(FORTUNE Magazine) – ANDY STERN'S WALKOUT FROM the AFL-CIO is being cast variously as a clash of egos, the latest death knell for organized labor, or trouble for the Democrats. After all, he was followed by 4.6 million workers from the Teamsters, the United Food and Commercial Workers, and his own Service Employees International Union. The truth is, Stern's move is possibly the most significant economic event of the year. Not simply because Stern, 54, is the only leader in recent memory to actually grow a union, but because he is in the early stages of something truly ambitious: forging new organizing models and public policies to reward work fairly. And here's the surprise: If CEOs can get over their natural fear of meeting with him, they might find an unlikely partner in making America more competitive and more just.

Okay, I'm gushing. But Stern really does see the big picture. Unlike your typical union boss, who seethes as workers get screwed and fat cats take care of themselves--end of analysis--Stern gets the irreversible economics of globalization. And that understanding is driving him to ideas that could take the labor movement far beyond the workplace. "We've had this one-size-fits-all union model built in the 1930s," he says. It had a great post-war run, but its momentum ended more than a generation ago. Do we try to revive that model, he asks, "or do we say, The economy is different now, and workers need different kinds of organizations?"

There's a model for the kind of new workers' group Stern has in mind: AARP. Imagine a new national membership and advocacy organization for millions of working people that wielded the clout in Washington that AARP now enjoys. Suppose the new "union"--or perhaps it would be one of a dozen such worker associations organized around major industries--took over benefits like health care, pensions, and training, and companies contributed a predictable amount into a pool (as opposed to, say, ever-soaring health costs) for those purposes. Or suppose the new association mounted a major campaign on behalf of health coverage for every American. Or for a mega-version of wage supplements like the earned income tax credit that lifted the effective minimum wage to $10 without putting the full burden on employers, which would kill jobs.

Stern believes a labor group like that could be hugely appealing to the 92% of private-sector workers who have no stake--or much interest--in traditional collective bargaining, but who are still scared about how they'll keep a job or retire with dignity. Business might even welcome Stern's new organization to the table if it helped ease benefits costs as part of a national competitiveness strategy. And if all that sounds like reinventing the labor movement without unions, welcome to the 21st century.

For a revolutionary, Stern is surprisingly mild-mannered; he comes across as a low-key professor running a seminar. But when he starts to spout heresy on policy details, you can see why I'm not imagining things. For example, he's open to giving Medicaid recipients vouchers to buy private insurance if it's done fairly, a notion liberals mindlessly loathe. He's known to suggest in meetings that "someday there shouldn't be a Medicaid"--because it'll be part of normal coverage, not a ghetto for the poor and disabled--at which point his colleagues tell him he's playing into the hands of conservatives. "That's the problem with the Democratic Party," Stern says. "You can't say things out loud and have a debate about 'Would it work?' because before you get anywhere, you're told that you don't care about poor people." Or consider Stern's education agenda for California: Organize members not just as workers, but as parents demanding better public schools. He won't put it this way, but it means union parents taking on the teachers' unions--which is like pasting your tongue to the third rail of labor orthodoxy.

Pervasive worker anxiety, corporate America's thirst to shed burdens like health care ... if Democrats had a brain, they'd be all over it. But it may take a renegade like Stern to blaze the trail--and he might. I recently saw Senator Evan Bayh, another Democratic hopeful, speak in L.A. Then I went to a dinner where Stern spoke. Bayh's robotic spiel put even diehards into a coma. Stern left some people thinking he should drop this union thing and run for President.

MATT MILLER (matt@mattmilleronline.com) is a senior fellow at the Center for American Progress and the author of The Two Percent Solution: Fixing America's Problems in Ways Liberals and Conservatives Can Love.