Off-Loading the Unsustainable Burden of Organized Labor

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Off-Loading the Unsustainable Burden of Organized Labor

Perhaps union leaders never heard the story of the goose that laid the golden egg. In one version, the goose’s owner is not happy with one egg and demands two eggs a day. When the goose does not comply, he kills the goose.

In another version, a farmer and his wife cut the goose open thinking it is filled with gold and they’ll have a big payday, rather than day-to-day sustenance. It contains no gold. In both cases, greed results in the loss of a profitable asset.

When applied to the realm of private-sector unions, the goose, of course, represents companies that have become uncompetitive because of rising labor costs. Examples abound. In the public sector, unions are carving up taxpayers in an attempt to gain higher wages, better benefits, and more generous pensions.

There is no argument that when unions first emerged, they played a positive role by acting as agents of change for safer working conditions and providing workers with an even playing field in dealing with employers.

At the time, there were hardly any laws in place to protect the health, safety, and economic interests of employees. Because of their collective power, union members were able to ensure their well-being in ways not available to individual workers.

But now, the pendulum has swung the other way, and a veritable alphabet soup of agencies, from OSHA to the EEOC to the NLRB, has been put in place to provide these protections. Meanwhile, the unions have grown in power, and the focus seems to have shifted from helping workers to helping the union.

In the private sector, the biggest problems with organized labor are restrictive work rules and short-term pay-offs for union officials and members. Lost in the equation, at least to the union, is the competitiveness of the company, and that is killing the goose.

The goals of the unions are to maximize the number of unionized workers and the amount of dues collected from them by the unions. As seen in industry after industry, unionized companies can only survive when market entry barriers are high, permitting them to pass along the cost of excessive wages and inefficient operations to customers.

However, once the barriers come down, it’s only a matter of time before these companies lose their competitiveness; GM and Chrysler are great examples.

This appears to be another lesson unions never learned, and it’s straight from Economics 101: elasticity versus in-elasticity. They have acted as if demand was inelastic for the products produced by the companies employing union workers. They believed that customers would pay ever-escalating prices.

But given alternatives, customers did not simply accept paying higher prices — they rewarded competitive pricing when it was finally available, causing the unionized companies to drastically lose market share...

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