Labor Pains

Labor unions have been in the news lately, from union-led protests against Wal-Mart to the Hostess bankruptcy (and, closer to home, here). In those two examples, the unions seem to be eating their own.

First, Wal-Mart:

Jamie Walsh faced a Black Friday dilemma: take advantage of Wal-Mart’s deals at the Salem, New Hampshire, store or support union-backed protesters demanding better pay and benefits. In the end, the deals won the day.

Walsh, 42, wearing a sweatshirt from the International Brotherhood of Electrical Workers Local 2222, where her late brother-in-law was vice president, said she was aware of the union protests planned at Wal-Mart Stores Inc. (WMT) locations around the country today. Still, she decided to (shop there today).

“It bothers me, but their prices are so good,” said Walsh...

And why are their prices so good? Because Wal-Mart isn't unionized.

Unions add costs. Not just salary costs, but much more insidious hidden costs. A perfect illustration of this is the Hostess bankruptcy.

The real story is the story of two unions, the Teamsters and the Bakery union of the AFL-CIO. Here's where things get interesting.

Start with the fact that Hostess's bakery operations are relatively efficient ... Hostess's production costs were neither excessive nor out of line with the market but its distribution costs were...

Union-imposed work rules stopped drivers from helping to load their trucks. A separate worker, arriving at the store in a separate vehicle, had to be employed to shift goods from a storage area to a retailer's shelf. Wonder Bread and Twinkies couldn't ride on the same truck.

Ridiculous.

In the larger scheme of things, however, it really doesn't matter which union is at fault. The truth is that, while unions may at one time have served a valid purpose in improving working conditions and salaries, today they mostly serve to kill the goose that lays the golden egg.

The old-time legendary labor leader John L. Lewis called so many strikes in the coal mines that many people switched to using oil instead, because they couldn't depend on coal deliveries. A professor of labor economics at the University of Chicago called John L. Lewis "the world's greatest oil salesman."

There is no question that Lewis' United Mine Workers Union raised the pay and other benefits for coal miners. But the higher costs of producing coal not only led many consumers to switch to oil, these costs also led coal companies to substitute machinery for labor, reducing the number of miners.

By the 1960s, many coal-mining towns were almost ghost towns. But few people connected the dots back to the glory years of John L. Lewis. The United Mine Workers Union did not kill the goose that laid the golden eggs, but it created a situation where fewer of those golden eggs reached the miners.

It was much the same story in the automobile industry and the steel industry, where large pensions and costly work rules drove up the prices of finished products and drove down the number of jobs.

Consumers in the private sector have the option of buying products and services from competing, non-union companies -- from Toyota instead of General Motors, for example, even though most Toyotas sold in America are made in America. Consumers of other products can buy things made in non-union factories overseas.

For the most part, those non-union products are less expensive, and often of higher quality. Compare Toyota reliability to GM, for example.

Toyota Motor Corp. is selling the most reliable cars in the U.S. auto market, Consumer Reports said Monday.

The top seven spots in this year’s predicted reliability report are all held by Japanese brands.

But there is one sector where union growth and influence has been increasing, and the consumer has no choice.

...unions are flourishing among people who work for government. No matter how much these public sector unions drive up costs, government agencies do not go out of business. They simply go back to the taxpayers for more money.

...government agencies are monopolies. You cannot get your Social Security checks from anywhere except the Social Security Administration or your driver's license from anywhere but the DMV.

Is it surprising that government employees have seen their pay go up, even during the downturn, and their pensions rise to levels undreamed of in the private sector? None of this will kill the goose that lays the golden egg, so long as there are both current taxpayers and future taxpayers to pay off debts passed on to them.

Like so many other government programs, the poor taxpayer is now expected to subsidize fat-cat union members who receive pay and benefits far in excess of what they deserve.

When will it end...?

UPDATE: Based on a comment from Harper (see the Comments) I've added the following.

One of the interesting -- and little reported -- aspects of the Hostess story was a quote from a Teamster driver that worked for Hostess.

Doug Mansky, a Hostess driver in Detroit and a member of the International Brotherhood of Teamsters, was in the process of moving to a cheaper condominium on Tuesday, after his union had agreed to an 8% pay cut that he said would shave $200 a week from his income. After Judge Drain cleared Hostess to impose the same new labor terms on the bakers union, they went on strike.

Now do the math. If an 8% pay cut = $200 weekly, then his annual salary was around $130,000. And that's not counting benefits.

So this poor guy had to take a pay cut from $130K to $120K - for driving a delivery truck. And he didn't even have to load or unload it.

Boo-friggin'-hoo...