Unions - A Discussion

[CactusCarlos]

Why Unions are a Bad Idea

http://ugleenakedguy.blogspot.com/2004/09/why-unions-are-bad-idea.html

There is a fundamental problem with labor unions that cannot be ignored: a person can't answer to two masters; somebody has to be in charge.

Just think of all the inane junk that happens because of labor unions. Consider that people are paid outrageous amounts of money to perform non-skilled tasks--often just grunt work--and the resultant price increase is borne by all. You can't tell me that it makes sense for a company to pay somebody 14 bucks an hour in 1984 to put cans on a grocery shelf. That's what I was paid back then.

Or how about the way labor is divided? I know a friend who wasn't allowed to pick something up and carry it from one part of the warehouse to another because it was the job of a union employee. Never mind what works best for the company who pays the bills; "protecting jobs" for the unions is the only thing that matters.

And the situation in our schools is a joke too. Administrators who are paid to make sure students achieve have little power to do anything to make sure that happens. I can give you many examples of the whining, silly demands that teachers have that run counterproductive to helping students.

The rebellion of the people against the owners of a company or against authority is as old as Adam and Eve--it was wrong then and it is wrong now.

Oh, and spare me the balony about unions being needed to ensure workers are not taken advantage of.

Somebody is taken advantage of if management is in charge and somebody else is taken advantage of if the union is in charge. The person who has right of ownership and who is held accountable should be the one with the right to take advantage of the other party.

Now of course we have laws in this country that won't allow the owners to take advantage of the workers, but none that keep the workers from taking advantage of the owners. Isn't that kind of backwards?

[CactusCarlos]

Unions: Good or Bad?

http://www.fool.com/investing/general/2003/10/30/unions-good-or-bad.aspx

By Selena Maranjian October 30, 2003

I've long supported unions. I've even belonged to two -- when I was a high school teacher and when I was a university administrative worker. (For the record, the Harvard Union of Clerical and Technical Workers had some great songs.) But in recent years, I've come to doubt my pro-union convictions. Permit me to share some of my thoughts and then to solicit your thoughts. I suspect that many who read my words are much more informed about and experienced with unions than I am.

Why unions are good
In much of industrial America, workers toiled under very unsafe conditions, earning extremely low pay and enjoying little to no legal protection. Unions were successful in bringing about many improvements for such workers, such as more reasonable working hours. They have generally served workers well by helping them avoid being exploited by employers. Even in these days, unions have a strong impact. According to the Bureau of Labor Statistics, union members in 1999 had median weekly earnings of $672 (that's $34,944 per year) while non-union workers had median weekly earnings of only $516 ($26,832) (source).

Why unions are problematic
Much as I'd rather not accept it, while unions have done a lot of good and have helped workers avoid exploitation, they also seem to have helped workers exploit employers. Perhaps it has been a gradual shift over time, with unions slowly accumulating more and more power. (Perhaps not -- again, I welcome your thoughts.)

Unions can have the power to impede a company's ability to compete and thrive. A firm might be in desperate trouble, yet its unions may be unwilling to bend or compromise in order to help the company survive. Many employers find themselves left very inflexible when they have union contracts to abide by.

Some more problems with unions:

Anti-competitiveness. The Socialstudieshelp.com website suggests that, "unions. are victims of their own success. Unions raised their wages substantially above the wages paid to nonunion workers. Therefore, many union-made products have become so expensive that sales were lost to less expensive foreign competitors and nonunion producers."

A decline in the value of merit. In many union settings, workers can't advance much or at all on their merits, but must generally progress within the limits defined by union contracts. Employers may have trouble weeding out ineffective employees if they belong to unions. In theory, at least, unionized workers might become so comfortable and protected that they lose the incentive to work hard for their employer. And outstanding employees might lose their get-up-and-go if there's no incentive to excel -- or worse, if they're pressured by the union to not go the extra mile.
Here's a webpage detailing some other union drawbacks.

Is there a problem?
So there's both good and bad associated with unions. I suspect that most businesses, and even many or most investors in said businesses, would prefer that the businesses be union-free. But that's easier said than done.

Is ownership an answer?
One strategy for companies to avoid unions taking hold on their premises might be to ensure that as many of their workers as possible are as satisfied as possible. That's simple and makes sense, but it can become mighty difficult to maintain as a company grows huge. Another option is to convert employees into owners -- via stock ownership or profit-sharing, for example. If workers have a real stake in a firm's bottom line, they may be more sympathetic to management's point of view and more eager to work extra hard to help the firm succeed.

That's not a perfect solution, though. Starbucks (NYSE: SBUX), for example, is known for awarding stock options. Yet some of its workers in the U.S. and Canada have organized into unions, while others would like to.

Consider also Southwest Airlines (NYSE: LUV), which has long made employees part-owners via profit-sharing and stock options. It hasn't escaped having unions in its midst. Yet, as this Foundation for Enterprise Development case study notes, "A few years ago the pilots' union at Southwest struck an extraordinary deal with the airline to freeze wage increases for 10 years in exchange for an increased proportional allocation of stock options. The flight attendants' union has since also signed a similar agreement that is unprecedented in the industry." And Southwest has continued to thrive in its notoriously tough industry.

American Airlines, whose parent company is AMR (NYSE: AMR), also decided to issue stock options to its employees, making the announcement in April -- and just a week or so ago it reported a long-elusive (though tiny) profit. Are the two items related? Perhaps, at least to some degree. Though it's worth pointing out that stock options aren't necessarily always attractive. If they're for stock of a shaky company in a wobbly industry, they may not be worth much at all. (Bill Mann noted earlier this year why investors might want to walk away from American Airlines.)

The healthcare crisis
If ownership isn't the best answer, perhaps healthcare coverage might be. Along with compensation issues, healthcare is a major factor in the recent strike of grocery workers in California. The unions don't want to lose ground on the healthcare package workers currently receive. The grocery chains are crying that they're being pinched as they fight the threat of Wal-Mart (NYSE: WMT) -- yet some have been recording increases in sales and earnings lately. Kroger (NYSE: KR), for example, posted a 3% increase in sales and a 16% increase in earnings between fiscal 2001 and 2002.

What's really going on? I suspect that both sides fear a slippery slope: Workers fear that if they give in a bit on healthcare, they'll eventually lose it all. (And with healthcare costs skyrocketing lately, that's a valid concern.) Employers fear that they're already on a slippery slope as they fight the encroaching behemoth that is Wal-Mart.

The Wal-Mart situation
Wal-Mart itself is interesting, when you consider unionization. Thus far, in its not-that-short history, it has escaped having most of its workers belong to unions. But a passionate fight is being waged right now, as workers struggle to establish a union.

This raises interesting questions for us investors: Should we root for the union, as it might lead to more livable wages for employees and might keep more of Wal-Mart's million-plus employees enjoying healthcare benefits? Or should we root for Wal-Mart, figuring that a union will almost certainly put pressure on profits and might threaten the company's ability to sustain its track record of formidable global growth?

I'd like to tell you what I think of the Wal-Mart situation, but I can't. I'm torn. I see both sides of the issue. I wouldn't want to see Wal-Mart unduly restricted by union stipulations. I recognize that although it's enormous, its net profit margins aren't that hefty, at around 4%. That doesn't leave lots of room for adding expenses (though of course there is some room). But at the same time, I wouldn't want employees to be taken advantage of simply because Wal-Mart is big enough to do so. I admire generous companies, ones that treat their workers well. I'd want Wal-Mart to be, as many folks would argue it currently is, fair or even generous to workers. I suppose what I'd like to see is a more perfect solution than a traditional union or successful union-busting.

Questions that remain
So after this brief foray into union considerations, I'm left with more questions than answers. Once more, I invite your thoughts. Please share them on our discussion board for this column -- or pop in to see what others are saying. (We're offering a painless free trial of our boards right now.) I hope to revisit this topic soon, to share some of the most compelling responses of yours that I read. Some food for thought:

If unions are no longer so critical, should they disappear, and if so, how? They enjoy many protections by law. By what process might we become a union-free nation?

If unions are indeed still vital, how worried should we be that less than 15% of our workforce belongs to unions, and that this figure has been dropping?

If a company wants to avoid unionization, what is its best strategy?

How might unions and employers/managements better coexist, without one side exploiting the other?

How should investors view companies that have unionized workers?

[Chris_]

Well....I sort of have ambivalent feelings about this issue.  I am certainly no friend of unions in general, as I think that over the past three decades they have priced the US out of many markets......steel and auto manufacturing to name a few.....as well as destroying our public education system.

That said, I watched a documentary a few nights ago (don't remember who broadcast it) on the coal miners strike in Kentucky back in the early 70's where the United Mine Workers was attempting to organize some mines that were owned by a company called "Duke Energy" or somesuch.  The film depicted the terrible working and living conditions that these miners had to tolerate, and I had to empathize with these simple working folks.  No employee should be required to work in a mine without proper shoring, ventilation, and at minimum filtration masks for the dust.

Now one would be correct to say that these folks were certainly free to leave the area, and work for someone else, but one must have a bit of understanding about these honest, simple people's ties to the area where ten generations of their families have lived and worked, and passed on.  I had the opportunity to travel through eastern Kentucky several years ago, and I came away with a real respect for these friendly folks, who although dirt poor, were always more than happy to share with a stranger what they had, and make them feel welcome.

I will agree that the constant union demands for higher wages have made many unskilled jobs ridiculous from the point of view of income and benefits, however, in the arena of working conditions and worker safety, I think that they have their (limited) benefits.  I am not so naive to believe that their are no ruthless, unprincipled companies out there, that will take advantage of the employees, whether blue or white collar, as companies, not unlike governments will always act in their own interests, and generally the free market will eventually prevail and a correction made......sometimes, it needs a wee nudge.......

YMMV.....

doc

[Chris_]

BTW, unions don't constantly demand higher wages.  In actuality, that's often not even in the top four or five goals to achieve with a contract negotiation.

*I whole heartedly believe, that in general, free markets are a good thing.  However, with rare exception, there's generally no such thing IMHO.*

Er.....hogwash.....sorry, but I worked in one of the largest (unionized) industries in the US for 20 years.....there was NEVER one contract negotiation that did not begin with a demand for higher wages.

I will agree with management complicity to the extent that caving to union demands when they shouldn't is deplorable, however, when you are faced with deciding between a new contract that will cost the company 100 million over 3 years, and on the other hand, a strike that will cost 1.5 BILLION if it lasts more than 60 days, you can see why the shareholders might  be easier to convince that "caving" was a good management decision.

Granted that the steel industry was operating in an obsolete fixed asset environment in the '60's, however, an (average) unskilled worker earning an effective wage (hourly rate, plus company paid benefits) of $22.75, in 1960, certainly was a large contributing factor.  In actuality, right behind raw materials, the steel industry's largest expense is/was labor.

doc

[Chris_]

Actually, you initiatied the extrapolation by your quoted broad brush reference to "unions" as though all unions conformed to your postulated thought.....I merely reflected your premise injecting a rather large exception.

For the record, the union I referred to was the largest in the US, perhaps the world......you might be correct that some two-bit union in a brewery somewhere might not consider a wage increase as their number one priority, however, the large AFof L/CIO affiliated unions almost universally place wages at the top of their barganing agenda as a political tool to maintain control over the rank and file.......has been that way for six decades that I know of.  To think otherwise is to demonstrate a poor grasp of the history of organized labor.

doc

[Doc]

Actually, you initiated the extrapolation by your quoted broad brush reference to "unions" as though all unions conformed to your postulated thought.....I merely reflected your premise injecting a rather large exception.

For the record, the union I referred to was the largest in the US, perhaps the world......you might be correct that some two-bit union in a brewery somewhere might not consider a wage increase as their number one priority, however, the large AFof L/CIO affiliated unions almost universally place wages at the top of their bargaining agenda as a political tool to maintain control over the rank and file.......has been that way for six decades that I know of.  To think otherwise is to demonstrate a poor grasp of the history of organized labor.

Sheesh, I actually edited what I wrote, trying to avoid this thread becoming some silly and outright stupid internet argument.  I said that Unions don't constantly demand higher wages, as constant implies that is a demand with every contract.  Which it isn't.  I also said that often, wage increases aren't in the top four or five goals to achieve with a contract.  That is also often true.

Feel free to continue making inflammatory remarks, towards unions that don't subscribe to your view of them.  For the record, the very union umbrella you're mentioning, is also held over some of the unions whom I'm speaking of.

I suppose that we will have to agree to disagree (although I'm confused by your last post as to what your point actually is)........

My initial post was supporting the fact that several decades ago, a particular union (the United Mine Workers) did a good thing by organizing some coal fields in eastern KY (thereby radically improving working conditions.....HOWEVER, that strike's number one objective was a wage increase).....however, my ambivalence comes from working with several very large unions over the past four decades, and my general impression is that they SUCK....big time.....for the most part, with the advent of OSHA, and government intervention in the areas of workplace safety, unions are essentially obsolete, and largely serve to make US manufactured goods noncompetitive in the world marketplace.  You will not be able to change my opinion of this issue, as I have seen first hand the negative effects of union labor on productivity and corporate profits, not to mention the effect on individual workers of reducing even the best employee to the "lowest common denominator"..  I really don't care what western Europe does with its union problem (and it has a very large problem), what I care about is keeping our industrial base healthy.......and the way to do that right now is to keep breaking the backs of unions where ever possible......

If you consider these comments a "silly internet argument", then I'll just have to consider the source and move on......

doc

[DixieBelle]

Actually, you initiated the extrapolation by your quoted broad brush reference to "unions" as though all unions conformed to your postulated thought.....I merely reflected your premise injecting a rather large exception.

For the record, the union I referred to was the largest in the US, perhaps the world......you might be correct that some two-bit union in a brewery somewhere might not consider a wage increase as their number one priority, however, the large AFof L/CIO affiliated unions almost universally place wages at the top of their bargaining agenda as a political tool to maintain control over the rank and file.......has been that way for six decades that I know of.  To think otherwise is to demonstrate a poor grasp of the history of organized labor.

Sheesh, I actually edited what I wrote, trying to avoid this thread becoming some silly and outright stupid internet argument.  I said that Unions don't constantly demand higher wages, as constant implies that is a demand with every contract.  Which it isn't.  I also said that often, wage increases aren't in the top four or five goals to achieve with a contract.  That is also often true.

Feel free to continue making inflammatory remarks, towards unions that don't subscribe to your view of them.  For the record, the very union umbrella you're mentioning, is also held over some of the unions whom I'm speaking of.

I suppose that we will have to agree to disagree (although I'm confused by your last post as to what your point actually is)........

My initial post was supporting the fact that several decades ago, a particular union (the United Mine Workers) did a good thing by organizing some coal fields in eastern KY (thereby radically improving working conditions.....HOWEVER, that strike's number one objective was a wage increase).....however, my ambivalence comes from working with several very large unions over the past four decades, and my general impression is that they SUCK....big time.....for the most part, with the advent of OSHA, and government intervention in the areas of workplace safety, unions are essentially obsolete, and largely serve to make US manufactured goods noncompetitive in the world marketplace.  You will not be able to change my opinion of this issue, as I have seen first hand the negative effects of union labor on productivity and corporate profits, not to mention the effect on individual workers of reducing even the best employee to the "lowest common denominator"..  I really don't care what western Europe does with its union problem (and it has a very large problem), what I care about is keeping our industrial base healthy.......and the way to do that right now is to keep breaking the backs of unions where ever possible......

If you consider these comments a "silly internet argument", then I'll just have to consider the source and move on......

doc

You're not alone. I wholeheartedly share your sentiments. I witnessed first hand the effects unions can have. Both bad and good. I saw my grandfather walk a picket line when his industry was treated unfairly. They were totally justified in doing so and conditions improved as a result. Fast forward to my adult years and membership in a union. Let's just say they have completely outlived their usefulness and serve as a detriment. I saw good workers demoralized because they could not be rewarded for doing an outstanding job. Meanwhile, the lowest common denominator got the same benefits and pay. They required dues regardless of membership, they were cozy with management and quick to throw members under the bus, they had an operating budget in the millions (from dues) and stood to lose a lot when a group of employees wanted to oust them before the next negotiations. Ugly doesn't begin to describe what I witnessed.

Unions serve a purpose and should be rightly credited with shining a light on unsafe and unfair working conditions. But along the way, they reached the point of no return and are now indistinguishable from the very evil corporations they fought for so long.

Just my $.02. Everyone will have their own opinions. This is an informational thread anyway.