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Labor Unions: Your Tax Dollars at (Less and Less) Work

In a recent issue of The Economist, an article appears entitled: “Boeing Bullied”. As a former Boeing management member, this was of some interest to me. The article opens with what is – for The Economist, anyway – some “high drama”:

“After several disruptive and costly strikes in a part of the country where unions are strong, a company opens a new plant in a region where they are weak. The union complains to a government agency, which accuses the company of illegal “retaliation” against the union. It seeks to force the company to relocate its new plant back in the heavily unionized region. Is this France, or Venezuela? Neither; it is America. The firm in question is Boeing, an aircraft maker. The strikes occurred in Washington state, where closed-shop rules mean that if a workforce opts to unionize, all employees must join the union as a condition of employment. The new plant that America’s National Labor Relations Board (NLRB) saw as grounds to charge the firm with “retaliation” is in South Carolina, where “right-to-work” rules mean that no worker can be forced to join a union. The case has often been cited as evidence that President Barack Obama is hostile to business.”

I have mixed feelings about this. First of all, I have myself been a union member – I was a UAW employee while pouring iron at a John Deere foundry working my way through college back in the 1970s. In addition, most of my family – father, Grandfather, siblings – were blue collar types and union members. In addition, I have been a member of management in companies like John Deere, McDonnell Douglas, and Boeing in both “Right-to-Work” states like Arizona and union-immersed states such as Illinois and Missouri. I have found great advantages – and some disadvantages – in both settings. 

Back in the 1970s, when I was a production scheduler at a factory in East Moline Illinois, I remember clearly that UAW piece workers stamping out parts in the Sheet Metal Department would regularly stop producing just after mid-way through their shift, because they had “made their money for the day”. In other words, because they were producing parts at a rate which had been evaluated and set by industrial engineers, and had exceeded the amount they had to hit in order to qualify for their day’s wage, they took it easy for the balance of that shift – drinking coffee, putting away their tools, and basically killing time until they could “clock out” and go home. Why? Because even though they could have kept working and thereby increased productivity by as much as 40% in many cases, they didn’t do that because it would have gotten them into hot water with the union. The union was protecting the majority of their members by making sure that even the members who were not as skilled or not as motivated would still look as though they were doing an adequate day’s work and avoid scrutiny and/or disciplinary action. It was a socialistic if not communistic model, and I believe that it was bad for the company and failed to appropriately reward outstanding performers, but that was never the union’s objective. The union’s objective was to protect all of their members, and that is what they did. It can certainly be argued that by protecting the less productive employees and “redistributing the income / wealth” among their members in that way, the productivity and profitability of the company in total was diminished. That’s pretty clear, I think. What is not as easy to see, though, is that the result of this is a less competitive business which allows competitors – not only in “right-to-work” US states, but especially in other countries with almost no worker protections – to sell their products at lower cost, and thereby cause ALL of the US factory workers – including the most productive, skilled, and motivated employees – to lose their jobs. This is a significant contributor to the recent exodus of US manufacturing jobs from US sites. 

On the other hand, as a child raised in a blue collar household, I directly benefitted from the health care benefits, overtime pay, and other protections that were hard-won concessions resulting from strikes, negotiations, and the related financial sacrifices of union members like my father, my brother, and my grandfather. Those benefits lifted the quality of life for hundreds of thousands of us who would never have been able to afford decent health care and work our way through colleges to a better life without them. 

I have observed situations that seem similar in many respects in the area of public education in the United States. I was a public school student when teachers’ unions gained a substantive role in the early 1970s. Our local teachers’ union went out on strike a couple of times, which of course we students were pretty happy about at the time. But since then, I have watched the average standardized test scores and competitive position of American education in light of other countries drop dramatically, even as the teachers’ unions have grown stronger. In his signature legislation called “No Child Left Behind”, President Bush attempted to link the viability of public schools to their performance, using standardized test scores as an objective measure of that performance. As a business person, I am a “pay for performance” fan. I believe that those who work harder, are more innovative, and demonstrate better results on an objective basis should earn more and generally be rewarded, so this approach makes sense to me. The difficulty always lays in the details of such programs and especially in the execution and administration of them. 

To return to the Boeing story, though, the interesting part for the Economist seemed to be that the US Government had aligned itself with the union involved, and was prepared – through the National Labor Relations Board (NLRB) – to back the union in charging Boeing with “retaliation” because they elected, after many bitter labor disputes in Washington State, to build their next manufacturing site in a “Right-to-Work” state (South Carolina). The NLRB dropped their case only after one of Boeing’s unions (the International Association of Machinists (IAM) struck a lucrative deal with Boeing in Washington, and requested the NLRB to back off. As the Economist says: “With the deal done, the union no longer needed the government to hold a helpful gun to Boeing’s head…..For this sets a precedent: the federal government’s supposedly neutral representatives will threaten a company with serious harm if it doesn’t make concessions to unions. That gives firms a powerful incentive never to set foot in union-friendly states in the first place. Many will doubtless build their factories abroad, where the NLRB’s bureaucratic bruisers can’t threaten them.”

Once again, our tax dollars at work – in the hands of US Government officials who seem to have no idea what the second-order impact of their actions will be.

What do you think?

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