Killing the Goose (But the Eggs are "Free," Right?)

[_Droopy]

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Killing The Goose
Thomas Sowell

Killing the goose that lays the golden egg is one of those old fairy tales for children which has a heavy message that a lot of adults should listen to. The labor unions which have driven the makers of Twinkies into bankruptcy, potentially destroying 18,500 jobs, could have learned a lot from that old children's fairy tale.

Many people think of labor unions as organizations to benefit workers, and think of employers who are opposed to unions as just people who don't want to pay their employees more money. But some employers have made it a point to pay their employees more than the union wages, just to keep them from joining a union.

Why would they do that, if it is just a question of not wanting to pay union wages? The Twinkies bankruptcy is a classic example of costs created by labor unions that are not confined to paychecks.

The work rules imposed in union contracts required the company that makes Twinkies, which also makes Wonder Bread, to deliver these two products to stores in separate trucks. Moreover, truck drivers were not allowed to load either of these products into their trucks. And the people who did load Twinkies into trucks were not allowed to load Wonder Bread, and vice versa.

All of this was obviously intended to create more jobs for the unions' members. But the needless additional costs that these make-work rules created ended up driving the company into bankruptcy, which can cost 18,500 jobs. The union is killing the goose that laid the golden egg.

Not only are there reasons for employers to pay their workers enough to keep them from joining unions, there are reasons why workers in the private sector have increasingly voted against joining unions. They have seen unions driving jobs away to non-union competitors at home or driving them overseas, whether with costly work rules or in other ways.

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. There is a reason why there was a major decline in the proportion of private sector employees who joined unions. It was not just the number of union workers who ended up losing their jobs. Other workers saw the handwriting on the wall and refused to join unions.

There is also a reason why labor 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.

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.

But 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.

[_cinepro]

The work rules imposed in union contracts required the company that makes Twinkies, which also makes Wonder Bread, to deliver these two products to stores in separate trucks. Moreover, truck drivers were not allowed to load either of these products into their trucks. And the people who did load Twinkies into trucks were not allowed to load Wonder Bread, and vice versa.

If that's true, I wouldn't want that to get out if I were the union.

[_moksha]

The country lay in rubble after the first minimum wage law was passed. Wrack and Ruination occurred after Social Security was enacted. The end of the world came when Congress approved Medicare. When will they learn?

[_Gadianton]

I have limited but not non-existent interaction with unions. I've worked with two companies now that do extensive east-coast business, and have some union run-in stories. They have ridiculous restrictions about who can do what and how. Our employees had to literally stand over the union employees and explain how to troubleshoot or install our computer systems, while the union employees would bark threats about not touching a screwdriver or placing a sticker -- as if they were contributing at all. There was implication of mob enforcement, which almost certainly wouldn't have happened, but the west-coast guys are never sure. Our east-coast guy just did what he wanted and let them threaten. Then there was the transportation situation with designated drivers who drove by day, and did something by night that resulted in a lot of bruises. And the "unspecified party" who got a cut of wherehouse rents used. All these things went together when our guys were working with the union guys...

However, as far as Sowell goes, what he's saying is still very different from what BCSpace and Droopy have been saying.

[_cinepro]

I have limited but not non-existent interaction with unions. I've worked with two companies now that do extensive east-coast business, and have some union run-in stories. They have ridiculous restrictions about who can do what and how. Our employees had to literally stand over the union employees and explain how to troubleshoot or install our computer systems, while the union employees would bark threats about not touching a screwdriver or placing a sticker -- as if they were contributing at all. There was implication of mob enforcement, which almost certainly wouldn't have happened, but the west-coast guys are never sure. Our east-coast guy just did what he wanted and let them threaten. Then there was the transportation situation with designated drivers who drove by day, and did something by night that resulted in a lot of bruises. And the "unspecified party" who got a cut of wherehouse rents used. All these things went together when our guys were working with the union guys...

One of my business partners used to work for a large corporation in Los Angeles and had to negotiate with a port-based union. He has odd stories about meetings being held in motel rooms in the seedy part of town, and whenever a deal was made the focus was on how it would benefit the union, sometimes to the detriment of the workers (especially the new workers). He firmly believed that if the workers knew what was being negotiated, they would have revolted against the union (but part of the deal was that the company wouldn't talk directly to the workers about the negotiations!)

I have a relative who served on a school board in Northern California and had to negotiate with the teacher's union. The negotiations weren't going well, and the teachers wanted much higher pay and benefits than the budget would allow. The teachers were telling the parents (and sometimes the kids) preposterous stories about the deal, so the school board finally took out a full-page ad in the local paper clearly explaining what the school district's income was, how the budget was organized, and what the teachers were currently earning and what they were being offered. After that, community sentiment turned against the teachers and a lot of parents were really mad.

If the middle class are hoping that the unions will help us out, then we're even more screwed than we thought.

[_MeDotOrg]

When John L. Lewis was elected President of the UMWA, many coal miners weren't even paid in money. They were paid in scrip, which was only redeemable at stores run my the Coal Mining Company that issued the scrip. Want to save money to move somewhere else? With scrip, it was impossible. A coal miner lived a life about a half-step up from a serf in the Middle Ages. Many mine shafts were 3-5 feet tall, which meant most miners had to worked stooped over all day, to say nothing of black lung disease.

Droopy, if you were working all day in a 4 foot tall mine shift, living in a Company town, being paid in scrip redeemable at a Company store, and someone came to you and said they wanted to organize for REAL money ($94 a day in inflation adjusted dollars) and decent working conditions, you would have said, "No thanks, I'm living in a capitalist paradise, and I want no part of your socialist hell?"

[_Droopy]

However, as far as Sowell goes, what he's saying is still very different from what BCSpace and Droopy have been saying.

No it isn't, we've just nevre touched upon that aspect of it in these threads as of yet. The gross inefficiencies created by union padding of work rules and personnel are legendary.

In point of fact, it appears that the Teamsters had come to terms with hostess and were willing to see reason. It was the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, representing about 5,000 Hostess employees - a small minority of the total - who would not see economic reason, come off the union gravy train, and save the company and their jobs for all of its employees in a competitive market, declining economy, in a business with vanishingly small profit margins.

Keep a couple of things in mind about unions per se. The core purpose of any union is to artificially limit the available pool of labor in any particular industry or trade to keep the price of their labor high. That's the fundamental purpose. Failing that, they use the state protected power of the strike, political clout, and physical intimidation to bargain for above-market wages, benefits, pensions, and other perks. Everything else that goes on within contemporary unionism is primarily aimed at funding and ensuring lavish, emperor-like lifestyles for union bosses and funding and fomenting political activism and supporting politicians and policies that will expand and increase concentrated, unaccountable union power over workers, businesses, and the economy in general.

Its long past time we grow up and get beyond the populist working class hero mythology and class resentment ideology of another century, take a long, hard look at the real history and traditions of unionism, and think seriously about going in another direction. Private sector unionism is nearly dead as it is (somewhere between 8% and 12% of the American workforce, depending upon who's research you're looking at) and is massively unpopular with most American employees, given a free and open vote on the matter. The only place it still survives in an substantial form is within the public sector, a place unionism never should have been allowed to exist in any form at all.

[_MeDotOrg]

When John L. Lewis was elected President of the UMWA, many coal miners weren't even paid in money. They were paid in scrip, which was only redeemable at stores run my the Coal Mining Company that issued the scrip. Want to save money to move somewhere else? With scrip, it was impossible. A coal miner lived a life about a half-step up from a serf in the Middle Ages. Many mine shafts were 3-5 feet tall, which meant most miners had to worked stooped over all day, to say nothing of black lung disease.

Droopy, if you were working all day in a 4 foot tall mine shift, living in a Company town, being paid in scrip redeemable at a Company store, and someone came to you and said they wanted to organize for REAL money ($94 a day in inflation adjusted dollars) and decent working conditions, you would have said, "No thanks, I'm living in a capitalist paradise, and I want no part of your socialist hell?"

Its long past time we grow up and get beyond the populist working class hero mythology and class resentment ideology of another century, take a long, hard look at the real history and traditions of unionism, and think seriously about going in another direction.

Your article that begins this post tries to make that point that the organized labor of today is part of a continuum stretching back to John L. Lewis. Your article brought up John L. Lewis in the first place. When I respond to the reasons for forming a mine workers union, you say "It is long past time we grow up and get beyond the populist working class hero mythology and class resentment ideology of another century."

It isn't mythology that coal miners were paid in scrip. It is fact. It isn't mythology that coal miners had to work stooped over all day. It was fact. It isn't mythology that thousands of mine workers died of black lung disease, without worker's compensation or health benefits. It is fact.

"The populist working class hero mythology", in terms of unionism being a legitimate response to human suffering, was NOT myth, it was fact. Calling it mythology is to dismiss or deny part of history that you find an inconvenience to your argument. Unions were an important part of helping create the middle class that defined the prosperity of the mid-century United States. Have Unions grown too powerful at times? Yes, I would agree that they have. The United States after World War II was the manufacturing colossus of the World. We grew fat and complacent. Both Unions AND Management. The U.S. steel industry failed to re-invest in new, more efficient manufacturing technologies. Detroit management in the 60's was like a Royal Palace hearing the grumblings of consumer revolution: "Mini cars make mini profits" and "When foreign cars reach 10% market share, then we'll worry" were two of the more famous pronouncements. (Read David Halberstam's "The Reckoning" for a good overview of the fall of the post-war Auto Industry, and look at the Vega manufacturing plant in Lordstown as a classic case in point).

Adversarial relationships between business and management occur because they have different roads for their objectives. Cut labor in on the profits and you create an incentive for labor to be concerned about cutting costs and being efficient.

[_Gadianton]

Given Droopy's and Me's recent posts I should clarify that I don't see any misunderstanding of economics in what Sowell writes, and his real-world examples are good for illustrating basic points, and that's what I was talking about. This is not the case with BC or Droopy. Whether or not Sowell's foray into economic history is sound, or consistent in interpreting situations from a market perspective without bias is another matter. While most of what our resident tea-party wingers here write can be falsified on its face with no research, I can't say I either agree or disagree with Sowell's historic perspective on unions, and that goes for what posters like MeDotOrg present as well. I'd have to spend a lot more time in personal research than I'm willing to invest to make a call on, and I have far less faith in my ability to make the right calls here. It's easier to stick with the low hanging fruit.

[_ajax18]

Adversarial relationships between business and management occur because they have different roads for their objectives. Cut labor in on the profits and you create an incentive for labor to be concerned about cutting costs and being efficient.

I agree with the sentiment, but what's to stop outsourcing or bringing in an illegal immigrant to do the job for cheaper. As long as those things exist, I don't see how labor would ever be in a position to negotiate for a piece of the profit.

It is kind of amazing to look back to our ancestors (1950s generation) and see people who got good paying jobs with just a high school education or less. What made their world different from ours?