Much like government, unions claim to be all about the members. But when it comes down to it, are American unions just parasites that ruin things for everyone?
October 7, 2019
By: Bobby Casey, Managing Director GWP
I want to preface this by saying: I’m not opposed to individuals organizing. We see it all the time where the result is phenomenally productive.
- Researchers organize, and we get advancements in technology and scientific discovery.
- Businesses organize, and we get mass production of goods and a boost in our quality of life.
- Charities organize and others are helped.
Society stands to benefit from all sorts of human organization, and that falls squarely into the category of freedom of association.
Unfortunately, like anything, people can use organizing for more nefarious purposes.
- Homeowners’ associations harassing people over the visibility of their trashcans or the length of the grass on their lawns.
- Governments with their comply or die edicts.
- Unions that make the individual workers suffer for the “greater good” of the whole.
Much like a gun, its utility can be used for good or bad, which is why things like this require an evaluation of the people involved, not the generic tool or tactic.
Unions in particular have been at odds with US competitiveness and productivity levels. 2018 was a telling year for the direction American unions in particular are heading.
First, there was the Janus v. AFSCME ruling out of the Supreme Court which said that nonunion public employees could NOT be compelled to pay any sort of union fees or dues.
Then there’s the overall trend in union participation hitting record lows just last year. Oddly the same article points out that union approval increased.
I can’t help but wonder if this is a similar but inverse phenomenon to that of congress: while their approval ratings are abysmal, the same people keep getting reelected.
I think people like the idea of what a union should be theoretically, but they disapprove of the costs and corruption that often come with that package.
The union making headlines most recently is the United Auto Workers Union (UAW). They are in the midst of staging one of the longest strikes in a long time.
The UAW were unable to recruit the VW plant in Chattanooga, TN, and other foreign transplants such as Kia and Honda factories. The support of their current leadership is waning, and understandably so.
When you do a search for “UAW Corruption”, countless articles from this year alone populate the screen. I’ll leave you to that, but one article in particular that I found interesting was written by pro-union and former UAW PR employees:
Current elected officers and board members have proved incapable of even acknowledging the extent of corruption, let alone fixing it. Their strategy has been to claim full cooperation with federal investigators and to adopt new joint program accounting controls.
This approach conveniently and completely ignores what the indictment of UAW officer Vance Pearson called, “a multi-year conspiracy involving senior UAW officials embezzling, stealing, and unlawfully and willfully abstracting and converting UAW funds (emphasis added) to purchase luxury items and accommodations for their own personal benefit.”
There’s no fixing the Big Three or the problems in American auto worker labor until you fix the union itself. I, however, question if the union is even necessary.
The Honda plant in Marysville, OH seems to be doing just fine. That plant took a depressed township and turned it into the 4th richest county in the US.
When the UAW was formed, there was no foreign auto competition of any real significance. Japan and Germany were still reeling over World War 2. That’s not the case anymore.
Today, the Detroit Three automakers are an island of UAW production surrounded by foreign transplants that now make up 48% of U.S. vehicle production, according to the Ann Arbor-based Center for Automotive Research. That’s up from just 17% in 2000. Non-union employment rose from 15% of the industry at the century’s turn to 39% in 2013, according to the most recent Automotive News analysis.
Look at how non-union plants compare in compensation:
Average hourly wages in non-union transplants run between $23 and $25 an hour, according to the Center for Automotive Research, compared to roughly $30 an hour for so-called “legacy” employees at UAW-represented auto plants. Health-care plans and 401(k) programs are common, and bonuses are comparable to UAW-bargained profit-sharing payouts.
Bear in mind that that employees at UAW plants pay union dues:
UAW members who are private or public employees and have a right to strike pay 2.5 hours of straight time pay per month if paid hourly, or 1.44 percent of their monthly wages if paid by salary.
UAW members who are public employees and don’t have a legal right to strike, pay 1.9 hours of straight time pay per month if paid hourly, or 1.095 percent of their monthly wages if paid by salary.
If labor costs more, and the union rules restrict what employees can do on the job, there’s no way for GM to compete on price and quality. Something has to give.
Unions are traditionally strict about what employees can and cannot do. They cannot do another person’s job. Non-union shops are more flexible.
The net outcome is the Kia Telluride sells for $5,000 less MSRP than the comparable Ford Explorer, and line items like these become more common.
Mary Barra, CEO of GM was harshly criticized for her “ruthlessness” in letting 14,700 employees go and shutting down plants while having the audacity to collect over $22 million in salary and bonuses.
It’s true, she shut down plants, laid off workers, and shut down operations around the world.
What the press is not talking about is how she is saving the company billions of dollars.
GM, the largest automaker in the U.S. and includes the Chevrolet, Buick, Cadillac and GMC brands, said the moves will save $6 billion in cash by the end of next year, including $4.5 billion in recurring annual cost reductions and a $1.5 billion reduction in capital spending.
She’s streamlined production to be focused more on SUVs and trucks and away from the sedan market which has been dominated by foreign manufacturers. And many of those laid off will have the opportunity to work at other plants.
She is using long-term contract workers to offset labor costs and remain competitive.
All this while taking a $1 billion hit from the imported steel tariffs imposed by President Trump.
Most importantly, GM has made public its offer:
GM says it has offered the union over $7 billion in investments and has pledged to add another 5,400 jobs. It also says it’s offering wage increases for all four years of the deal, an $8,000 signing bonus per member, and an improved profit sharing formula. It’s also offering “solutions” for two assembly plants that are scheduled to close.
I watched a one-hour film by Johan Norberg called “Sweden: Lessons for America?” and among other things it touches on the difference between Swedish unions and American ones. Swedish unions are not divisive or contentious.
They understand that to employ and pay people, the businesses themselves have to be competitive and profitable. Sweden also doesn’t have a minimum wage, because their union relations are effective enough to where people are paid equitably.
So while I’m not a big advocate or defender of unions in general, there are obviously cases where they are not as disastrous as they are in the US, and serve a useful purpose.
The motivation in the US for higher wages either from the government in the form of minimum or living wages or from unions is that each would receive more in revenues as a result. For the same reason that California is reclassifying Uber and Lyft drivers as “employees” rather than “contractors”: they stand to gain $7 billion in tax revenue in doing so.
UAW workers are living off $50 per day from a strike fund. That’s $6.25 per hour and roughly a quarter of the pay they are used to receiving. Is this strike really about the workers?
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