate boardrooms through investing their massive assets in corporate shares is news. Some labor unions, such as teachers’ unions, demonstrate their power in local elections, especially in off-year elections (Sarah Anzia, “Election Timing and the Electoral Influence of Interest Groups,” Journal of Politics, 73(2), 2011). However, studies that compare lobbying and campaign spending between corporate interests and labor unions unanimously conclude that the unions’ place in politics has contracted dramatically (e.g., Kay Lehman Schlozman, Sidney Verba, and Herny E. Brady, The Unheavenly Chorus: Unequal Political Voice and the Broken Promise of American Democracy, 2013). Jacoby’s book expands our perspectives regarding the venues where competition between labor and corporations occurs beyond the political arena.

What is the verdict regarding organized labor’s embracement of financial markets as activist shareholders on the welfare of union members and American workers? Despite the fact that public pension funds and labor unions significantly increased their roles as shareholders, Jacoby’s book highlights that this financial turn often led to strange bedfellows between unions and corporations, and sometimes led to disastrous outcomes for workers. For example, CalPERS invested $250 million in Enron for a limited private equity partnership in 1993 and expanded its investment by $500 million four years later (p. 112). This anecdote suggests that public pension fund boards’ appetites for higher returns on their pension assets partially contributed to the Enron Scandal in 2001. When Enron declared bankruptcy in December 2001, the biggest losers were Enron’s own employees, who had invested 60% of their 401(k) savings in Enron’s stock. Labor unions’ penchant for higher returns also led to its massive investment in private equity. Aggressive business tactics adopted by private equity firms are often criticized as anti-labor. But when much of the money that private equity uses to implement their strategies, such as selling off firms and shutting down factories, comes from public pension funds (e.g., Pennsylvania State Employees’ Retirement System’s investment in Brynwood Partners, which shut down production at the Stella D’oro Biscuit Company in Ohio and New York, p. 169), it is not clear whether the financialization of labors’ strategy improves workers’ welfare.

In the epilogue, Jacoby briefly mentions the trade-offs inherent in American labor unions’ strategy to exert their power through pension assets. But these trade-offs should be more explicitly addressed in the book. Labor in the Age of Finance provides little account of how rank-and-file union members perceive their union’s new role—as activist shareholders—and whether they approve of this approach. The decision-making process within a labor organization remains opaque, with little discussion about potential conflicts of interest between labor leaders’ pursuit of their own political agendas and the financial returns to their members. Those who govern public pension funds—whether appointed by governors or elected by members—have their own interests (Sarah Anzia and Terry Moe, “Interest Groups on the Inside: The Governance of Public Pension Funds,” Perspectives on Politics, 17(4), 2019)—and political pressure is frequently exerted on public funds’ investment activities. In addition, representation on pension funds’ boards by political appointees and elected rank-and-file union members is associated with poor performance of private equity investments (Aleksandar Andonov, Yael V. Hochberg, and Joshua Rauh, “Political Representation and Governance: Evidence from the Investment Decisions of Public Pension Funds,” Journal of Finance, 73(5), 2018). Extant evidence suggests that the governance of pension funds has its own problems. Jacoby’s book omits a full account of how pension fund managers make investment decisions and whether political motivations of elite actors within the labor movement potentially compromise the shareholder democracy that labor has actively embraced to bring workers’ voices to corporate boardrooms. Despite this omission, Labor in the Age of Finance significantly expands our understanding of labor’s political and economic power in American society and leaves us with an intriguing question about whether labor unions’ embracement of finance improves the lives of American workers and union members.