Wednesday, March 15, 2017

Are Unions Evil? Pretty Much!

Unions would like to sell you a narrative that is essentially false.

A reader writes saying I am unduly negative about unions.  We are not negative or positive here at Living Stingy, just realistic.  And after working in a number of union plants, both as a non-union "salary" person and as a union "hourly" one, I can say with authority that unions basically suck, and even the hourly workers they supposedly benefit know this - which is why a lot of hourly employees vote Republican and voted for Trump.   They know firsthand how a union can destroy a business and kill everyone's job - even if they get small pay increases in the interim.

Which is better, making a few bucks more an hour for a few years, or having a job that you can hand down to your children and grandchildren?   People living in rust-belt ghost-towns in the Northeast can tell you the answer to that question.  Unions have destroyed entire cities and even States in America.

The narrative the union sells is this:  In the bad old days, greedy corporations and factory owners forced laborers to go to work for starvation wages, so that they could never get ahead in life.  Working conditions were unsafe and if anyone complained or was injured, they were fired and starved to death.   The unions came along and forced companies to pay fair wages to workers and improve working conditions.  Without unions, we would not have high pay and the 40-hour workweek!

Nice fantasy, but a large part of it is wrong, dead wrong.   The unions still are selling the "We created the 40-hour workweek" saga, but it is basically false.   Henry Ford created the 40-hour workweek and also more than doubled pay in his industry, all without the prompting of any union.

Before we analyze why Henry Ford - a notorious skinflint - would do this, you have to ask yourself why so many other professions and jobs are not unionized.   For example, as a Lawyer, I am not part of any union that set wages and working conditions.   And yes, wages are low in our profession today - pathetically so.  And many "sweatshop" law firms ask young associates to work 60-80 hours a week or more - 10-12 hours a day, seven days a week, or you're fired.   Seems like an industry ripe for unionization, eh?

The professions are largely un-unionized simply because, traditionally, the demand for labor exceeded supply.   In the salary world and professional world, you are hiring talent and not mere labor.  The pool of talent is very shallow, the pool of labor is fathomless.

The second reason why many jobs are not unionized is that they are not easily blackmailed by unions into giving concessions such as allowing unionization, standardizing wages, and implementing work rules.   A large factory is often mortgaged to the hilt by bankers.   The company has to keep cranking out cars, steel, chemicals, or whatnot, just to make payments on the debts and to stay competitive with other companies.

A strike of any length at all would result in the company going bankrupt, which in turn forces them to the bargaining table.   Management makes concessions or has to go out of business.   And often these concessions end up being slow death for a company as they are now no longer competitive and cannot invest in new technologies and capital improvements.  It may take decades, but eventually the plant closes, and all those promises at the bargaining table - pension benefits, for example - are for naught.

People who have no job skills, who can be replaced at moment's notice, have no leverage to use to maintain their jobs.  Real talent, on the other hand, has options.

And one might assume that raw labor has no options as a result.  One would assume wrongly, however.

Early on in the history of the Ford company, Henry Ford realized that a big cost to his company was labor turnover.  Working on the assembly line didn't necessarily require special skills.  However, it did cost money to train new people how to do a particular job.   But the hours were so long and the pay so low, that many worker up and quit at a moment's notice, as they could make more money with less hours elsewhere.

The problem became so acute that Ford did something that really pissed-off his competitors.  He more than doubled pay to $5 a day and cut hours to 40 hours per work-week.   He wanted a happy, contented, and trained workforce, without a lot of turnover.  People who were overworked and underpaid, quit.  With higher pay and shorter hours, Ford had one of the most loyal workforces in the industry.

And all of that, without unions.

The union succeeded not because they were an idea whose time had come, but because they used strong-arm tactics, muscle, and organized crime connections to force workers to join, and to force management to negotiate.   And often management was being sold a product - labor peace - for a price.  The unions then told the workers that the only reason they had the pay and benefits they had was due to their efforts.   And a lot of people believed this.   

But a lot of other workers were beat up, forced out, or even murdered by union goons, if they refused to go along with the union's machinations.   As I noted in my earlier posting, I was threatened with bodily harm if I did not "fink" on some union reformers (who thankfully have since reformed the union somewhat).   Fortunately, I did not know the names to give them, and fortunately the "shop steward" and his lackeys, Vinny and Knuckles, believed me.

And my experience is not unique.  Violence and intimidation are the name of the game in the union business - that and corruption and criminality.   And over time, corruption has a corrosive effect on any business, and indeed a society.   Corruption results in the degradation of a society over time, and if you don't believe me, spend some time in Mexico.

Over the years, the unions strangled American companies.   As the auto industry became more and more automated and as competition from non-union American factories increased, the number of employees needed in the plants tapered off.  The unions, interested in collecting union dues (which are not cheap) forced through contracts that required companies to pay people not to work even if the factory was closed.

GM and Chrysler went bankrupt as a result.   Restrictive work rules were almost worse - forcing the companies to hire 2-3 people where a job could be done with one.

The proof, as they say, is in the pudding.   Non-union American car factories, such as owned by Nissan, BMW, Mercedes, Honda, Toyota, Subaru, and others, are not only able to prosper and expand, but are able to export cars from America to foreign countries - something the "big-3" unionized American plants have not been able to do in decades. 

Is there a place for unions in the American work force?   That is up for you to decide.  However, I would suggest that you should shoot for a career in a non-union job.   Union people, no matter how much money they make, never seem to be happy.  They harp all day long about "the contract" and what they are obligation to do - and not to do - under this written piece of paper.   The are less concerned about actual work than the appearance of it.

And in the end, they often don't come out ahead.   After years of hard work, they retire from a failing company whose pension benefits are underfunded - or worse yet, managed by the union.  Too late, they realize they were snookered, trading short-term gains for long-term losses.

American workers have not been blind to all of this.  Many have firsthand experience with dealing with unions and didn't like the smell of it.   Or they have parents and grandparents who worked at factories that are now just burned-out shells, because the unions kept taking, taking, and taking, and gave nothing in return.  And this is why the Volkswagen plant voted against the unions, even as management there stayed on the sidelines and actually encouraged the workers to unionize.  It is why a Boeing plant in South Carolina voted overwhelmingly not to unionize.   Hourly workers are not as dumb as the unions make them out to be.

Union jobs are shitty jobs.   I was offered a full-time job at United Parcel when I worked there.  They told me it was a great gig and I would make lots of money over time and whatnot.  They really wanted me.   But I gave it up to work at the Patent Office for less money,  as I wanted a career and not merely a job.   Plus, my experience with the "union reps" left a bad taste in my mouth.  I wanted to work for a living and not have to dance around a bunch of restrictive rules and nonsense, enforced by the dumbest people in the plant.

Unions suck - for the workers and management.  When a shop unionizes, update your resume - because you'll be leaving eventually anyway.

But what about developing countries?   We hear all the time about fires in sweatshop factories that kill workers who are forced to sleep next to their sewing machines.   Or the conditions in the Apple plant in China - deplorable!   Surely a union could fix all that, right?

Well, maybe, if they weren't concerned more about their own perks, benefits, and making money for the union.   Maybe unions really started out as a worker's rights organization.  But early on, they were hijacked by organized crime.  And with organized crime in Asia being what it is, I am sure they would hijack it there as well.

What we are seeing, however, in both India and China is that wages are rising as more and more production occurs there.   It is taking a long time, but the cost of labor in these countries is rising to the point where they are less and less competitive than labor in the United States.  Wages rise due to supply and demand.   When unions artificially inflate wages, it doesn't increase earnings across the board, but instead creates a market distortion which can not only close the plant, but destroy the economy.   The stag-flation of the 1970's nearly bankrupted America, and lead to the high inflation and high interest rates of the early 1980's.   It really sucked, and unions were in a large part to blame.

Manufacturing is returning to the USA not because we have a blowhard President, but because with the cost of shipping and the increasing cost of labor overseas, the cost advantages of manufacturing overseas is eroding.   Before Trump was elected, the US was slated to retake its throne as king of manufacturing by 2020 at the latest.

But part of this is, of course, due to the decrease in wages in the US.   Nissan pays part-time workers about $15 an hour in Mississippi, which is what GM was paying full-time workers back in 1978, when I worked there.   In other words, our labor rates are more competitive.   And you can live pretty well in impoverished Mississippi on $15 an hour, let me tell you.

Could a union raise those wages?   Maybe.  And just maybe the plant would then close and those Nissans be made somewhere else.   And that in a nutshell is a problem with unions.   You ask for 2-3 times the going rate for your labor, eventually you price yourself out of a job.