Are You For Or Against Labor Unions?

Workers On StrikeHostess Brands is shutting down and 18,500 of its workers are temporarily losing their jobs given the Bakers Union of 6,700 workers went on strike. It’s safe to say thousands of Hostess employees are pissed off they will no longer get a paycheck until the owners find a buyer. Even then, there is no guarantee employees will still keep their jobs.

Walmart workers are planning a huge strike on Black Friday because they are complaining about low wages, poor working conditions, and bad benefits. If workers go on strike during the biggest shopping day of the year, there will undoubtedly be a loss of profits which will potentially lead to a drop in share price. In this scenario, nobody wins, especially consumers who are looking for deals.

Going on strike is an American tradition. We strike all the time here in San Francisco against everything and anything. It feels good to chant for your rights, especially if you can get paid to protest! Let’s talk about the pros and cons of labor unions.

ARGUMENTS FOR LABOR UNIONS

* Higher survival rate. With competition as cutthroat as ever thanks to globalization, companies are finding every way possible to cut down expenses. Labor is often the highest cost associated with running a business. By teaming up in force, each worker has a higher chance of survival as it’s harder to get singled out. Think of a shark and a school of fish analogy. Workers who feel threatened due to age, sex, or orientation may also survive longer under a labor union.

* Higher wages and benefits. A labor union’s bargaining power is much greater than the bargaining power of a single individual. This is especially true for younger employees and employees who are below average in performance. Mess with one, and you mess with all carries weight. The labor union has a team of wage specialists who actively do market salary research for the group to ensure everyone is getting paid properly.

Duty to protect the weak. Some people are just naturally stronger, better, and smarter than others. A labor union allows for such gifted individuals to protect the less fortunate. If you believe it is the responsibility of the rich to take care of the most destitute, you are more inclined to believe in a labor union. Even the strong fall on hard times. Everybody needs a helping hand at some point.

ARGUMENTS AGAINST LABOR UNIONS

* Makes our companies less competitive. If a company has to pay artificially higher wages, then a company’s bottom line gets impacted. This is bad for management, shareholders, and anybody who investments in stocks or mutual funds. A weak company means less capital to hire and expand.

* May foster complacency. If you have a labor union always watching your back, you might stop studying after work to advance your knowledge and skills. With a backstop, you might forget about building multiple income streams. A labor union might demotivate you to find a new job, even if you are well aware your company is a sinking ship.

* Might not agree with the labor union. Seldom do we always agree on everything. If you were to ask the 6,700 member Baker Union at Hostess Brands to rewind time and not strike, maybe they would have been softer on their demands. Once you’re in the labor union, you can’t do anything outside the labor union for fear of retribution. For example, if you are caught working non-union wage side jobs as a plumber, you will be fined, booted, and ostracized.

THE GREEN GRASS GROWS

After about the 10th year of work, I began dreaming of joining a labor union. The finance industry is notoriously volatile and people get blown up during each economic downturn. A labor union could help minimize my risk of unemployment and allow me to rest easier. I was tired.

Unfortunately, I was never given the opportunity. I had to scratch, claw, and fend with the best of them to achieve financial security. I knew nobody was going to watch my back, so I had to watch my own. I didn’t even trust the government with its Social Security promises so I saved like a mad man every year since college.

If I was part of a labor union, I might still be happily working at my day job while working on my online endeavors at night. But, I’m happy now being free, so what’s the difference?

Readers, what are the pros and cons of a labor union in your opinion? Have you ever wished to join one? How do we know which one is better if we’ve never experienced both? Is a 100% pay cut better than a 25% pay cut given unemployment benefits?

Regards,

Sam

How To Make Money Quitting Your Job

Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship.

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Comments

  1. Matt says

    Unions have certainly found their way back into the headlines. But, I think in the Hostess case they are somewhat of a scapegoat. Here is an interesting article that dissects Hostess’ finances, and points to a different cause. (this isn’t so easy, as Hostess is a private company, at the moment. But bankruptcy brings facts to light)

    I work in the automotive industry, and I can endorse both the pros and cons. There are a multitude of stories during the formation of the UAW about companies’ disregard for their workers. If you look at the controversies surrounding Foxconn this year in China, you see some of the same thing. (in a nominally communist country!!)

    But by the 1990’s, (and certainly much before) the UAW in my mind was a net negative. There was clearly the promotion of “useless work.” That is, people who still had a job but provided basically no business value. This peaked with the concept of the jobs bank, where people were paid in full without performing any labor. (actually, the companies made up the large gap between unemployment payments and their regular wages) The companies tried to make it less comfortable by requiring people to report to a room, rather than let them sit at home or do whatever–it was a paid detention period or study hall! This kind of inward-facing (il)logic showed how far from global competition the industry was. The best example of a local solution to the issue was to allow people on the jobs bank to do volunteer work, so that at least it was a positive for the community, albeit still at shareholders’ expense.

    I also think the wages were symptomatic of how out-of-whack things were. While autoworkers are expressed as “blue collar,” in reality they were the best-paying job an English major could get. Where else could you get more than $40k per year without any specialized, technical training? I personally know many autoworkers who were caught by surprise when they guided their kids to try to get in the plant straight out of high school, just like they did and maybe their own parents did, only to find that this was no longer adequate. This was not due to any specific knowledge, but only because a college degree showed some kind of effort beyond the required minimum.

    I do think the UAW has largely woken up now. Bankruptcy will do that to you. I think neither the Management of the Big 3 nor the UAW had ever imagined that the companies could go bankrupt. Today is in no way the heydey of the 80’s and 90’s, but even for new workers auto jobs are still a lot better than retail, if you don’t have the ability or desire for more specialized training in college. Contrast that to the CAW, who sounded like they were in the 1990’s still with their initial contract demands this year. Or IG Metall, who is resisting plant closures in Europe when plant utilization is only at 60%.

    • says

      Matt, thanks for your perspective and bringing us back through history. I’m curious to know if you are happy being in the automotive industry union? Do they, or does the automotive company you work for give you confidence of retiring at your desired age with enough money?

      A lot of us non-union, no public sector employees DREAM of one day joining the public sector or union to get benefits. The idea is: make as much money as possible in the private sector, and work the second half of your career with the public sector or a union job to get benefits for the rest of your life once retied.

      BTW, your link to the post disappeared for some reason.

      • Eric Shun says

        In the 1980s, the federal PATCO air traffic controllers violated their own labor agreement and “striked” themselves out of their 6-figure jobs. In the 1990s, Eastern Airline machinists “striked” themselves and all other Eastern employees out of their jobs.

        It seems to me that the unions completely failed their members in these cases.

        • Eric Shun says

          I think if someone didn’t want his job, he’d simply find another one and
          quit, or better yet, “negotiate is own layoff & severance package.”

          In the PATCO case, the fired Air Traffic Controllers have been trying to
          get their jobs back for over 20 years.

          In the Eastern Airlines case, every few years, the Miami press runs
          news pieces on the former employees, and all of them expressed
          a wish to be back at Eastern.

      • Eric Shun says

        “and work the second half of your career with the public sector or a union job to get benefits for the rest of your life once retired.”

        Those retiree benefits are largely going away now, especially for new hires. Retiree health benefits (often just a cash subsidy) disappear at age 65 when the retiree is eligible for Medicare. Defined benefit pension plans are being replaced w/ defined contribution plans. Nonetheless, the level of such benefits are based on years of service. A ten-year second career wouldn’t accrue much in retiree benefits anyway. In fact, ten years is a common vesting period.

  2. says

    In the example of Hostess, I wonder what the other 11,500 workers who are not part of the Bakers Union are thinking right about now. They are blaming the shutdown on the fact that they couldn’t reach an agreement, but those other workers were not directly part of the negotiations (and subsequent breakdown) yet they are adversely affected.

    I’ve seen many stories where the members and leaders of this particular union are justifying their stance by pointing out that they’ve already taken concessions on other occasions. The issue I have with this is that the company is still not any better, so I don’t think that asking again is unreasonable. If Hostess were in the black yet coming to the union pleading for pay cuts and increased benefit contributions, then they would likely get sympathy. But, the fact is that the company is still losing, so the concessions (in my mind) aren’t unreasonable.

    The flip side of that is that upper management has been getting pay raises and that they also dictate the strategy that has led to the continued failure. If they are in fact taking more compensation, then that is deplorable, but at the same time, even if they did roll back those increases, the bottom line difference would not be changed so much that they wouldn’t be looking for concessions anyways.

    Also, pointing out that they’ve been asked for concessions before is not an argument in my mind. I’m not in a union and by virtue of the fact that I’ve had three years without bonuses or pay raises, I’ve had health care premiums double in that time, and we had our company match to the 401(k) removed, I’d equate that to the same type of ‘concessions’ and that’s certainly qualified as ‘multiple’. Yet my company would be pretty unsympathetic were I to approach them saying ‘Well, I’ve given multiple concessions over the years, so time to pay up.’

    Bottom line, I put more blame on the union in this particular instance. They played their cards and the company called their bluff.

      • Eric Shun says

        During bankruptcy proceedings, key managers always get very large retention bonuses if they agree to remain for the duration of the bankruptcy or work-out proceedings.

        I suspect that upper management did receive nice bonuses during the 8 years, for the same largely the reason – to retain them during such difficult times; an plus to justify one another’s bonus.

      • Sally Newton says

        Wrong our management get not only a raise but as a non-profit they get 100,000. Christmas bonuses. If it weren’t for our union, I’d be making 8.00 an hour so they could get even larger BONUSES. Our company has people working on part time doing the same job as I do for 8.00 an hour with no paid holidays,no insurance(they offer cobra). And you can take the job or not, some poorer sucker out there will work for those peanuts. A BIG YES FOR UNIONS

  3. says

    Wow that was a long comment.

    Great article Sam. You certainly know how to push buttons and write about controversial topics. I must say that I’m not a big fan of unions. I believe they had their place years ago when workers were actually abused, didn’t get paid crap, and when there wasn’t OSHA and all of the safety regulations/requirements that we have now.

    Unions do breed complacency; I worked in the construction field for years and saw first-hand how the old members don’t do a thing. They sit on their hands all day, work the minimum that they can, and know they’re protected. It’s ridiculous.

    Furthermore, the competitiveness is a big issue. The more we pay these people the more our goods are and the harder it is to compete on the global scale.

      • says

        WSL,

        Building on the OSHA and safety regulations – we also didn’t have all the (proper) anti-discrimination laws that we have now. If someone is older and they are terrible at their job they should get fired not protected…if it is due to just age then they can sue under the proper State and Federal statutes

  4. says

    As a non-union truck driver, I’ve seen unions do all kinds of harm in recent years to trucking companies. Including driving a few completely out of business. They just couldn’t afford to keep paying higher wages while still paying out high pensions that were promised to retirees.

    As for the Hostess thing, I find comical irony in the situation. When I think of democrats, I think of welfare recipients and union workers. I often see welfare recipients using their food stamps to buy junk food, like Twinkies, from convenience stores. Now all these democratic voting welfare people will no longer be able to buy Twinkies because of the stupidity of their co-democratic cohorts in the bakers union! Haha!

      • says

        The keyword there being “growth.” (Without reading the article) I suspect this is because food stamp usage was already densely saturated in democratic voting counties. Well meaning people in the republican voting counties, who accounted for all this growth, likely had little other choice than to go on food stamps thanks to economic conditions brought on by democratic policies and government regulations (arguably).

        • says

          Actually the majority of the highest-usage states for food stamps vote republican. http://blogs.wsj.com/economics/2011/05/03/about-1-in-7-americans-receive-food-stamps/ I’m an independent, so I simply find it amazing that so many people vote not in their best interest (voting to reduce the evil government handouts to the poor when 1 in 5 in their state are on food stamps) and instead tend to vote asperationally (when I’m off food stamps and my business takes off, then I’ll be glad I voted for all those high-income tax breaks!)

          Happens both ways. People don’t vote in their best interest. Applies to unions too. Many unions when faced with cuts in either people or benefits vote to save the highest up the pyramid, and vote to get rid of more people or benefits of the low seniority folks because that way “when they get there” they’ll be protected.

    • says

      Welfare certainly has ballooned over the past 4 years. However, if we are bothered by it, shouldn’t we find a way to join them instead of be against them?

      What was the cost of being a union truck driver e.g. dues? I guess you had a choice, which is more than some can say who are forced to join yeah?

  5. JayCeezy says

    I’m against unions.

    I do some work for Public Agencies, who are unionized at the professional level (engineers at $150K top pay) right up through their management ($330K/yr top) who have a favored-nations status to get at least everything granted to the workers. With very few exceptions, these people would not make the money or hold the positions they do, if they were in the private sector. The reason I hold that opinion, is I can see they are not good performers and do not get results from their work.

    There was a time when unions were valuable, and they brought advancement to the workplace we all enjoy today, like safety, vacation, and non-discrimination. But they have gone way past the tipping point, and have far over-matched ineffective and politicized management. Who pays the consequences? Taxpayers and ratepayers, who wind up paying inflated utility bills for feel-good wind and solar projects that fail. Teachers who work 9 months a year and retire out a 55 with lifetime healthcare. FAA air traffic controllers who retire at 50 (yes, you read that right). And the biggest consequence is a much larger percentage of goldbricking sinecures, who cannot be disciplined or removed without an exhorbitant legal and political cost.

    • says

      Man, but to make $150-330K a year and achieve special nation status would be awesome no? If we ask those people to comment here, wouldn’t they all be very PRO union?

      Wouldn’t we all want to work 9 months a year and retire at 55 w/ lifetime healthcare? I would… but I guess it would depend how much they paid me…. I wouldn’t mind teachers getting paid more since they are education the future of our nation. But, with more pay, comes more performance of course.

  6. Investor Junkie says

    If you are a slacker or not good at anything a union is perfect for you. Unions are the socialism utopia everyone hopes for, but is never realized. If it just was implemented better life would be perfect… Then economics and reality sets in.

    How many union members did it take to deliver the cakes and bread? (mind you each were in separate trucks) Yea a company like this can compete against Little Debbie.

    I read that the arbitrage for Hostess the Baker’s union leader didn’t even show up… How is that for shooting yourself in the foot. Not once, but twice!

    • says

      Is Little Debbie a public company? If so, their stock must be surging.

      If that’s the case about the union leader not showing up, it’s clearly b/c he and the union didn’t want their jobs, and unemployment benefits is better. Makes sense to me.

  7. Weston says

    I think in some cases all 3 of your pros are extremely flawed logically when you take a closer look. All 3 of those pros were extremely valid before globalization, but in fact often end up with the opposite result in today’s world.

    For example. I spent 6 years working in a highly unionized industry in a heavily Union controlled state (Textile factory in New Jersey) Yes, short term we got higher wages and benefits. But as the costs of those wages and benefits continued to grow the only way the companies could survive was to move to either another state or another country. My employer just shut down and I (along with 350 other people) ended up out of work which quickly wiped out any gains in income we had while employed.

    Most of my employers competitors moved to the Carolinas to open non-unionized plants. As the unions began to make inroads there, most of them just shut down US operations completely and outsourced to Asia. That was the only way they could compete in a global market and that is why the bustling textile industry in the Northeast is only a sad, distant memory.

    • says

      Isn’t it a matter of time where almost all US based textile businesses shutdown? Therefore, the 6 years you were at a union helped artificially protect and increase your income.

      Without the Union, perhaps the company would have shutdown in 3 years or moved operations no? Do you have an example of a non-union competitor who is still alive today or for years after your company shut down?

      • Weston says

        Isn’t it a matter of time where almost all US based textile businesses shutdown?

        A. Possibly. That’s above my pay grade. I’m not exactly qualified to be an economist
        and I left the textile industry after the closure/layoffs I mentioned which
        occurred approx 35 years ago.

        Therefore, the 6 years you were at a union helped artificially protect and increase your income.

        A. Yes that is true if you focus on only those 6 years. That was my point.
        It kept my income artificially high for 6 years while also making it impossible for
        my employer to stay open and sustain our jobs at those wages and benefits.
        The artificial increase in wages we enjoyed were wiped out within a few months
        of us being employed.

        Without the Union, perhaps the company would have shutdown in 3 years or moved operations no?

        A. Here is one I can answer conclusively. No is right. In fact I would
        pronounce it NO! That company probably could have lasted years if they were
        paying non-union wages. When they tried to renegotiate the Union contract
        after a cyclical downturn in business they (at the Union’s insistence) opened up
        their books to the Union leadership and accountants. According to the union CPA
        firm labor costs were what was making them non-competitive with their
        competitors that had already moved down south to non-union states.

        Do you have an example of a non-union competitor who is still alive today or for years after your company shut down?

        A. I’ve been out of the industry for 35 years or so.
        I can tell you that my uncle eventually became an executive for one of the
        company’s competitors. They still are very much in business and very healthy.
        All of their manufacturing and processing is done overseas and that has been
        that way for about a quarter century.

        • says

          Thanks for the answers Weston. So we can conclude from this experience that unions are net positive for union participants in denying industries due to longer survival and artificially higher wages. That Unions allow participants to get as much as they can before the impending closer in capital intensive businesses.

          With big gov’t, has America not become a nation of what can the country do for me, rather than what we can do for our country? Big government is here to stay. Thoughts of Going John Galt and protesting government waste?

          BTW, I have an economist background, so any waste is disturbing to me.

  8. SmithR says

    I am part of a union, and there two things that are most important to me. Whether or not I will get a raise, and what I have to pay for my health insurance. Our contracts are for four years. Therefore, I know what I will be making and what I need to pay. My pay raises have been 2% each year, but health care has gone up, so I really haven’t made anymore money. But this way, I know how to plan and budget to accomodate it.

    • says

      Thanks for your thoughts. Better to have a 2% pay increase a year than a total annihilation of income like many folks in the private sector experienced in 2009-2010! Health insurance has gone up for the private sector very drastically as well fyi. Nobody is immune.

      • says

        Very true!

        At my old company I was part of a union and that was great, particularly all the allowances and benefits for shift workers (I worked all kinds of crazy hours). That said, it has less and less bargaining power nowadays from what I can see. I do wonder what the future holds for unions in general.

    • lurker says

      you may not have had a raise but take a look at top management where you work….we need unions to try and spread the wealth or the greedy white guys at the top will take it all, as they have been for the past 30 years….CEOs making 400 times the average worker???? are you shitting me? how can anyone on earth rationalize or justify that ratio of value??? I have never met a ceo worth 400 times the best secretary in the place…..never. ever. ever. Unions are far from perfect but what other weapons to the rank and file workers have??? seems like nothing.

      • says

        Greedy white guys?! Ugh your comment literally made me sick.

        What weapons do you have? Vote with your wallet. If you or anyone in your family bought anything at walmart in the past you are not helping your labor-brethren.

  9. says

    I used to be management before I joined a union. My former career placed me on the owner side of the table. Now I find myself in a union, albeit a professional union. All the members are teachers. I think it is necessary with the school district because they would just steam roll over the teachers. Unfortunately, representation comes with a lot of negatives. I never feel as though they represent me! I have only had one raise in 12 years, although I have had increases. The salary table has not kept up with inflation at all. It is great for the liberal arts grads, but very low for tech, math and science majors. Unions are similar to mutual funds! NO highs or lows, but instead moderate performance. Really productive people do not want to be in a union.

      • says

        I was referring to the fact that the members were professionals (college grads) vs. a trade union. My pay was cut very year through furlough days. The union gave up days to help reduce the budget shortfall. In good times, we should have those days restored. Prop 30 allow the school board to restore the 10 furlough days we would have lost this year. It amounts to a 5% reduction. I wonder if the union thinks about these issues.

        • says

          Given only 30% of workers have college degrees, would it not be logical to conclude most union workers don’t have college degrees? Shouldn’t make a difference IMO regarding education level.

          Not having to work is a benefit for many, so I’m not sure if that’s a reduction since there’s no work for pay.

  10. JimL says

    First of all, I don’t think public workers should have unions. They work for the taxpayers and not private organizations. Additionally, most states are struggling to get by based on the overly generous pension programs dictated by the unions to politicians as they throw around their political weight. Look at the price that all of us taxpayers are burdened with as a result.

    As for private companies, employees should have the right to belong to the unions, but not forced to. Most have no choice and end up losing a significant amount of money to mandatory union dues.

    • says

      This would be my point exactly. Public unions are a ridiculous scam against the tax payers. If a union negotiates with the state, and then uses the union dues to elect representatives, the joke is on those paying the money (i.e. taxpayers).

      As for private unions, I wouldn’t want to be a part of one, because it would annoy the heck out of me watching one lazy person do nothing while I worked my rear off and yet received less due to the length of my tenure.

      That being said, I’m not against unions. People should be allowed to join a union – but never forced to. In the end though, I think unions eventually do more harm then good to the overall welfare of the companies employees – unless they are able to realistically negotiate with the ownership on the proportion of company funds that should be used on the union workforce. This is probably different from union to union.

  11. says

    Unions were first developed in the interest of employees and I am all for collective bargaining, but at the same time if a company is too restricted in how it can be organized or cut costs it loses a competitive advantage.

    I am very torn, I think there is place for unions; however I also think that there needs to be more flexibility in how unions, workers and companies interact especially in bankruptcy. When a company is very profitable the unions protect the rights of employees and collective bargaining is needed. When companies are on their last leg, unions often are the last nail in the coffin.

    There is no right or wrong answer to this one, it can be argued either way depending on your perspective.

  12. says

    I agree with the purpose labor unions once served, but I don’t agree with them all-out. I think in many industries and companies, labor unions serve a good purpose because management does not treat workers respectfully. My father-in-law was an electrician for the local utility, and the union really did help protect him from outrageous working conditions, even today.

    However, in retail, I think there are less needs for labor unions, but once again, it comes back to the company and their management. Wal-Mart has a track record of violations against employees, so maybe that is an instance where a union could help?

    The trouble is that employees used to speak with their feet and quit if a workplace was terrible. Now, with the poor job market, that isn’t easy to do, and so workers end up sucking it up instead of moving on. I think some companies take advantage of that.

    • says

      True, although the Internet has made it easier than ever for anybody to start a side income stream.

      I understand the growing dependency on companies and government. It gets addicting. But we have more opportunists now that at any time ever before.

  13. Darwin's Money says

    Present day unions are a scourge on society. They suck the life out of any business, service or governmental organization. They rely solely on extortion (strike) and political coercion (they know they own Democrats and in turn, Democrats always enact union-friendly legislation and contracts). At least in the private sector, bankruptcies like the Hostess type will generally weed out the unions that are sucking the life out of a company, but in the public sector we’re stuck with them. In many municipalities, you can work 25 years and collect a full pension until you die. That means essentially, that you are paid more of your life for NOT working than when you were. That is complete insanity. And the taxpayers have to pick up the tab.

    You talk about “strong” and “weak”? Don’t mince words. It’s called good performers and shitty performers. With some tenure, the lousiest employees are allowed to stay around forever while younger (often better) are laid off first when a layoff is unavoidable. Look at all the local school districts that had to lay off the young best and brightest making half as much as a nasty crusty old drone waiting around to collect their pension. That’s not to generalize and say experience shouldn’t be rewarded. But I believe in a meritocracy, not union protection where it’s DEFINITELY not about the kids.

    Greece is finally learning what happens when you give away the house and too many people are takers rather than givers. In the US, it may take another several years, but unless we shed unions, pension obligations that can’t possibly be predicted 50 years out and the politicians that are involved in the corrupt cycle, we will all pay.

    • says

      When you say unions sucking the life out of a governmental organization, isn’t that a double negative, which therefore equals a positive?

      Maybe older folks, and folks who are a part of a union are much more for the union than those who aren’t part of a union.

      • lurker says

        firefighters, cops, teachers, garbage men and women are not lazy…let the assholes who attack them try these jobs and then comment. perhaps the millionaire politicians should work for free as most of their money comes from elsewhere anyway….

  14. Travis says

    Whenever I think of unions, I think of union representatives making more than those they are representing. My mom worked in a grocery store as part of the UFCW when I was growing up in California.

    In the early 2000’s (2003?) the union leaders forced a strike even though my mom and her co-workers didn’t want to strike. They were happy with the health plans and pay they had, but the union leaders kept pushing for more. So, she was forced to stand in a picket line instead of being allowed to work.

    One day her union rep came to visit them and he pulled up in his brand new 500-series BMW. My mom and the other workers were driving small compact cars that were 5+ years old (we had a Plymouth Sundance). My mom told me she asked him how he could afford a car like that. His eyes got as big as saucers and he did a lot of “um, uhs” while trying to figure out how to explain that he was making more money from union dues than they made as the workers paying the union dues. The other workers started chiming in and they all started yelling at the union rep, who quickly got back in his BMW and left.

    There was once a time where unions were needed. But, now unions are just another group of moochers with their hands out. They want their union dues so the union leaders and reps don’t need to find a real job.

    • says

      Oh man, great story! Reminds me why I drive a $5,000 car and try and keep as low profile as possible.

      Is there a way for folks to apply to be Union Leaders in order to make the big bucks? I wonder if there are classes or majors. Hmmm. Can’t beat em, join em and really join em!

  15. says

    Unions seem to love capital-intensive businesses. They thrive on these, and ultimately drive them elsewhere. When you think about it, the United States is the best place to put a factory that will ultimately sell goods to an American consumer. Interest rates are low and there’s no currency risk, energy is cheap and plentiful, shipping costs are minimized, and our politicians still have a little more decency than those in emerging markets.

    I can’t help but to think that unions, or at least the threat of unions, are one of the biggest reasons why we’re losing capital-intensive businesses to foreign lands.

    Labor cost visibility in a business with entrenched labor unions is nonexistent. There really isn’t any way to know what the union will demand next year or 20 years from now. When you have to make the decision to invest in a factory that’s going to be around for 50 years, it’s not too comforting to know that the economics of labor costs could shift dramatically within that period. So what do we do? We ship products halfway around the planet with fossil fuels we’re quickly running out of to arbitrage labor cost risk. That’s the definition of insanity.

    Weston’s comment basically alludes to this point. There are plenty of asset heavy niche industries that use entirely American labor. Diaper manufacturing is one. The unions have spared it and thousands of Americans are enjoying an honest living because of it.

    So, short answer: no – I’m no fan of unions.

    • says

      I think the loss of capital-intensive businesses to foreigners is an inevitability. Therefore, unions can either serve to prolong or quicken the inevitability. So far, I think they’ve served to elongate life, which is a net positive for employees. All good things come to an end though.

      • No Name Guy says

        Actually Sam, you’re mistaken that unions prolong life of capital intensive operations in the US. I work at one (Aerospace) with very high barriers to entry. The Machinists union effectively shot themselves in the foot by constant strikes that disrupted deliveries to the Customer. The companies response: Open a factory in a right to work state (South Carolina) to insure uninterrupted deliveries. Why take that extreme measure? Our customers were complaining that we were becoming an unreliable supplier and were increasingly going to our only (current) main competitor.

        Currently the Engineers Union (of which I am a member) is in negotiations. The union position is absolutely bat shit insane. The going in position was wanting 7% a year for 4 years. While in the short term, that would certainly be a positive, I’m thinking 10, 15, 20 years down the road. What happens then? While the barriers to entry in this business are very high, they aren’t insurmountable. Bombardier in Canada, Embraer in Brazil, COMAC in China are all entering the large commercial aircraft market that is currently dominated by the duopoly of the 737 series and A320 series. Why can, or why DARE they try to enter such a high risk, capital intensive market? Because they see the 2 current players as offering a too high priced product. The best LONG TERM strategy is to keep the competitors out of the business in the first place. Do that by keeping the returns for the incumbents high, but not so high as to tempt some one new from trying their hand at it, since once in, they won’t quit easily and in the process of will drag you down (look at how Lockheed and Mac D killed each other with the tri jets of the 70’s for a classic example).

        Where do those high prices come from? One aspect is too high of a cost structure – wages, benefits, feather bedding, artificial limits on productivity improvements, inability to ditch the bottom 5% of performers who clearly aren’t productive enough to earn the wage, and all the rest.

        Mind you, these aerospace jobs are high skill positions that will command high wages and benefits that correspond with the high productivity – but there are wages that correspond with productivity and wages way out of line with productivity (e.g. the demand for 4 years @ 7% year). The engineers union is out for NOW, NOW, NOW and to heck with tomorrow. Sadly, that’s exactly what killed Detroit and the auto makers.

        Oh, and to the earlier comment on Eastern Airlines: The motto of the pilots, who’s strike is what finally killed them (if memory serves) was “full pay to the last day”. Clearly it was a now, now, now mindset with a slogan like that.

        On a personal note: My biggest problem with my union is the “one size fits all” mind set. They’re all about the standard, consumerist way of doing things. Pension at 65 in lieu of an increased 401k that I can 72(t) when I hit ER / FI in the 40’s or early 50’s – in essence it’s a set of “golden hand cuffs” to keep you working until 65. First dollar pay pre-paid health maintenance (what they call “insurance”) – thanks, but no, that doesn’t work for me – I’m healthy, take care of myself and want true insurance with a 5k deductible and then to pocket the cash money price difference – but no, that’s not an option. Company paid life insurance – thanks for nothing – some thing that actually COSTS me money (I have to pay income tax on it) – I don’t have a spouse or kids, and no option to decline the so called benefit and pocket the cash value. The arrogance of the union to think they know whats right for the members is stunning. And don’t dare to question them – as is typical, violence for those that dare to question the party line is common – less so in my case (but still there) , more so in the trade unions. Thugs with slide rules…….

        I look forward to the day when I punch out – ER / FI will be sweet.

        • says

          True, and I see your points. However, in the long run, we are all dead as one famous economist once said.

          Hence, isn’t it about ME, ME, ME in the short-run to get all you can, while you can? This is why America voted for big government, so we can have all the goodies now, and make our children pay later. And in the same light, isn’t it logical to want to be a part of the union, especially if you are tired or an underperformer so that you can get paid above market rate and survive?

          Financial independence is great and all (check out the post if you haven’t read it), but perhaps being in a Union is the 2nd best thing!

          Go USA!

  16. Tony says

    Sam, you are not hitting on what labor unions’ main charge was (and still should be). Please keep in mind that not all unions are the same; I deal with the musicians union and the teacher’s union, 2 completely different entities with different goals and separate strengths/weaknesses.

    When you talk about a trade union, you are talking about businesses who, before OSHA and other acts that protected workers, companies literally killed employees who worked with toxins daily. Considering hostess is creating poisonous crap out of chemicals for children to consume, they fall into trade union category. I’ll bet before the workers were unionized, they had to work under horrible circumstances.

    I don’t like what unions have become these days, but at their core their mission is sound.

  17. says

    Getting past the empty rhetoric about standing up for workers rights etc, unions essentially two do things:

    (i) drive up wages and benefits: while this is great for those who have jobs, it is not so good in terms of job creation becuase it incentivises businesses to look for cheaper alternatives such as offshoring makes it harder to grow. It also increases the risk that the company will fail financially;

    (ii) limits market participation by attempting to limit ability to hire non-union labour. This is bad for employers (obviously) and bad for people who are locked out of a particular part of the labour market (again, obviously) and bad for consumers who may have less access to products and/or be forced to pay more (slightly less obviously).

    I have nothing good to say about unions.

  18. Sergey says

    Strongly against. It’s up to worker whether he\she should accept the terms of employment. Don’t like the wages or working conditions? No problem, find another place or start your own business. Can’t do it? Shut up and work. Otherwise, there will be dozens of other applications.

    • says

      There certainly are dozens, if not hundreds of people interested in one job. We should appreciate the jobs we have… up to a point, which is the crux of this article. They were willing to be jobless, otherwise, they wouldn’t strike.

  19. says

    I’ve only ever had one job where I could have joined a union, and I considered it for liability protection. But when they showed their recruitment video and it had more resemblance to fear mongering propaganda than describing the costs and benefits of membership. If they couldn’t describe why it was worth joining without trying to scare the crap out of you, I knew I wanted no part of that union and never joined.

  20. says

    Hey Sam, think about it: with a Union you CAN’T engineer your own layoff ;-)

    I find rules in the Unions strict and for the benefits of bad employees, good employees can’t be rewarded.

    Quebec has definitely the highest % of workers under a Union and I see nothing good coming out of it. With a Union, you can’t negotiate your salary or salary increase (even if you are the most productive employee, you get the same raise as the biggest loser on the floor). So why would you give more than anybody else? Unfortunately, a lot of workers think this way and we get to a point where several employees are not working much since they are protected by the Union.

    I think that the work place is competitive enough that if you don’t treat your employees right, they will find another job elsewhere. I think it’s a better way to ensure that employees are treated well!

    • says

      You sure about that Mike? You must certainly can, it just might be tougher!

      I thought Canada was all about unions given the more socialistic nature of the economy?

      When Americans retire, we dream of retiring in Canada!

      • says

        I’m certain as if you want something from your boss, you are not allowed to negotiate with him, you have to go see your Union representative. If you try to negotiate directly with your boss, it is seen as you are bypassing the Union and it’s not good ;-).

        Yeah, get rich in the States and move to Canada after ;-) lol!

        Quebec is the worst province of all in term of Unions (or the best if you like Unions, lol!)

  21. says

    I’ve never had anything to do with unions. From what I can see (excluding unions involving physical/dangerous work) they will generally push for having a few people getting everything they ask for rather than letting many people have a job they want and are good at with a salary and benefits that are acceptable to them. They talk about equality but create a privileged elite. That is unless they manage to change economics so everyone can earn a huge income without doing anything.

    All too often it seems like a case of ordering people: “you must do what I say, because I need you”. A few employers call the bluff and find other ways to get the job done. I prefer to say “I can do what you want if you do what I want” so that everyone is better off.

    When I think of unions I think of how they tend to reward people for things like how long they have been at a company instead of other measures such as performance. I have steered away from careers and industries because of this.

    My age and what I have done in the past are among the few things about myself that I cannot change so naturally I will fight against rewards based on those. I can change what I will do in the future, and I won’t give up the rewards from that just to benefit others who are too scared to make a change.

    I reserve the right to change my opinion in 25 years.

    • says

      Sounds good mate. Your last point is something I’d like to highlight. In 25 years, you will have less energy than you have today. I believe you will WELCOME joining a labor union where the union leaders will keep your income and job as long as possible, DESPITE a loss in productivity.

      We can’t look down on people who want to coast after giving decades of their life to a company, can we?

      • says

        That’s exactly why I’ll be a union supporter in 25 years! Until then I will act as though my income will cut off in the next 15 years and prepare for that. If it does I won’t have any complaints about being misled or tricked.

  22. says

    Totally against it.
    The only thing unions are about is them selves. Everything is fine and dandy until shit hits the fan, that’s when many find out that unions are a bunch of BS!

  23. says

    I’ve never worked in a Union in Canada so I can’t comment either way. I do know that there are pros and cons to everything and you explained them well here for your readers. I do have mates that are in a Union and I have hear stories that boggle my mind though. Thanks Mr.CBB

  24. says

    I am absolutely for labor unions.

    There is not a stitch of difference between a company like Wal-Mart using it’s buying power as leverage to get better terms from it’s vendors and the people who actually do the work at Wal-Mart using their collective labor as leverage to get better terms from Wal-Mart. If you are at all interested in being intellectually consistent, you can’t say that one is okay and the other isn’t. Labor unions are about as pure a form of capitalism that has ever been conceived.

    • Weston says

      Rob-

      I could see where your argument might have some validity in about half the states in the U.S. which are “Right to Work” states. In those states the employee has the option of joining the Union or not joining the Union in order to work at the employer. This is analogous to vendors who are of course free to either do business with Walmart or to just walk away from the deal.

      However, I think that your argument fails drastically in the other half of the country which allow for (what we used to call) “closed shops”. If you want to work at the employer you have to join the union. In those cases (to continue your analogy) it would be akin to a vendor seeking to do business with Walmart and being told that by law they would be required to pay a significant portion of their earnings to a third party whether or not they felt that the third party was providing commensurate benefits to the vendor in return for those fees.

  25. says

    With globalization, businesses have to compete with other like businesses around the globe. This makes it difficult for a company to survive, if it has to deal with a union. We have witnessed what happened to car giants GM and Chrysler in the past. Now, same story is being repeated with Hostess brand. Go figure!

  26. Weston says

    FS

    Where you said….

    “So we can conclude from this experience that unions are net positive for union participants in denying industries due to longer survival and artificially higher wages”

    I don’t understand what you mean by this sentence. Particularly the part about “denying industries due to longer survival….” Please expound

    • says

      Sure. Unions create artificially higher wages and extend industry lifecycles longer than natural market forces. Therefore, if you are in a dying industry, you want to be in a union while you hopefully boost your skills and find another job!

      • Weston says

        So when you wrote “denying industries” in your first response you actually intended to write “dying industries”? Now the sentence itself makes more sense to me, but still have to strongly disagree with your ultimate conclusion. The union membership had absolutely nothing to do with boosting my skills, those same skills were taught in non-union plants. If the union was not in place my employment probably would have lasted several years longer which would have given me a far greater boost in my skills.

  27. rubin pham says

    if i am a private worker, then i hate union. if i am a government worker, then union is the best thing that can happen to me.

  28. Meredith says

    I worked for a few years in the mini-mill steel industry. Now granted I worked in “corporate” (big and bad, I know), but most of my time was spent in the mills and I made friends with a number of the local union presidents and heard both sides of the argument. Based on my experience, I’m strongly against unions in their current state.

    As one example, this company had both unionized and non-unionized mills. Four of these mills had a collective bargaining agreement where the contract reached extended to all. The companies stance on collective bargaining was that, in the interest of all employees, they did not grant rights/ privileges to unionized workers that were not also enjoyed by our non-union workers. Well, this bargaining group wanted certain rights that were FAR over and above what the non-union mills had, and after some contentious negotiations, they staged a walk-out of one mills. In return the company locked-out another mill. Who was hurt in all of this? Not the company, at the time the capacity could be absorbed in other sites. Not the unions, they held strong and fast to their position. It was the mill-level, shop-floor employees who lost out. It was their families that counted on the income from their primary bread winner in towns with limited or non-existant job markets.

    Not only does the union do damage in terms of burden cost to the companies they are in, but I’ve seen it do real and hard damage to the employees it is supposed to protect. Unions had their place once, but now the only interests they look out for are their own!

  29. sunshine says

    I am a non union worker, but have the choice to be in the union. I choose not to because at least where I work I have been screwed by the union and by the company. They save peoples jobs that are worthless workers and biggest babies. They cry about the smallest things but when its something big they dont help at all. I am not saying all unions run like this because I am sure there are some good unions. I see the union and company both breaking contract rules, discriminating against people, helping one person in a situation and not another. Just childishness all around it really upsets me. Call me a scab I don’t care I’m not in for the right reasons. I wouldn’t by a car if it didn’t work so why would I join a union if they don’t work. Some companies may need unions but one that operate in the right way. I know other companies that do not have unions that run just fine get paid more and have better benifits but not all are like this. Every year at the company I work for we loose more and more things and that’s mostly thanks to all the lazy and big baby people that the union keep around. Do your job.

  30. UrbanTeacher says

    I understand the struggles surrounding the union. My parent worked in the government and just retired. This parent did 20% of the work in the office while everyone else did enough to just get by. Those that sucked were never fired, sometimes moved around or even given promotions based on their race and closeness to higher up. Thankfully, my parent make 10K to 15K more than most of the co-workers rewarding my parent’s hard work.
    I am a teacher in an Urban area. As a teacher in this urban area, I am apart of the union.
    While the suburban teachers and districts get compensated for their advanced degrees and make 10K-20K, I do not. So, “If you have a labor union always watching your back, you might stop studying after work to advance your knowledge and skills.” I only wish my district paid for more education for myself and fellow teachers.
    However, I am glad to be apart of the union. There are good years and bad years in teaching. Sometimes you get a group of kids that just do not get along and vibe with you while other years is the best students. Should I or my colleague lose their job one year since there was just a bad mix-up of kids? Should I lose my job since the Dean at the school does nothing about behavior created a problem in the school and in my class when I ask for support? What about the principal that cares more about the appearance of the school rather than dealing with the problems? Why in one minute the principal cares about test scores and AP scores, but schedules events the week before the events preventing teachers from preparing students for the test the last few days? There are huge problems with education, but it is not all the problems due to the unions. The union protects me from erroneous accusations by students/colleagues and making sure that I get paid for my effort and time! This is why I left a charter school as I had no protection bc there was no union.
    Over 95% of my students are making progress in their classes. When talking to an administrator about my school and students he said, “You need to bottle up what you are doing and teacher others!” I told him regarding my recent evaluation, “If it ain’t broke, don’t fix it!”

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