Tuesday, October 6, 2009

A Case Aginst Unions

By Patrick Coughlin

When the first labor unions were established in the United States, working conditions in nearly all manufacturing facilities were abdominal at best. Factory owners exploited employees, forcing them to work 14+ hour work days without a break in the worst of conditions. Mistreatment of employees nearly overshadowed the benefits the Industrial Revolution brought to the country. In one of the darkest hours of the American worker, labor unions were founded and provided employees with benefits such as an eight hour work days and a fair living wage.

However, labor unions in this country have transformed from champions of worker’s rights to powerful juggernauts that have unduly increased their influence and have stunted economic growth in the process. On average, General Motors must pay $70 in wages and benefits to each current worker per hour (this figure adds together the cost of active and retired workers, divided by the number of hours each current worker is on the clock). This translates to a higher cost of production—approximately $1,200 more—for each vehicle General Motors rolls off the assembly line (The Heritage Foundation). Once again, this figure includes compensation due to both active and retired workers.

To stay competitive with their Japanese counterparts, American car companies need to produce cars with comparable prices. In order to do so, some features such as power windows/door locks and keyless entry must be omitted as standard on certain models. Finally, during the restructuring of GM and Chrysler, the United Auto Workers gained an ownership stake of 17.5% and 65%, respectively. The argument that companies do better when the workers have a stake in its success is only true when the workers are the actual stock holders. In this case, the stock holders are a nightmarish bureaucratic body with only one goal: self-aggrandizement. The same can be held true for the government’s involvement. Unless the American taxpayer sees a dividend check in the mail, he or she does not benefit from having an ownership stake in a failing company.

Labor unions also have a stranglehold on American politics as they traditionally vote in blocs. It should be of no surprise that after receiving heavy union support in this past election cycle, President Obama signed off on a plan to restructure GM and Chrysler which allowed the UAW to take a large ownership stake in both (see above).

This is just a twenty-first century form of political patronage. Why is the public, then, not outraged by this, you may ask? The answer lies in a comment made by President Obama’s Chief of Staff, Rahm Emanuel: “a crisis is a terrible thing to waste.” The Obama administration is seemingly using the current economic situation as an excuse to advance its supporters by dressing questionable actions as “beneficial” in these difficult times. This is clear government overreach of the “necessary and proper” clause of Article I of the Constitution.

A case for labor union reform will soon follow.


Anonymous said...

There is no doubt that unions are hurting not just the very companies which provide them with the jobs which put food on the table but other workers as well. When unions successfully force companies to pay them exorbitant wages and benefits, or when government sets a minimum wage, the fact is that the company then can only hire a certain amount of workers which is less than their hiring capacity at lower rates. The price we may for unions and minimum wages is less jobs, more unemployment and more struggling companies.

DSKohn said...

I disagree that it was an overreach of the necessary and proper clause. The autos may not be essential for the functioning of the American economy but in an emergency they represent the most easily available heavy manufacturing base if there is a war. In the Second World War it was the Big Three's factories that provided much of our armament.

When agriculture was no longer the mainstay of the American economy the government was forced to find a way for us to keep producing at least some of our own food. The same is going to have to happen for industry as we move to a service economy.

That being said, the Big Three would most likely be able to compete if we had a President that was willing to take on the unions. Rick Wagoner's management of GM was terrible because under George Bush he had a President that would have most likely taken his side against the unions if he pushed them to make cuts. Giving the unions a piece of GM was definitely a bad solution.

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