When people talk about unionization as a cure for income inequality in the United States, I suspect they’re thinking more of Norma Rae than On the Waterfront and more about the Rouge strike than about GM’s Indianapolis stamping plant:
A faction within the union consists of what are known as “GM Gypsies”–workers who have transferred to this plant from other GM plants that were shut down. They’re trying to put in enough time to retire on full benefits, which means they don’t want to take permanent jobs at JD Norman; they feel that unless they can get something very close to what GM pays, they seem to think they’re better off with a plant shutdown, which makes everyone eligible for transfer.
However, there are workers in the plant who don’t want to transfer. Indianapolis is their home. They’re angry at the gypsies for trying to shut down a plant that is good for the local community, and good for them. I’ve heard that these folks are disproportionately close to retirement, in which case they’re eligible to take their GM pension, and then go to work for JD Norman at reduced wages.
I have nothing against unions. I’ve been a union member myself a couple of times. How does closing the Indianapolis stamping plant help American workers? This isn’t the 1920s or 1930s. Is pitting one group of workers against another in the face of the likelihood that the plant will be closed entirely what unionization means today?
I think unions are victims of their own success. On all the important issues, work conditions, decent pay, work hours, child labor etc. the unions won long ago. I think the threat of unionization remains an important check on management. However, the industrial unions seem to be working themselves out of existence. I think they have more in common with the AARP than their glories a half-century and more ago.
My father-in-law, for example, is a steelworker and lifelong union member. Because seniority is so important in the union, the average age at the plant is about 50. The previous plant owner went bankrupt and the plant was purchased by a multinational who reopened it with about 1/2 the staff (the plant was previously overstaffed). The union determined who would stay and it was based solely on seniority.
My FIL is 64 and plans to keep working as long as possible. He’s one of the most senior people there, so when there are layoffs, he gets to choose whether he gets laid off or not. If he does, it’s for a set period of time and between unemployment and the union stipend he makes 80% of his normal wages (but no overtime). For him the union has been a lifesaver. The only question for him is his pension. The previous company’s (LTV Steel) pension went belly up shortly after bankruptcy an was taken over by PBGC. He’s got some new kind of pension (plus a 401k) with this new company, which is one reason he wants to keep working as long as possible.
There aren’t any young people working at the plant. When there is hiring, new people spend more time laid off than they do working. Who can afford a job like that? Family members of union members also get preferential hiring, but very few are taking the offer because of the seniority system. There is zero stability for young workers.
Also, Dave, you might be interested in listening to this excellent NPR story on the NUMMI plant in California. It’s got a lot of good stuff on the dysfunctional union-management system in the US.
Hahahaha….the way to solve the problem of income inequality is to create monopolies. Right that will solve the problem.
Dopes.
I’d also argue, Dave, that you are leaving out two groups here:
1. investors/shareholders,
2. customers.
Profits are a social good, not a social bad, despite what many dingbats think. Reducing profits, reducing shareholder value (keep in mind shareholders aren’t Wall Street fat cats, they are often other workers with a 401k that owns stock). If plants are shutting down and supply is decreasing then price might very well go up which also makes customers worse off.
Additionally the problem with unions is that they engage in restraint of competition. As such they impose not only a dead weight loss, but seek to capture some of the “consumer surplus”. In this case the consumer is the firm. Consumer surplus is that that “value” over and above the price that the consumer is paying. Alternatively you can think of it as the difference between the maximum price the consumer is willing to pay and the price the consumer actually does pay. For a firm, I’d argue that that excess value is most likely going to be profits.
Now many might be thinking so what? So what? Did you skip economics class or flunk out? Those kinds of profits, for a monopolist, are considered to be unearned. Another name for these profits are economic rents. When people talk about (economic) rent seeking one of their usual examples is a firm seeking to become a monopolist. Trying to solve the problem of income inequality by giving people income they didn’t earn strikes me as a rather bizarre solution.
So, if its bad for some firm that controls the market for say beerkoozies….why isn’t it bad for a union like the UAW? Logically there is no distinction. And keep in mind that for a union to extract economic rents it must supply fewer workers than would otherwise obtain in a competitive environment–i.e. a union depresses employment levels in the very industry that was unionized to supposedly “protect the workers” from the vile depredations of the capitalist.
Like I said, anyone who thinks this is a solution to income inequality is has got to come up with a better argument than anything I’ve seen put forward. The union workers are not only extracting wealth from the firm (i.e. share holders, and once again shareholders are often other workers in other industries) but also from workers that would have been employed in that industry but are not all so that the union can extract its economic rents. All the arguments that make a monopoly bad make unions bad. They may have had their place, but I’d argue that place should now be relegated to the history books. Promoting competition should be a goal of anyone who wants to see economic growth. Of course, most people who advocate some sort of activist economic policy almost inevitably end up advocating policies that decrease competition.
Arent unions just a way for workers to compete for a share of the pot? Any individual low paid worker has little clout compared with a highly paid exec. If unions compete too successfully, they risk putting themselves out of a job, but I dont think that is much different than what happens with executives who manage to get large pay raises that are often not linked to performance.
Query- Why do unions work better in Europe?
Steve
Andy –
“The previous plant owner went bankrupt and the plant was purchased by a multinational who reopened it with about 1/2 the staff”
Would that happen to be a certain Indian company, and now a certain Indian/French company?
Drew,
Yes, you’d be right! The plant my FIL works in is owned by ISG which in turn is owned by ArcelorMittal.
Which is precisely the definition of cartel which tries to obtain monopoly profits. So again, why is a cartel good in one market but bad in another when their effects are precisely the same. Imposing economic inefficiency, reducing the quantity brought to market (in this case jobs), and driving up prices and earning economic rents? All because you want them to have a larger slice of the economic pie…even though they didn’t earn it?
Is that the argument you are putting forward?
Okay, so is this the argument you are using in favor of unions? Executives garner large salaries that may or may not be related to performance, so we should let all workers enjoy benefits they haven’t earned? I haven’t earned a medical degree steve, but I want a part of your income. See what I did there?