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Are Labor Unions relevant?
Posted at: Feb/28/2011 : Posted by: mel
Related Category: Society,
For the sake of fair disclosure I need to be clear right from the start; I am not a union member and to this point have made a significant effort in my professional life to avoid being a part of a unionized work environment.
Labor unions have played a very important part in the American economy. In particular, during the post WWII decades when U.S. manufacturing dominated the world economic stage the labor unions of this era ensured that their members were not abused along the way. Left without boundaries and fences, any group can take excessive advantage of a situation. Labor unions: during the 1950’s garnered increased wages, 40-hour work week standards and meaningful benefits for their rank and file membership. With very little if any government oversight available at the time, these contract agreements were important at the time because the metered the potential excesses of corporate management. Since the U.S. economy was at the time a manufacturing economy, from autos and aero-space to the service sector and trades, these unions helped to create a middle class.
That is an important statement; union leadership continues to defend any encroachment on their bailiwick arguing that they are the champions and defenders of the middle class. Unfortunately for the labor unions, the business models of the 1950’s and 60’s are no longer valid. Much of the world’s economy has become globalized; this means our labor costs need to be competitive with everyone from China and its other Asian neighbors to Latin America and Eastern Europe. The U.S. manufacturing sector lost sight of this fact in favor of seeking short-term gains during the later portion of the 20th century and ceded our industrial dominance to emerging markets such as South Korea, Vietnam and India. At its peak in 1983, nearly 24% of American workers were associated with a union, by 2008 that number had decreased to less than 14%. In truth, I suspect that even if there had been more of a spirit of corporation between unions and management, the jobs would have still moved overseas…it would have merely taken an extra decade.
It is important to remember that at the close of WWII, the United Stated had in place an intelligent workforce, a wealth of raw materials, substantial energy resources and an existing manufacturing capability. These things all combined to feed the consumerism of the post war families and the propagation of all the new suburbs patterned after Levittown. As Japan, Germany, Korea, South East Asia, China and other parts of the world entered the manufacturing arena decades later; each in their turn could do so with newer facilities and less expensive labor.
As union strength has diminished in manufacturing, a few of its last remaining bastions including public sector employees and education have become targets for scrutiny. I know, we have all read about public sector pensions that equal or exceed anything that those same people ever brought home as a regular salary, but those are the exception. Obviously, those abuses need to be curbed, but a little research will show that the average pension obligation across the country is only around $19K annually which is not a significant amount. There is still plenty of room to look at closing the gap on some inequalities. There is still the obvious concern that during richer time’s cities like San Diego and states like California agreed naively to ever growing pension funding obligations. Now that the economy has slowed substantially the ability to pay those increased pension obligations is an increasingly significant burden that takes away from the rest of the budget line items.
Most current union contracts include a salary, fully funded medical and a fully funded pension obligation. Looking at the last two on that list is the easiest way to see the gap that has formed between union and non-union professional workers. First, there is that noteworthy means to retirement called a pension. I will be personal about this. I have been working for 29 years at this point and have never once had access to putting my name on a pension. I have for the last 25 years been putting a portion of my paycheck into a 401K type retirement fund, yes it is true that my employer has also provided over the years some “matching fund”. Regardless of any matching funds, the vast majority of the money I have set aside for retirement is money I chose to set aside and not spend in real-time. That means a piece of my salary never came home for groceries or to pay the mortgage. In a similar fashion I have been offered access throughout my career to a group medical plan, but only provided I kicked in a substantial portion each month from my take home check. This is what draws much of the ire with respect to public sector employees now, it is not the pay scale; it is the fully funded pension and medical plan without having to pitch in from your salary like the rest of us must do. There are obviously other differences as well. In the private sector, regardless of seniority, job preservation is dependent on performance year after year. In most union models, a seniority or tenure system exist for advancement and for decision about who to cut if and when cuts need to be made.
There is no doubt that historically unions have served a valuable role in American history protecting workers from management abuses. The important question to ask is if they are still relevant in our current economy and society. Unions have set a standard for worker protections that have been emulated by a host of state and federal agencies. It seems as though most things involving people and policy swing like a pendulum. Arising out of a legitimate need they then grow or mutate to excess and the next correction is invented to solve the previous solution which has become the latest problem swinging the pendulum back in the other direction.
Let’s take a quick look at teachers. First I need to say that I have tremendous respect for most of the teachers I have met, but the union contracts they work under protect seniority over performance. More importantly, in struggling economic times they actually punish the kids despite what we periodically hear. California, like many states is in the midst of a fiscal emergency. In response to this emergency the local school districts have been challenged with significant budget cuts. I am going to give you the overly simplistic model. Faced with a fixed salary budget of 3 million a district can use 50 teachers at $60K each, or 60 teachers at $50K each. Yes, this is overly simplistic as teachers have a broad range of salaries depending on experience, but the problem is that the union contracts protect seniority so the less senior teachers who happen to cost less are let go. The problem here is that now there are 10 less teachers to go around for the same number of students. If you believe that experience alone will make up for class size you are severely misguided. With larger class sizes, more students with learning challenges will fall further behind. The problem with my example is that it is also way to simplistic. Many of those senior educators bring valuable experience both to the classroom, and in developing their peers that cannot simply be discarded because of cost. As a parent who is actively involved in my children’s education I have met a lot of teachers. I have met young teachers with energy and passion, I have met experience teachers with a wealth of knowledge and experience they call upon to solve challenging situations, and unfortunately I have met older faculty who are burned out and are really just punching a time clock. In the private sector the weight of supervisor evaluations and the need to perform annually solves much of the problem associated with the third type of teacher previously mentioned. This is one of the key productively issues associated with unions, the low performer is protected from the burden of competition and at the expense in this case of class size and education quality. So we end out with a staff of teachers that as a group are not the best solution for the classrooms or the students with the current budget limitations.
I guess it is time to tell a little story. A long time ago in one of my previous lives I worked in a test lab performing acceptance testing on aerospace electronics destine for extreme environments such as missiles and satellites. There was an occasion when the item I was involved in testing needed a very specialize acoustic vibration test. We did not have this capability in house so we contracted to do the test at the facilities of another company. I represented my employer and performed the system testing while the contracted company provided the staff and expertise for the special test environment. Seven hours into the day I came to realize that the testing was going to run a little long. I contacted the lab manager to ensure the technician who had been working with me would be available for an extra hour or two. To my dismay I was informed that I would not be working with the same technician. He further explained that by union agreement any overtime had to be offered first to the most senior person in the department. I am sure I had a confused look because he went on to explain that this would mean offering the overtime to someone who have very limited experience with this piece of equipment and no history with my documents or procedures that the other person had spent days reviewing and preparing for. I called up my leadership to ask them how they wanted me to proceed. I was left to make the decision myself and left in one of those no-win situations. The equipment would not again be available for another 2 weeks and we needed to be done with the testing in the next day or two and on to the next stage of testing. What should have been 1-2 hours with the first technician turned into 7.5 hours with someone who needed me to do most of his work, but was entitled to the extra hours first because of union rules. I actually have years of similar stories, but one will do. In case you can’t tell I personally don’t hold labor unions in very high regard.
Ignoring my personal disdain for labor unions, the real issue is relevance. So let me ask you, with IRA and 401K personally funded retirement accounts, a variety of government agencies looking after employee rights, soaring medical insurance costs, a declining manufacturing force, are labor unions still relevant? I think that regardless of being a union member or not, everyone needs to be contributing to the medical insurance costs. I think that regardless of being a member of a collective bargaining group, everyone needs to be funding a major portion of their own retirement account. The only thing left is pay and job security. Except for teaching and public sector employees, everyone I know get a raise based on merit and job security through performance.
There was a time when labor unions were the leading edge of ensuring the best people did the best job possible and protecting them from management excesses. Now labor unions appear to be struggling to preserve the past, rather than adapting and moving into the future. Unions brag that they created the middle class, I don’t disagree…but do we still even have a middle class beyond government employees? The majority of our current middle class is college educated professionals as our economy has evolved to a service oriented economy.
You would be hard pressed to convince me that labor unions as we know them currently provide any value accept to protect their own meager and apparently parasitic leadership. The economy of the United States is no longer an isolated engine. We buy, sell and trade internationally. For all this to work we need to be competitive internationally and rethink many of our potentially dated ideas. Being relevant counts! We have retired the buggy whip; let’s look beyond the burden of labor unions before it is too late.
Agree wholeheartedly with most of what you say. I would only caution you to be careful about the pieties that "everybody knows." Specifically that is that unions were once a good thing. Funny how my own experience matches that of everyone I know who has worked for or with a union shop. Those experiences are universally negative. Now it could be the Pauline Kael effect (sometimes humorously misquoted as, "How did Nixon get elected? I don't know anybody who voted for him."), but do you notice how all the "good" that unions did is in the distant past, beyond living memory of anyone you're talking to? Most of us only know this good history from Hollywood movies and textbooks. How much of what your children read in textbooks that you have real experience with matches your actual experience?
Rightly or wrongly unions were essentially the concession that all labor consists of interchangeable or low skilled humans (the Fredrick Taylor viewpoint from the industrialists side). They operate from the concept that industry is essentially a cartel and that labor's only defense is creating a competing cartel. Notice how labor's rise and policies were consistent with anti-immigrant policies to keep the cheap unskilled labor out, so that the current more expensive unskilled labor can live better.
Collective bargaining for a closed shop consists of making labor in the affected industry a cartel with a high cost of entry (high union dues and arduous but frequently irrelevant certifications). That works the same way a cartel for capitalists work, by preventing competition and driving up costs for those requiring the services involved.
The problem with cartels is two-fold. First they require force, frequently external. As Washington said, “Government is not reason. It is not eloquence. Government is force; like fire it is a dangerous servant -- and a fearful master.” Government is usually the force used to create and continue cartels. Without government force cartels tend to have short life-spans. Same with union cartels.
The second problem is that cartels are very good at making a few people at the top very rich. They don't do much to better the condition of those not at the top of the cartels. It worked for Rockefeller and Carnegie as it works for Al Gore now. Most of the Greens are really rent seekers in Adam Smith's terms forcing the current energy industry's customers to pay for their government subsidized and government required "green" industries. Unions likewise are very good at making a few, professional union leaders very rich, but otherwise are mostly good at making sure that those who can't do enough good work to justify their pay, don't get fired.
Posted at: Mar/07/2011 : Posted by: Frank Hood