Will the Autos Debacle Tarnish the Image of Unions?

First, I should disclose that I am no fan of unions in general. I certainly did read The Jungle and I understand the union's role in confronting the tyranny of the employer prior to their ascension in power. Still, I firmly believe that unions' role in protecting the worker stopped many years ago, and more recently, unions have been much more of a force in consolidating their own power and even creating a tyranny of the employee. My only experience directly with unions was when I was fourteen years old and working at Jewel. For a period of four two week pay checks, the union took out $80 each time for union dues. This was quite a fee given that I made $4.50 hourly and worked 15 hours weekly. While this may have colored my opinion of unions, it also shows just how corrosive they can be. I didn't want or need a union and the union didn't do a thing for me. All they did was take part of my measly paycheck for their own funds.

That said, generally unions poll well. Their membership is happy with their performance and the public at large has much more trust in unions than they do most special interest groups. In fact, unions have maitained remarkable popularity despite several troubling trends. First, most businesses that employ unions do far worse financially than do businesses without unions. Is there any doubt that the strength of the unions have lead to the downfall of the airlines? Second, unions have, over the last several decades, gained a terrible reputation for corruption.

The malaise of the automakers is not the first time that an industry has faced turmoil in direct result to union power. Will this be the story that finally moves public perception against unions? In fact, the most corrosive example of union power came in Major League Baseball. Starting somewhere around the early 1990's, the sport had an explosion of cheating, through steroids. For many factors, the sport turned a blind eye while cheating became systemic. Then, in the early part of this decade, the management in MLB finally decided it was time to tackle the problem head on. The ownership proposed several stiff penalties and random drug testing. Their proposals were scoffed at by the Player's Union. In fact, the Player's Union, headed by Donald Fehr, made the ludicrous claim that random drug testing would violate the privacy rights of the players. In the view of the Player's Union, someone could cheat and their employer had no way of checking because confirming cheating would violate the player's privacy rights. The Player's Union carried so much power that this absurd stance was able to halt any attempt by MLB to test players or carry out any punishment for offenders for years. It wasn't until Congress demanded action that the Player's Union relented and the current drug testing and penalties because standard. There is, however, no doubt that the strength of the union caused MLB to allow cheating for several more years than it needed to go on, had a less powerful force relented to allow measures test for cheating.

In a wholly different sort of a way, the UAW has become a corrosive effect on the auto industry. Their power has caused American auto manufacturers to become entirely uncompetitive. Here is how Mitt Romney described the problem.

First, their huge disadvantage in costs relative to foreign brands must be eliminated. That means new labor agreements to align pay and benefits to match those of workers at competitors like BMW, Honda, Nissan and Toyota. Furthermore, retiree benefits must be reduced so that the total burden per auto for domestic makers is not higher than that of foreign producers.

That extra burden is estimated to be more than $2,000 per car. Think what that means: Ford, for example, needs to cut $2,000 worth of features and quality out of its Taurus to compete with Toyota’s Avalon. Of course the Avalon feels like a better product — it has $2,000 more put into it. Considering this disadvantage, Detroit has done a remarkable job of designing and engineering its cars. But if this cost penalty persists, any bailout will only delay the inevitable.

The troubles of the automakers have become the number one story for days and it doesn't appear as though this story is going away anytime soon. As it continues to be reported, a set of numbers continues to dominate the headlines: 71 and 46. $71/hour and $46/hour is difference between what a GM car costs in labor compared to one made by Toyota. Toyota has no union.

In a sense, nothing we are learning about the role of the UAW in this mess should surprise anyone. Unions by nature cut into the profits of employers. That's what they are supposed to do. They represent one of the employer's main expenses, labor. The entire job of the union is to maximize labor costs. It's only logical that unionized companies make less money than those with unions.

This has bothered very few people for years. That's because employers are naturally unsympathetic while employees are naturally sympathetic. That perception, however, may be in for a rude awakening. That's because the narrative in the story of the automakers is that the cut throat negotiating tactics of the unions have caused the automakers to lose so much money that they are no longer viable. Whereas we used to see the unions as benefitting the workers at the expense of profits, in the case of the automakers, we see the unions benefitting the workers the expense of the viability of the industry at large. Furthermore, the union has done itself no favors perception wise by holding firm in not engaging any plans to re negotiate the very contracts that have become an albatross on the autos.

What this crisis has spotlighted is exactly what those of us weary of the unions have suspected for years. The unions more than anything just make it nearly impossible to do business. That's why Wal Mart is successful while Delphi is bankrupt. The crisis is very likely to make that clear to public at large. As such, it's very likely that one of the casualties of this crisis will be the perception of unions by the public at large.