Asking for More: Labor Unions Face a New Competitive Reality
By Jack Healy, Director, Manufacturing Advancement Center, [email protected]
The tradition of "more," the foundation of big labor’s existence, is coming to an end. The President of the United Auto Workers’ Union recently told his membership in clear language that they are facing structural challenges that "cannot be ridden out" and far-sighted solutions are required.
This competitive reality is best summed up in the following letter from former US Senator George S. McGovern. In a recent conversation with me, Mr. McGovern asked for comments from our manufacturers. Readers wishing to offer an opinion can do so by e-mailing and they will be forwarded to Mr. McGovern for response.
I have never wavered in my support for policies that relieve poverty and improve the standard of living of American workers. As a lifelong liberal, I supported Medicare and Medicaid, civil rights, Social Security and workplace safety requirements. Today, I strongly support universal healthcare.
And I have always been a supporter of the labor movement. Unions have a proud legacy of improving the lives of millions of workers over the last century.
But lately I have seen developments that have me worried. And I have been reminded of legendary union leader John L. Lewis, who was once asked what his miners were after. His answer? "More."
It was a funny answer, and perhaps it was honest too. But these days, it’s not a very effective strategy, and we are seeing some unfortunate and unintended consequences of Lewis’ "more" philosophy.
Delphi Corp., the biggest auto parts supplier in the country and the employer of 34,000 hourly workers, is bankrupt. One big reason is that the company’s unionized workers earn $64 an hour in wages and benefits — more than twice what some of its competitors pay. General Motors and Ford — the companies that have epitomized high-paying unionized jobs over the last several decades — have stated that they will lay off 30,000 workers each. The United Auto Workers, General Motors and Delphi recently announced an agreement to offer voluntary buyouts to the UAW-represented employees at the companies. Wall Street thinks these are just the first steps.
Airlines have come under similar pressure. The bankruptcy stories associated with legacy carriers are driven in large part by the compensation packages and work rules that unions have won for their members, which are too expensive compared to more recent entrants such as Southwest. "More" has, unfortunately, become "too much" in a global and far more competitive economy.
Many of my friends will consider this view heretical. But it is based on stark reality. Some progressive union leaders, facing this economic reality, have come to the same conclusion. Others are holding fast. Their behavior is partially a function of internal politics — and sheer habit. Not unlike members of Congress, union leaders are in the business of asking for more. That’s what their mentors and predecessors and heroes did. It’s very difficult to turn around and say that "more" is not always possible.
It can be galling to hear companies argue that they have to cut wages and benefits for hourly workers — even as they reward top executives with millions of dollars in stock options. The chief executive of Wal-Mart earns $27 million a year, while the company’s average worker takes home only about $10 an hour. But let’s assume that the chief executive got 27 cents instead of $27 million, and that Wal-Mart distributed the savings to its hourly workers. They would each receive a bonus of less than $20. It’s not executive pay that has created this new world.
I understand the attraction of asking business — the perceived "deep pockets" — to shoulder more of the responsibility for social welfare. But there are plenty of businesses that don’t have deep pockets. And many large corporations operate with razor-thin profit margins as competitors, both foreign and domestic, strive to attract consumers by offering lower prices.
The current frenzy over Wal-Mart is instructive. Its size is unprecedented. Yet for all its billions in profit, it still amounts to less than four cents on the dollar. Raise the cost of employing people, and the company will eliminate jobs. Its business model only works on low prices, which require low labor costs. Whether that is fair or not is a debate for another time. It is instructive, however, that consumers continue to enjoy these low prices and that thousands of applicants continue to apply for those jobs.
Maryland recently passed a law aimed at requiring Wal-Mart to spend more on health insurance. This is an extremely flawed path to healthcare reform. We need universal coverage, not piecemeal legislation designed to punish companies because they operate differently than their competitors.
The fact is, demanding more from business based on sales or the number of employees is not always the best way to achieve a just result.
