Last July, in Chicago, Andy Stern broke up the AFL-CIO's¹ 50th-anniversary celebration by leading 4.6 million workers in three dissident unions out of the largest US labor organization. In doing so, he not only demonstrated the flair for the dramatic that has marked his tenure as president of the Service Employees International Union (SEIU) but also took squarely upon his shoulders the responsibility for rebuilding the US labor movement—or for its demise—at a time when unions represent just one worker in eight, down from one in three during the 1950s.

Today Stern, 55, has expanded his rebel band into a labor federation representing some six million workers, including drivers, food workers, carpenters, hotel workers, laborers, farm workers, janitors, and health care workers. His course so far bears witness to how effectively he has taken advantage of the service economy's growth. By focusing on raising the wages and benefits of workers in low-wage, fast-growing jobs, he has built the 1.8 million–member SEIU into the fastest-growing union in the United States.

Most of the dissident unions operate in service industries whose workers are relatively protected from the threat of outsourcing jobs abroad. Nevertheless, unlike Stern's former AFL-CIO compatriots—leaders of the manufacturing unions in industries, such as autos and steel, that have been ravaged by foreign competition—he has a vision of how a revitalized labor movement can counter globalization's threat to workers: global unions. An aggressive organizer, Stern envisions an expanded federation of such unions, oriented by sectors, to take on multinational service companies. This federation would bring to bear cross-border union leverage to organize entire industries rather than individual companies, thereby lifting the living standards of workers who now fear for their jobs and benefits.

Stern's innovative thinking about labor's future, belied by his low-key personal style, doesn't stop simply with the idea of creating global unions. In an interview at the SEIU's Washington, DC, headquarters, he spoke recently with Lenny Mendonca, a director in McKinsey's San Francisco office, about the possibility of "outsourcing" labor actions, reforming US health care policy to boost the competitiveness of employers, and creating grand labor-management partnerships that might let companies off-load their health care, pensions, and training to unions.

The Quarterly: What's behind your effort to reshape the labor movement?

Andy Stern: The context for me is simple but rather profound. We are living in the most significant economic revolution in world history. The world is changing. Work is changing. We've gone from a local to a national to an international economy, from a world where one job lasted a lifetime—and the American labor movement has just not kept up with those changes. Somehow, we were trying to go into the future by looking in the rearview mirror, and it just wasn't working. If we were a business it would have been obvious: we were losing market share. So if we want work to be valued and rewarded in America, we felt that we needed to do something different. Trying to build something stronger and leaving the AFL-CIO seemed to be a very first and preliminary step in making the change.

The Quarterly: What is the agenda now?

Andy Stern: I think a series of corresponding events will occur. The unions that left the AFL-CIO happen to occupy sectors in the economy that aren't going overseas—sectors where unions can actually work, where a fairer distribution of the proceeds of companies can actually raise wages and benefits, where we actually can add value in the marketplace by leveling the playing field so that competition is not about wages.

Probably more significant than the convention held in Chicago was one that took place a month later, of the largest service-sector federation—a worldwide federation of unions that says it represents 15 million to 17 million people. It met under the banner of "Imagine a Global Union." So this was the first time, really, that anybody had not just talked about but tried to build the structural framework and the intellectual vision for a global union. That's the next current of activity.

The Quarterly: Where does it go?

Andy Stern: I honestly think that what we're going to see happen in the next ten years, if not sooner, is a convergence of a global labor movement, a global corporate-responsibility movement, and nongovernmental organizations. In the end, we're all dealing with the same sets of concerns and, more important, with the same grouping of multinational employers. Before, we shared a sense of purpose, but we really didn't share employers. When you look at the corporate-responsibility movement, clearly a lot of those issues relate to work, and there are hundreds if not thousands of NGOs around the world that are dealing with business and multinational corporations. So I think we're on the cusp of another convergence trend. As employers and employees get "divorced," people have seven or ten jobs in a lifetime, and an employer is not responsible for your work life. We need to build new organizations that can help people, and on the global level that will require joint efforts by unions, NGOs, and corporate-responsibility groups.

The Quarterly: How does the global-union concept become concrete?

Andy Stern: What we're seeing is that the same companies are now beginning to serve multinational employers around the world in cleaning, catering, and security—to name just a few services. In a world where companies, not countries, are making the rules, how do we have one relationship with a company? It's hard, but there is no reason we can't overcome the same challenges that companies have faced in building global organizations.

We are beginning to build a network of different unions around the world, developing a common set of proposals to deal with global employers and a common set of responses if global employers aren't particularly interested in these proposals. If workers are ready to go on strike in the United States, and we are ready to pay them to strike, it would be very costly. But paying workers in Indonesia or India or other places to go on strike against the same global employer isn't particularly expensive. How do we take the different assets that different unions bring to the table and use them strategically? American unions, for example, have a disproportionate amount of resources, while other unions have political power, and if we think together we may be able to use the global economy to our advantage.

The Quarterly: So a global federation or union might decide, in effect, to outsource a strike to the lowest-cost area because the amount needed for the strike fund would be lower, and thus put pressure on one wing of a global employer's operations?

Andy Stern: Yes, absolutely. There are places, logistically, where people bring goods to port in very just-in-time arrangements. If you lose your place in the logistical line, all of a sudden you can't get your goods out on the shipping line, and that creates problems for your customers. So you could imagine a situation in which unions in different countries made sure that uncooperative global employers faced disruptions, so to speak.

The Quarterly: How do you avoid hurting the gains that outsourcing brings, say, to people in low-wage countries while still protecting vulnerable people in higher-wage countries?

Andy Stern: The challenge in America is not to stop globalization. The real question is how, in the long term, can the jobs that remain in America become decent-paying jobs. The problems we're having now in the US economy are not about productivity and growth. They are about distribution. We have not found a viable distributive mechanism. Unions once were a distributive force when we were strong enough, and so was government when it acted differently. I don't know what the appropriate mix of distributive models is, but if we don't find it, then [longtime US Federal Reserve Board chairman] Alan Greenspan is going to be proved right—the gap between the rich and the rest of the population is growing so wide and so fast that it's going to threaten democratic capitalism.

The Quarterly: Let's talk about your idea of industry-wide approaches. How does that work?

Andy Stern: In economists' terms, we're trying to take wages out of competition. We are trying to make labor costs resemble electricity, so that all of our employers compete on how they use their capital, innovation, technology, and creativity and not on how they screw their workers. We see what is possible, for instance, in the cleaning of office buildings in New York City. The workers who clean every one of those buildings make the same money and have the same benefits. So employers can't compete on who can hire workers most cheaply; they have to compete on the management of the cleaning service. It's a competition where employers take advantage of their management skills and not of their most vulnerable cost by lowering wages and benefits.

The Quarterly: What's the right way to think about health care, which US companies facing global competition view as an acute cost problem that leads them to demand and win concessions from unionized workers?

Andy Stern: The right way to think about it is that American business leaders are incredibly timid about screaming from the top of their lungs that we have a health care system that makes them globally noncompetitive. That we have legacy costs and high health care costs that are totally exacerbated by our American model of health care. Employer-based health care will not work in the 21st century in a global economy. We pay too much money in America and don't get the right returns, while other countries do better.

The Quarterly: What do you think has to change in the way business leaders think about health care?

Andy Stern: I think business leaders have to shed their ideology and their desire to have their own health care plans. They have to decide that there really has to be universal coverage. Are they for that? Or are they just for the lowest cost possible? I think that since most employers will conclude that they do believe in an America where people have access to health care, we can all debate how much or how little health care every American should have. Then we need to find a system that actually works—the American plan, not the Canadian plan, not the UK plan. The American plan would probably draw on the best of our experience and look at systems such as the federal-employee health benefits plan, the Veterans Benefits Administration system, and Kaiser Permanente, which has done a lot of innovation and modernization. We're certainly not going to lower costs with an anti-free-market prescription drug plan that we have now, where we can't bargain in a free market for the cost of our prescription drugs.

The Quarterly: It sounds as though there should be an area of common ground between labor and corporations. What stops them from reaching that common ground?

Andy Stern: I just think employers are scared. They've lost their voice. They've lost their courage. They go to conferences and think that somehow they're going to manage the problem in their own companies. They're scared to get out in the political arena, where this is going to have to be resolved. This will not be resolved until American business leaders say that if you want good jobs in America, if you want America to be able to compete, you've got to change our health care system.

The Quarterly: What might a new role for unions look like?

Andy Stern: I think we can imagine the union in several ways. First, as an outsourcing vehicle that takes a whole series of services from employers—not just for one employer but for whole sectors or whole industries—so that there are common benefit plans or common training plans or common ways to deal with workers who lose their jobs and need a bridge until they find new employment.

Unions can also be labor contractors and supply skilled workers to employers, as the building trades have done historically. There could be ways to create organizations that are more like national advocacy organizations at the sector, national, or international level and less at the work site level.

The problem is that people have always said that unions need to change the paradigm. I think there are some of us who are ready to change the paradigm. I think the question has now been turned back to the employers. Are they just going to be class struggle organizations, or do they want to try to create something new in the 21st century?

The Quarterly: As an executive, what would I have to be open to that I haven't been or haven't thought about previously?

Andy Stern: Businesspeople need to have an open mind to appreciate that they have a series of problems concerning their workers in a global economy. Employers need to recognize that the world has changed and that there are people who would like to help them provide solutions in ways that are new, modern, and that add value to companies. They should have an open mind to understand that having a union designation after your name doesn't mean that you wear a pinky ring and are looking back toward the last century. There is a new social contract to be had in America. No one is quite clear what it is. We have to invent it together.

The Quarterly: You organize very aggressively, but you seem to be saying that your ability to rebuild the American labor movement depends on the willingness of employers to be partners. How do you square those approaches?

Andy Stern: What we like to say is that we prefer to use the power of persuasion, but if that doesn't work we use the persuasion of power. The truth is that confrontational models are very slow and not a relationship-building orientation to have. We've talked with so many business leaders about changing the proposition, but it takes two to dance. The appropriate critique of the American labor movement for a long time has been that we are old fashioned, very old style, and very protectionist. But I now find that American business leaders are unable to think differently about what the world of work could look like.

The Quarterly: What would the mental adjustment need to be?

Andy Stern: I think businesspeople have a very short-term mentality. So they may say that changing the health care system is a great idea, but what does that have to do with getting my numbers right for the next quarter? What does that do for my ever-shrinking tenure as CEO? I also think it is a very big problem when large American employers don't see themselves anymore as American employers. People have started thinking of their companies as global companies. When America becomes another market for American employers, it just diminishes the ability of business leaders to provide leadership in our national political environment.

The Quarterly: Who are the business leaders you admire?

Andy Stern: I look at people like Howard Schultz at Starbucks, who I think has dealt with the health care issue rather spectacularly. He has also thought about how he purchases coffee in a way that is much more responsible than that of other people in the industry. I look at the people who run Kaiser Permanente, who have tried to compete in a very difficult health care world with a tilt toward providing service at the bedside and taking care of their employees as well. And companies like UPS have mastered the global technological framework and have provided decent wages and benefits for their workers.

The Quarterly: You say that business may need to change the way it thinks. What do your fellow labor-movement leaders need to change?

Andy Stern: You can start with tossing out the premise that every employer is rotten, greedy, and just trying to make the most money possible. Or you can try to appreciate that although this is true in some cases, employers live in a competitive environment and have to meet certain shareholder expectations, and labor can play a role in helping to meet them. How can I contribute to meeting those expectations in a way that also meets mine? I think labor leaders at times are insensitive to what employers are dealing with in their own industries.

The Quarterly: What can labor learn from business?

Andy Stern: One thing is that the world works sectorally. In too many countries around the world, we are building general worker unions that don't understand that there is a logistics industry, a service industry, a car industry, a steel industry, a hospitality industry. But some unions try to represent workers across the entire spectrum. I think it's hard to be a partner in lots of different industries where employers don't have unions with expertise, where unions can't figure out how, politically or in terms of training, to organize themselves to provide value. We have reorganized the SEIU sectorally, where the unions within it are strong enough to stand alone by sector. We face the same challenges as businesses. We need to get as efficient as possible.

The Quarterly: What do you worry about?

Andy Stern: That the SEIU is not moving fast enough to make the changes. That the world is changing so much faster than our ability to both understand it and keep up with it. That institutions like unions—not just here, but around the world—are very nationalistic and very slow to build alliances and partnerships. We desperately need to do this.

The Quarterly: Is the model of a workers' organization that isn't based on the workplace a viable way to get past the traditional confrontation between management and labor?

Andy Stern: Yes, and I think that trying to have some kind of broader, less work site-based sectoral and national relationships is one way to do this. Another way is for unions to change their role to that of service provider, outsourcer of training, and benefits provider.

The Quarterly: For this to work, does the word "union" have to go?

Andy Stern: It may. The word isn't important. The idea that people get a chance to combine their strength, that ordinary people get to do extraordinary things, is what's really important. What we call ourselves is not our core issue, but the results of our efforts in changing people's lives are hugely important for Americans.

The Quarterly: I'm the executive assistant to Ms. Global Company Forward-Looking CEO, and I have Andy Stern on the phone. Why should I put you through to that CEO?

Andy Stern: Right now, you would put me through because the consequences, the alternative—not putting me through—may be far worse. In the future, I would hope you would put me through because people would say that here is someone who wants to work with me to solve problems. A person who is serious and concerned about rewarding work fairly and who understands that I want to do the right thing but that I also live in a world with very significant competition and that I want someone to try to be my partner.