Monday, November 21, 2005

Unions Hurt the Economy, Society

General Motors, the world's largest automaker, announced recently that it will be cutting 30,000 jobs and closing about a dozen facilities in an effort to save $7 billion a year and return the company to profitability. Those 30,000 jobs that will be cut represent about 22% of General Motors' hourly workforce.

But the United Auto Workers union may make things difficult for GM. They of course have blasted the move as unfair:

Not surprisingly, the leadership of the United Auto Workers union blasted the move as unfair.

"We have said consistently that General Motors cannot shrink itself to prosperity. In fact, shrinking General Motors only exacerbates its problems," UAW President Ron Gettelfinger and Vice President Richard Shoemaker said in a joint statement. "Unfortunately, it is workers, their families and our communities that are being forced to suffer because of the failures of others," they added.

...

The company's contract with the United Auto Workers union essentially prevents layoffs before it expires in September 2007, as the company needs to pay union members whether or not there is a job for them.


To a small degree, the UAW is right: you can't simply shrink a company into prosperity. But what you can do is manage a company into prosperity. And some of that management involves cutting excess capacity, which is a big, costly problem for GM right now. And given the fact that the UAW contract guarantees pay for these 30,000 employees through 2007, it looks like GM has its hands tied. GM will be facing many difficulties in adjusting their payroll and excess production capacity in order to keep the company thriving.

What is the UAW doing essentially? They are telling GM what to do. They are restricting GM's ability to manage itself as a company, and contract and expand as the market demands. Of course, UAW would never have any problem with GM expanding its workforce, because that would mean more union members, more union dues, and more clout for the union itself. But whenever GM tries to cut back, the UAW fights tooth and nail. The UAW serves as the greatest impediment to GM's attempts to become profitable again. Ironically, the longer it takes GM to turn a profit, the more financial hot water the company gets in, and the hourly union jobs currently in force become even more at risk.

In my opinion, GM (and all automakers in North America) should refuse to hire union members. The UAW doesn't make cars: GM does. The UAW doesn't make its own jobs: it takes money from those who have jobs, and the UAW itself has only a small payroll for the union administrators. But if it weren’t for automakers like GM, Ford, and others, the UAW wouldn't even be able to pay its own administrators or collect union dues. The UAW's entire existence is dependent upon auto giants like GM to employ its members. And yet here we have the UAW telling GM how to run itself. Maybe GM should tell the UAW how to operate, and tell it to shut the hell up.

What does a union like the UAW do? It fights for "decent pay," for one thing, which amounts to an artificial minimum wage within a niche industry (in this case, automotive jobs), and we all know how minimum wage situations hurt society and the economy. They also fight for as many jobs as possible, which restricts the employer’s ability to turn a profit, and in the long run only endangers the job security of everyone that works for the company. Indeed, it puts a greater risk on the mere existence of the company. And to top it off, the pay raises that the UAW fights for are either nullified or reduced in effectiveness for the union members because of the mandatory monthly union dues.

A union can do some good in a monopoly job market. But this is a capitalist economy, where over a dozen different automakers have huge operations in America, and the UAW is obsolete and superfluous. There is a literal automotive job market, where auto manufacturers naturally and necessarily have to compete with each other to offer the best jobs to attract the most capable workers. The unions don't need to exist to protect anybody's wages or job security. The nature of the free and competitive job market does that automatically.

But let's look at the heart of this particular issue: the 30,000 employees that will be laid off. It will be unfortunate for these 30,000 people to receive pink slips. But why artificially protect their jobs through coercion or restrictive, long-term contracts? These 30,000 people will have plenty of options once they get laid off. They can find other jobs at other automobile manufacturers. For example, if GM is laying them off due to lower sales, yet the car market is expanding (which it is), then that means that other companies like Toyota or Honda are increasing their sales. Those other companies will need to hire more people to produce the extra cars that are being sold. These 30,000 people can get jobs at the other companies (yes, Toyota and Honda have many large facilities operating locally in North America). Or the 30,000 people could get jobs in other fields. Or they could start their own car company!

If the UAW is right, and they think they know how to operate a car company better than the people who run GM, then why don’t they organize and start their own car company? It’s a free market and nobody is going to stop them from starting up a competing automobile company. They already have a 30,000 person strong workforce to tap into, after all. I already know what a UAW representative would answer to that question: they would say that the automaking industry is fierce and that they would be squeezed out of the market before they got a chance to sell a car. In other words, they would be admitting that they wouldn't be able to run the company efficiently and competitively enough to survive. So who the hell do they think they are telling GM how to sail its own ship?

The UAW has the attitude that their members have a right to a job. That’s bullshit. Nobody has a right to a job, ever. What all those union members do have a right to, is the freedom to seek a job and be evaluated fairly for the job based on their own merits. This concept is totally foreign to the UAW, and the message is lost in the minds of its members if it ever reaches them at all. They would rather have an organization represent them and coerce a company into keeping them on the payroll rather than face the risk of market forces and merit-based employment. What a bunch of pussies.

Unions do not belong in a capitalist society. They do not belong in a competitive job market. They definitely should not be telling their members' employer how to run itself. But GM is also partly to blame for this problem, because they enable the UAW's evil behavior by agreeing to hire its members and by signing restrictive contracts. GM should stand up for itself and refuse to hire any more union members or sign any more contracts with the UAW.

Looking at the situation from a bird’s eye view, we see a competitive job market and a variety of employers. Then we see a monopoly of sorts, and that monopoly is the UAW. Is it any surprise that the UAW is the entity in the puzzle that's screwing everything up? I hate unions and want them all to disappear, but for sheer smart-ass irony value, I'd love to see a competing union sprout up and drive the UAW out of business. Wouldn't that be something!

13 comments:

Francois Tremblay said...

This may be a nitpick, but since this is an individualist blog, I must say that it's the employees that "make cars" not "GM" or "the union".

Aaron Kinney said...

Ok Ill give you that, if "employees" includes the designers, managers, officers, and laborers.

Aside from that, how did you like my union criticism? does it get the point across adequately and explain the case?

Francois Tremblay said...

"Ok Ill give you that, if "employees" includes the designers, managers, officers, and laborers."

Everyone. if someone's not needed, then he wouldn't be there.


"Aside from that, how did you like my union criticism? does it get the point across adequately and explain the case?"

Yes. Although I think most of these problems would be solved if unions were non-coercive.

Aaron Kinney said...

Hehe, I think that if unions were non coercive then they wouldnt even exist ;)

Francois Tremblay said...

No, I don't agree at all. I think that in areas where work is not too differentiated, there is a strong interest in having unions. In other areas, there isn't, and most of the time there's no unions in those araes either. I think coercive unions just takes self-interest and turns it into organizational irresponsibility and stupidity.

LBF (Left-Brain Female) said...

Yeah! I knew someone could articulate this one better than I - Bravo! Check out T. F. Stern's Rantings where I made an extensive comment -

http://tfsternsrantings.blogspot.com/2005/11/is-this-beginning-of-end.html

Ryan said...

I hate the UAW, about as much as I hate pilot's unions.

Stephen said...

I would like you to know that I actually used your paper in a paper that I wrote about unions. It was a big help, thank you very much. And don't worry, credit is given to you where it is due.

Anonymous said...

I liked the article very much. I'm using it as a cited source for a paper that I'm currently writing. I was a member of the UAW at one point in time and saw things that will forever leave a negative image of the UAW in my mind.

popin said...

It seems to be that libertarianism is being confused with pro-corporatism, libertarianism would only be objecting to UAW so far as there is any force for workers to join it, (and many workers would still join voluntarily, to increase their bargaining power - firing everybody at once would be impractical). Of course, once any entity becomes large the other parties lose bargaining power, but this precisely what antitrust people feel about large companies which use their market share to kill other fledgling companies.

TATE said...

Gees you make me sick. If it wasn't for unions fighting for the blue collar workers rights you wouldn't even be making the money you make now. Do you think if all union went out of business your employer would keep paying you and giving you all the benifits you get? BULLSHIT on that. Your employer wouldn't have anyone making or setting a standard for pay or work safety or pensions or nothing. It is becuse of unions that we have a safer working environment and a 40 hour work week for non college blue colar worker who built this damn country you act like you love so much. All of the major non union companies keep a standard of higher pay and a great package deal for their workers because they are unions out there. Without US the companies like HONDA< KIA < GM< FORD and hundreds like them would pay you like a school boy and when it comes to being fair about the safety of you job you wouldn't have it. All of you reading this should be greatful they are unions even though your not in one. Unions have always raised the standard of pay for everyone, yes even the guy that wrote this piece. I know I repeat myself allot but sometimes that is what it takes. It boils down to this in the simple form. Without the UNIONS we would all be slaves to our employers. EVEN YOU.....

Anonymous said...

It is funny reading a self-professed libertarian write something completely un-libertarian or 'corporate libertarian' for the derogatory reference. This entire article fails to identify the real problem and that is power inequality. Unions exist for a very good reason (and they are organic organisations, not some government creation, you should read the history of the labour movement) and that is collective bargaining. When you have one employer (the corporation) with 10,000 employees BUT a pool of millions of potential employees out there, do you really think a mutual contract can be worked out that even remotely addresses the needs of both parties? Unions are really a corporation in themselves, so a collective bargaining agreement is analogous to the contract that might exist between two corporations doing business together. You know, economies of scale (since labour is usually considered a business input, a commodity). That's all there is to it. That is why they exist, in order to balance power, and they are completely compatible with libertarianism since they voluntarily came about by workers grouping together. The evolution of the labour movement shouldn't come as a surprise and the choice being either labour unions negotiating a fair deal on level with the employer (something an individual cannot do) or pent-up rage leading to French Revolution 2.0 I know which is better for both business and society. There is also nothing socialist about them, although due to their structure they are often hotbeds of left-wing economic advocacy; they are simply serving the market in labour to maximise the return on the value of one's labour (this may sound socialistic, but it isn't, it is a trade: money for labour). The 'corporate libertarian' however, is really only concerned about wealth, economics, their own money not getting taxed, and all that feel-good warm stuff. All the other issues (social issues for example) are secondary or not important at all.

Anonymous said...

‎"Unions: the people who brought you the weekend. And capped working hours. And employment rights and protections. And fair wages. And pensions. And ended child labour. What a bunch of greedy bastards."