Perils Of The Monopolistic Union

Yesterday, I wrote about a pet peeve of mine:  when people are anti-corporate but pro-union at the same time, even though unions are corporations.  While traditional corporations and labor unions may be structured slightly differently on the surface, they have identical objectives and even go about achieving them the same way.  Today, I am going to explore why this anti-corporate/pro-union attitude is harmful to society.

Why Do Labor Unions Exist?

Labor Unions exist as a way to fight for better pay and working conditions against a corporate culture than seems monolithic and uncaring.  Sadly, workers have sometimes been badly mistreated over the centuries.  Unions were and are a way to level the playing field, so to speak.  They give workers a say in their work life and improve labor conditions for everybody.

That’s the theory, anyway.  In practice, the institution of the labor union certainly started off this way but has long since departed from this noble path in pursuit of more selfish objectives.  These days, the purpose of the labor union isn’t to ensure fairness or equality at all, it’s to gain as much profit and benefit for its shareholders (union members) as possible regardless of the broader consequences.  It’s gotten so bad, in many cases, that things have come full circle.  Where once it was the workers who were mistreated by the company, sometimes now it is the company that is mistreated by the workers (vis a vis labor unions).

The Monopolistic Labor Union

Since unions are corporations too, their actions and behavior are subject to the same laws of supply and demand as every other corporation in America.  Sometimes, the value of labor goes up.  Other times, it goes down.  The problem with many of the more powerful unions is they try to inflate their compensation in the good times without having to suffer through the flip side of the coin when the value of labor decreases.  Now there is nothing at all wrong with a union attempting to maximize the price of their goods in the open market.  That’s what corporations do, of course.  The problem is that unions are a special kind of corporation.  They are often given monopoly rights by the government.

Over the years, dozens upon dozens of laws have been passed governing how companies can deal with union members, labor disputes, strikes, and everything in between.  Furthermore, the institution of the union has been ingrained so deeply in some parts of the country that they hold the fate of entire industires, and the economic well-being of many, many, many innocent bystanders in the palm of their hand.  And what do they do?  Like any good corporation (i.e. union), they squeeze and squeeze to maximize their own benefit without any regard whatsoever for the well-being of others.

The United Auto Workers union (UAW) is the prototypical example of this.  Over the years, the UAW has succeeded in pushing the average cost of their various members above their marginal productivity, not least of all due to health and pension benefits for retirees.  The reality is that in the global marketplace, these workers simply aren’t worth what they are being paid.  Is that unfortunate?  Yes.  But pushing for ever-higher wages and benefits once you’ve exceeded the value of your marginal productivity is counterproductive and harmful for everybody.  Sure, a few workers will get to keep their jobs at higher wages, but many more will lose their jobs entirely and even more jobs will never be created to begin with.  Not only that, many supporting jobs (food servers, retail employees, real estate agents, etc) will disappear as well due to the economic fallout.  If nobody can afford a meal out, there’s no point opening a restaurant.

The High Cost Of American Labor

Here’s a striking statistic.

Avg Labor Cost for US Hourly Worker:
GM:  $73.73
Toyota: $48
Source: National Public Radio

Foreign automakers assembling cars on US soil such as Toyota don’t have this problem.  In its non-union plants, Toyota has the ability to hire as much labor as they need at a reasonable price.  Are these non-union workers mistreated?  Not even close.  These non-union auto plant jobs, especially those located in the south, are highly sought-after and pay well.  Because of their huge cost advantage, Toyota is able to make very high-quality vehicles for a lower price than their domestic counterparts.  Many would argue the US automakers would be more successful if only they manufactured higher-quality vehicles to compete with the Japanese auto companies but this is a catch 22.  General Motors, Ford, and Chrysler simply can’t afford to manufacture these higher-quality vehicles due to sky-high labor costs.  In order to compete with Japan and sustain high domestic labor costs, American automakers need to produce quality vehicles.  But they can’t afford that due to, you guessed it, high labor costs.

Two Wrongs Don’t Make A Right

Many would argue, “well, management gets obscene salaries and bonuses even as their companies crumble” in an attempt to justify the UAW’s behavior.  Two wrongs do not make a right.  Management’s classless greed is no excuse for your own.  Until domestic automakers’ labor costs come down to be more in line with Japan’s, domestic automakers will continue to struggle.  It’s as simple as that.  Union members need to ask themselves one simple question:  do I want higher wages and benefits for myself no matter how much damage it does to everybody else or am I going to take one for the team and accept more reasonable compensation for my own long-term benefit and the benefit of everybody else in this country?  That’s what unions are all about, after all:  sacrificing for the greater good.