What’s the Connection Between Unions and Your Wallet?

by Odysseas Papadimitriou on November 9, 2011

labor union workersUnions are inextricably tied to the U.S. economy. Since the industrial revolution, they have served an important purpose, ensuring that there is a balance of power between management and labor. But what if things have gone too far? Could unions actually be costing Americans jobs by forcing companies to outsource? And, if so, what’s the solution?

To understand the role of labor unions today and how they could be jeopardizing your wallet, we must circle back to their origins. When most of the U.S. labor force was concentrated in mills and factories in small towns and growing industrial epicenters, connected only by a limited railway network, unions played the dual role of watchdog and agent. They ensured that management could not subject workers to inhumane conditions or force them to accept unfair compensation by giving workers bargaining power borne from unity, organization and educated leadership. For many of us, the noble role unions played during this time, righting wrongs like those explored in Upton Sinclair’s famous novel about the U.S. meatpacking industry, The Jungle, created a romanticized image that unfortunately does not match up with current realities.

These days, unions have progressed far beyond simply getting their members a fair shake. Sure, they still do play the traditional watchdog role and this role will forever remain integral, given that it is natural for ownership to push boundaries in the name of profits. Just consider the allegations that Amazon.com warehouse workers in Breinigsville, Pa. were repeatedly subjected to sweltering or below-freezing conditions at different times in 2010, and you’ll see that management impropriety or, at the very least, negligence is not a thing of the past.

But you also have to consider unions that have abused their collective bargaining powers to such an extent that: 1) their members are grossly overpaid based on their qualifications (e.g. the auto industry prior to the latest round of bankruptcies); 2) they are resistant to common-sense practices like having compensation tied to performance (think teachers unions); and 3) it has become next to impossible to fire underperforming employees (e.g. government workers).

The general philosophy of labor unions in this country seems to have shifted to that of a talent agent, with union reps trying to get their constituents the best deals possible, regardless of what that means for the rest of us. This has gotten to the point where U.S. labor is often just too expensive, resulting in higher taxes and unemployment rates and forcing companies into the unenviable of having to choose between outsourcing and bankruptcy. What we’re seeing now is a form of labor collusion, and given this country’s history of cracking down on collusive business practices and busting monopolies, that just seems out of whack.

A paradigm shift is therefore needed to resurrect the U.S. job market and re-implement a fair balance of power between labor and management. But how can we bring it about?

Well, we need to create a system where unions are there to help those that need it, not provide an unfair advantage to those that don’t. For example, unions are obviously necessary in industries dominated by one major employer because people trained to work in that industry would otherwise be at the mercy of management, as they would be forced to choose between accepting whatever is offered them or starting all over again in a new field. On the other hand, unions are not necessary, at least to the extent they are used now, in industries where a number of different employers will be naturally incentivized to compete for the best labor. For example, I know that as a tax payer, I would be none too happy paying teachers more than I make simply because they belong to a strong union and I do not. We are a meritocracy, after all.

That’s why I propose that the negotiating power of unions be tied to national averages. If unions are only able to negotiate salaries and benefits for their members up to 80% of the national averages, normalized for qualifications and geographic cost of living, then they will be able to maintain their intended purpose without being given enough rope to hang the rest of the U.S. workforce. Management can always give employees more, and in many cases they will in order to maintain competitiveness, but they will not be forced to pay more than they can afford.

This is obviously not going to happen overnight, but the benefits of such a system are clear. Neither management nor labor will be able to unfairly force the hand of the other, the most qualified workers will be the most highly compensated, and more jobs will be available for U.S. citizens. When you think about it, this is all we really need, since federal and state regulations outlaw a lot of the unfair practices that were commonplace in the heyday of unions.


Linda Ray
Thank you for the insight.
December 18 at 19:59 pm

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