Thursday, January 23, 2020

Do You Need a UNION?

Are unions a way of protecting workers from exploitation by management, or just an extortion racket that victimizes both labor and management?

It seems like we are living though the roaring 20's once again - where the stock market is going bananas, while the farmers go broke.   And unionism is once again on the rise, along with a lot of "share the wealth" and "everyman a king!" politicians pushing the same old snake oil - nationalism, communism, socialism, and fascism.   I thought we went over this already.  I guess not - and a new generation, steeped in self-esteem classes and rewritten history has to learn the painful and deadly lessons of their forebears all over again.

The era of big unions died off in the 1970's and 1980's due to economic conditions and some changes in the law.  Back in the day, if your employees went out on strike, you had little choice but to negotiate with them "in good faith".    Even if their "bargaining" proposal would insure your company could go out of business, you had to negotiate and grin and bear it.  You could not pack up the plant and move to a non-union State, or even just call it a day and close the factory entirely.   That would have been against the law.

But as I noted before, things started to change as companies lost more and more money and competition from overseas was fierce.  The ball bearing plant I worked in was closed - not all at once, but little by little, as each "shop" in the plant - the forge shop, the ball shop, heat treat, grind, etc. were packed up and shipped out - usually to India, and we relied on German and Japanese-made parts to replace that production.   The result was lower costs and better quality, of course.

The problem was multifold.  Like most American companies, it was top-heavy with management, drawing obscene salaries.  But you can't expect a manager to make less money than his workers, and when workers were making five times the local wage rates, the managers had to make even more.  Compounding this were restrictive "work rules" that mandated that two or three people do the job of just one, or that people be kept on the payroll even if there was nothing for them to do.   And no, those idle people could not be put to work on plant maintenance - that was not their job description!  As a result, there was no money left over to buy new equipment and machinery or design new products.  It was a classic death-spiral.

Since those days, union membership has gone from 30% of the work force to less than 10% today.  And today, unions are trying to reorganize and gain back some of the power they lost.   This time around, they are targeting low-wage workers, such as fast-food workers and domestic help in hotels.  Time will tell if they are successful.

The reason for this shift in focus is interesting.   The number of workers in the automotive and other manufacturing sectors has declined, not because of overseas competition alone, but because of automation - and by that, I don't mean "robots" but machinery that does tasks more efficiently so that one person can do the work of four or five.   My friend at Caterpillar, for example, was a welder.   In the old days, dozens of welders would weld steel plate to make the frame of a Caterpillar tractor - sparks flew everywhere!   Today, he supervises five robotic welders, setting up the parts, programming the machine, and then pressing the "start" button before going on to the next machine.

And there is no choice in this, either.   With today's technology (and litigious society) welds have to be perfect every time.  You can't afford the variations in welding quality we had in the past (usually compensated by over-engineering everything).   A company that used manual welding would go out of business in short order.   So it is a trend, nationwide, in manufacturing, that fewer people produce more things - a trend that cannot be halted or reversed, even if we wanted to.   It is the same as the trend in farming - fewer people are needed to farm, and each farmer farms more acres as a result.

Back in the early days of the assembly line, Henry Ford did a startling thing - he instituted a 40-hour workweek and doubled wages overnight for his workers.   Was he being generous?   No, he was being realistic.   Although he was paying "prevailing wages" in his industry, his assembly line technique insured that each worker was far more productive than in traditional auto plants, where cars were assembled by hand.   As such they were worth more to Ford.

Problem was, assembly line work was monotonous and strenuous.  People got tired of it quickly and quit - and went to work for a more slow-paced "traditional" car company.   The turnover got so bad - nearly 50% per year - that he had to do something.  Now, granted, unions had been fighting for higher wages and 40-hour workweeks for years.  But that was not what drove Ford to make these concessions - it was turnover, plain and simple.

And that right there points out the two ways of insuring your get the wages you deserve.   If enough people quit, then employers have to raise wages.   Right now, unemployment is at all-time lows.   Most low-wage employers are offering wages higher than minimum wage to attract workers.   In the labor market - which is a market like any other - the laws of supply and demand are still in place.   If you don't like the wages or working conditions you are in, you always have the option of quitting.

And for most people, this is the mechanism they use to get the pay they want or at least deserve.  Not a perfect mechanism, of course, as we shall see.   But for eons, salaried employees never had unions, and yet never were discontented with their wages - too much.   Professionals such as Engineers, Doctors, and Lawyers, never had unions - even as wages have stagnated in some professions.

That does not mean, however, that you can just "name your own salary" and make whatever you think you deserve (although a lot of people have tried - some succeeding, but they are usually in jail).  In my own profession(s) I saw the salaries for Engineers stagnating, and even for Patent lawyers.  One reason I retired was that the prevailing wages for Patent Attorneys was declining or at least remaining stagnant since the "glory days" when I started out.   That, and the working conditions were less than optimal.   But since I quit, that means some younger attorney can likely ask for a dollar more in wages as a result.

But suppose you have no special skill or training that makes your labor worthwhile and negotiable in price?   Suppose there are millions of people out there, just like you, with no real job skills, and the number of available jobs is far less than that?   In that case, a union might work to your advantage, as they can basically extort higher wages from management by threatening to destroy the entire enterprise, either through a strike, or as in the past, through actual violence.

The problem of course, was twofold.   The unions quickly realized they had a lot of power - over management and the workers.   And they became corrupt fairly quickly.  Union leaders would line their own pockets with money in return for "labor peace" and companies learned it was easier to just pay off the unions and make promises of benefits in the future, than to actually negotiate fair and just wages.

In the 1970's, unionism resulted in a schism in the labor force.   In the few plants that were unionized, you could make scandalous wages.   "The country club" they called our ball-bearing plant.  As a young, unskilled worker, you went down to the union hall, and maybe an uncle or other relative got you in (and maybe you bribed someone as well).   The big company in town would hire you for a month - and then lay you off.   You'd go to work somewhere else for a fraction of your union wages, waiting for "the call" to go back to work.   You'd work like this for years - a month a year, two months a year, six months a year - until you had enough seniority to be on the payroll full time and largely immune from layoffs.  "Last hired, first fired!" was the rallying cry.

It was, in a way, cruel to the workers, who had no steady work until they were well into their 30's.  And once they were on full-time, it was deemed that they no longer needed to work hard - or at all.  That was the job of the up-and-coming youngsters.

But of course, these bloated wages meant costs spiraled out of control.   As wages went up, the price of cars went up.   Workers couldn't afford the cars anymore, so they went out  on strike for more money, which meant the cars cost even more.  The Ford Pinto, when introduced in 1971, cost under $2000.   When it went out of production, it cost over $5000.   And no, it wasn't a firetrap or a deathtrap, any more than any other small car of its era (it was actually safer than most Japanese makes and of course, the VW, of the time).   But that's another story for another blog posting.

Since those days, a lot has changed.  A big chunk of the union labor force is in government unions, and even those have been crippled by some recent court decisions.   Until recently, if you worked in a union shop, you were required to pay union dues even if you didn't want to join the union.   Such is no longer the case.   And union dues can be pretty steep, as I learned during my brief tenure as a Teamster.  A lot of new factories have opened up in the formerly agrarian South - non-union factories with correspondingly lower wages, fewer work rules, and less labor strife.   While GM lost billions in a labor dispute this summer (but oddly enough, is still cutting production as the market retracts - I think the strike was actually a blessing for GM!) the American plants of Toyota, Honda, Nissan, VW, BMW, Mercedes, Hyundai, Subaru, Mitsubishi, and of course Tesla, kept on humming along with nary a hiccup.

VW bears special mention as they have voted - twice now - on whether to unionize.  In both cases, they turned it down.   VW had a UAW plant in Pennsylvania back in the 1980s and closed it down and retreated to Germany as the quality control was horrific and sales of the second generation Golf and Jetta suffered as a result.  There is a reason VW offers a 100,000 mile drivetrain warranty on their cars.  At 50K, the struts and half-shafts of our '87 GTI were shot.   That's just not acceptable today.

Many workers today are disenchanted with unions.  Maybe they had an experience like mine - where I was bodily threatened by union thugs.   Maybe they are smarter than we think, and realize that a dollar more in pay is fine and all, but a closed factory pays nothing.    Maybe also the nature of work in manufacturing plants has changed - there is less back-breaking physical work and more skill-related technical work.  Like my friend at the Caterpillar plant - in the old days, a welder would come home from work, covered in dirt and weld splatter.  Today they wear lab coats and press buttons - well, at least some of them do.

So maybe that is why the unions are targeting "raw labor" type jobs - the few that are left in the United States.   They are trying to organize fast-food workers, hotel maids, and other no-skill and low-skill workers.   And yet, automation may take over those jobs as well.    On a recent trip to Walmart in Florida, I saw some management and techy types calibrating a self-driving floor cleaner.   It booped and beeped and went down the aisle washing the floors automatically, stopping for customer, carts, displays, and small children.   When I asked them if this was a prototype, they laughed and said it had been deployed at over 100 stores already.   The ten guys with mops-and-buckets were replaced by one guy driving the mop-o-matic machine.   Now the one guy is gone - but Walmart still remains the largest employer in the world and will probably stay that way for some time.

As for fast-food, kiosks are just the start of automation.  Someone will figure out a way to make burgers with a machine instead of a small army of low-wage workers putting things into and out of little drawers to "assemble" a sandwich.   I've already seen automated french-fry vending machines, as I noted before.  It is only a matter of time before there are only one or two employees at such a place - the manager unlocking in the morning and pressing the "start" button, and maybe a technician to work loose the burger bits from the conveyor belt.

But of course, the union situation could all change in a real hurry.   Unemployment is at all-time lows, but if the economy craters again, and unemployment goes back up to, say, 10%, and wages stagnate further, the unions will have an easier time of selling their snake-oil to the populace.

And for a lucky minority of people who get union jobs, it will mean the "country club".   For the rest of us, it will mean higher prices for goods (and higher property taxes to pay overpaid public employees).   But for people who have skills in our economy, it won't mean much, as skilled labor has rarely found the need to be unionize - unless forced to do so, under threat of physical violence, as has taken place in the past.

Overall, though, I think an individual is far better off being a skilled worker and non-union, and thus able to negotiate a salary, not have to blackmail for it.   Relying on extortion schemes to get higher wages - and having connections with crooked unions to get union jobs - is a far less desirable position to be in, as you have far less leverage and control over your own life.