BuckeyeBlog

The Weekly Standard has a great article about how government employee unions are contributing to state budget problems. It points out the generous compensation government workers receive, courtesy of your tax dollars:

For every $1-an-hour pay increase, noted Dennis Cauchon in USA Today, public employees have gotten $1.17 in new benefits. Private workers have gotten just .58 cents in benefits for every $1 raise. This gap worries left-liberal labor economist Barry Bluestone. The price of state and local public services increased by 41 percent nationally between 2000 and 2008. Private services only increased by 27 percent. The benefit growth has continued unabated into the Great Recession, and Bluestone says the gap will inevitably produce a backlash.

The rising compensation of state government workers in Ohio has contributed significantly to the current state budget problems, as I wrote about here.

To go along with my article this week, here is a much more in-depth look at the damage to workers caused by unions:

Labor unions get more respect than they deserve. They are nothing other than labor cartels. Like all cartels, their success depends on the extent to which they can cut off their trading partners—employers, workers, and the customers of employers—from alternatives. Notwithstanding that the National Labor Relations Act (NLRA) helps private-sector unions capture their victims, over time those unions lose market share because of the process of creative escape….

Exclusive representation precludes employers from dealing directly with employees about wages and other terms of employment. Employers are forbidden to reward individual workers for meritorious performance without union permission. Unions are loath to grant permission because they want workers to think that they, rather than individual productivity, are the source of wage gains. Thus, highly capable workers often want nothing to do with unions. Exclusive representation also prohibits individual workers from speaking directly with employers about any job-related issues without union permission. Individual workers have no voice. Only certified unions may speak.

The full article is well worth the time it takes to read it.

Unions and their allies in Congress have been pushing legislation for the past few years that would undermine a variety of worker and business owner protections currently in the law. The so-called “Employee Free Choice Act” would actually undermine employee free choice by making it much harder for workers to vote by secret ballot in unionizing votes (anyone see the potential for abuse there?).  It would also impose mandatory arbitration on workers and employers in the event of an impasse during contract negotiations. The only things that have stopped it from passing this year were President Bush’s opposition and the Republican miniority in the Senate. Next year Bush is gone and there are far fewer GOP Senators. It’s quite possible this legislation will become law.

University of Chicago law professor Richard Epstein discusses the problems with the law in the Wall Street Journal:

The National Labor Relations Act strips employers of basic common law rights, including the right to refuse to deal with the union. It imposes on employers (and unions) a duty to bargain in good faith toward a contract. But this duty does not force agreement. Either side is free to walk away from any deal it does not like. Unions can strike, and firms can lock out workers. Today’s law, accordingly, restricts arbitration to interpreting existing agreements, not to making agreements from whole cloth.

The EFCA takes away the employer’s right to walk. Now the successful union, backed by direct government power — i.e., mandatory arbitration — can force itself on the firm. Yet the proposed law does not let any court block the deal or ensure that the mandated terms offer a reasonable return on its invested capital. (Even modern rent control statutes require that much.)

The government-chosen panel could well impose terms that might cripple the firm competitively. Consider that the takings clause surely prevents the government from forcing any person to buy real estate for twice its market value from a seller. That same principle applies to this labor law: No government should be able to force a firm to hire labor at $50 per hour when the company is not willing to pay half that much.

Memo to the UAW: When you’re negotiating with a judge, you might want to dispatch action teams to protect her tires.

Over at NaugBlog, Matt takes apart Governor Strickland’s claim that President Bush is to blame for the GM plant closings in Ohio. To build on his analysis, it’s interesting to read an editorial in Investor’s Business Daily that points out how unions in Ohio (and elsewhere) are a large reason why car manufacturing jobs are shrinking in the upper Midwest:

It’s tempting to blame automakers for [moving jobs to Mexico]. Indeed, they do deserve a big chunk of the blame for poor management decisions. And by far, their worst decisions yet came when they agreed to company-destroying labor pacts with the United Auto Workers union that practically guaranteed Big Auto’s demise.

We don’t fault workers for trying to get more in labor negotiations. But the fact is, past UAW deals have saddled U.S. companies with such high costs that they can no longer make cars here and compete on a global market. So they make cars elsewhere.

Like a coyote caught in a trap, U.S. automakers have been desperately gnawing off a leg to escape certain death. They’re closing plants and slashing jobs in Michigan, Ohio and other U.S. union havens, in favor of non-union, foreign places. Like Mexico and China.

Meanwhile, foreign companies have no problem making cars here. They do it in the non-union South, where the UAW is weak.

Though little noted, last year was a watershed for U.S. carmakers. For the first time, foreign producers in the U.S. made more cars — 54% of the total — than the former Big Three. As recently as the 1980s, Ford, Chrysler and GM made 73% of all cars here.

Why is this? U.S. carmakers pay their workers an average of about $73 an hour in wages and benefits — way more than others.

According to the Center for Automotive Research, there’s a $16.15 per hour gap between what Detroit’s Big 3 pay workers and what Toyota pays workers in the U.S. Add to that a $5 billion a year difference in health care and other retirement costs, totaling thousands of dollars in extra costs on every car sold, and U.S. automakers operate at about a $12 billion a year disadvantage.

It doesn’t take an MBA to understand this is an industry in peril.

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