The Insanity of Unions – Equality vs. Employment

I don’t hate unions. I think good things have been accomplished by unions. But I am against corrupt unions. I am against unions whose actions hurt the very workers they claim to support. I am against unions whose actions hurt workers, societies, and countries. And this interview by the Wall Street Journal of Andy Stern, head of the Service Employees International Union, illustrates all too well the insanity of the mindset of some of the unions in this country.

I don’t care about the unions donating to political parties. I don’t care about how much union heads get paid. But I do care about their goals and the policies they are trying to enact to achieve them, because some of them will hurt our economy and our country. Here are a few examples from the article:

1. Card-check, aka the Employee Free Choice Act. If you knew nothing about the Employee Free Choice Act other than that it was associated with unions and you had to guess what it was, what would you guess it does? Maybe it allows employees to join a union or not join a union? Actually, it would make it more likely that employees would be coerced into joining a union.

Right now, if the employees of a company vote to start or join a union, they can. But those votes are secret. Nobody knows which employees voted for the union and which didn’t. Unions can make their case to employees, and employers can also make their case. But under the Employee Free Choice Act those votes would no longer be secret. Unions would know who voted for or against unionizing a company, and could target (i.e. harass) those employees. Do you think we’ll see a lot more companies being unionized if this legislation passes? Do you think that means more employees paying dues to a union? Do you think that means more money for Andy Stern? You betcha. Do you think we’ll see improvements in worker conditions and in the economy at large? Mmmm, not so much.

Andy Stern says “Employee free choice is only a process of giving workers the choice of sitting down with their employers about getting raises,” but it sounds like just the opposite. I run a business. My employees can come and talk to me any time about a raise and we can negotiate. If my business was unionized, the unions would be negotiating with me instead of the employees, and they would be negotiating whether or not the employees wanted them to. Unions don’t create a connection between employers and employees, they add a buffer.

2. Minimum binding arbitration. But it doesn’t stop there. Let’s say 51% of the employees of a company vote to join a union. They join a union, and the union comes in to negotiate a contract for 100% of the workers (sorry, no free choice for the 49% who voted against unionizing–everyone joins or you can get a job somewhere else). But what if the employer and the union can’t come to an agreement on a contract? After 120 days it goes to a mediator who listens to both sides and then decides what the contract will be. Who is this mediator who makes this decision, which both employer and union have to agree to? The government, of course. The government will now decide the contract between employers and employees. So much for employers saying “We’ve got such and such a position that pays $10/hr” because the unions will say “No, that position has to pay $20/hr” and when the employer and union can’t agree, the government will come in and say “Let’s compromise and make it $15/hr”. The trouble is, maybe the company can’t make a profit if they’re paying $15/hr for that position. So the company can either get rid of that position entirely (which obviously doesn’t favor workers), or they can start charging more for their products and/or services. This means we, as consumers, end up paying more for those products/services, and that means we’ll buy less of those products and services. If the company is selling less, how does that help workers?

Markets have an uncanny knack for matching up people who are willing to work for $10/hr with companies that are willing to pay $10/hr. When unions and the government come in and start saying “No, you should pay more for this position” then it appears to benefit the worker who now gets $15 instead of $10/hr, but it’s a superficial and short-term view. Applied generally, such market interference hurts companies, economies, and ultimately the very workers the unions are supposed to help.

But as Andy Stern puts it, “It’s not good for America when people fight.” That is, it’s better when unions and the government force businesses to do things then if the businesses can negotiate directly with employees.

3. Universal health care. If health care is a right, why wasn’t it include in the Bill of Rights? Why didn’t the founders of our nation even discuss the issue? But let’s not get into that right now since it’s fairly obvious that people are willing to call anything they want the government to give them a “right”.

But why are unions for universal health care? They’ll say it’s good for workers, but like most things unions propose it isn’t. Frankly, I don’t know why they’re for it because I haven’t researched the connection yet, but I would guess that if you follow the money/power trail, you’ll find your answer.

4. Let’s be more like Europe. What I really have been waiting to get to is the true insanity of Andy Stern, which comes out in his statement “I think Western Europe as much as we used to make fun of it has made different trade-offs which may have ended up with a little more unemployment but a lot more equality.” This statement is so ridiculous as to make me wonder if I’m misunderstanding him, but based on other comments in the article I think he means exactly what he’s saying.

Just to make sure we all understand the economy of Western Europe that Mr. Stern would like to emulate, let’s take a look at a few nations’ unemployment rates, as of 2007:

France – 8%

Germany – 8%

United Kingdom – 5.3%

Italy – 6.2%

Spain – 7.3%

Compare those to the United States’ unemployment rate of 4.6% at the same time. Obviously that has gone up in recent months, but the unemployment rates of Western Europe have likely also gone up as a result of the current economic downturn.

Does Mr. Stern truly believe this country would trade our unemployment rate for that of Western Europe for the sake of equality? There are two ways this “equality” can take place–higher wages for workers while keep executive pay where it is, or lowering executive pay while keeping worker wages stable.

Obviously workers would like to be paid more, but Mr. Stern himself admits to the connection between higher wages as a result of union negotiations and/or government decree and higher rates of unemployment. There is a trade-off and there’s no way around it. But the absurdity of the argument is plain. Given the choice, would anyone prefer equality over employment? Are autoworkers at the Detroit 3 more worried about what the execs are getting paid or whether or not they’ll have a job next year? Would you be willing to sacrifice your job if you knew it would help your co-worker earn more so that the gap between workers and execs would shrink? Would you be happy to give up your job if you knew the CEO was getting a pay cut? Many people might gripe about executive compensation, but I wager it would be tough to find a single employee in the entire country who would prefer equality over employment.

Ironically, Mr. Stern argues that China, which has no unions, has no incentive to innovate or use workers efficiently because they have an abundant supply of cheap labor. But in fact the standard of living in China for a majority of the population has risen dramatically since 1978. Of course China is not a model for the US, except in the sense that they’re moving in the right direction. We, however, seem to be rushing to meet them and go the other way.

A paragraph or two ago I said that there is a trade-off between higher wages and unemployment and there’s no way around it. This is true if the higher wages are due to non-market interference. Markets do quite well at raising the wages of workers while keeping unemployment low, provided the markets are allowed to function more or less freely. Yes, I know that union wages generally are higher than non-union wages, but at what cost?