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Friday, October 12, 2007
Linda Chavez :: Townhall.com Columnist
Profits, Not Unions, Save Jobs
by Linda Chavez
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Workers at Chrysler's U.S. plants went back to work six hours after the United Auto Workers union struck the automaker this week. The once powerful UAW, which in its heyday had more than 1.5 million members, used to be able to bring Detroit to its knees. No more. Today the UAW claims only 640,000 active workers, and its major goal in negotiations with the big car companies is to keep that number from shrinking. But the battle ultimately may be a losing one -- and the union is largely to blame.

It costs Chrysler an average of $75.86 an hour to employ each worker, according to the Associated Press, which is the highest in the American auto industry. The costs include not only what goes into the average worker's paycheck, just under $29 an hour, but more importantly the contributions the company makes to employees' health and retirement benefits.

Like General Motors, which settled after a two-day strike last month, Chrysler also pays retirees' health care, a roughly $19 billion liability. Chrysler's agreement with the union included a promise to create a health care trust similar to the one GM and the UAW set up to take over that company's $55 billion liability for the retiree health care program.

Last year, GM lost $10.6 billion, while the Chrysler division of DaimlerChrysler -- the German company that owned Chrysler until it was sold recently to a private equity firm in the U.S. -- lost $1.5 billion. Companies that lose money can't continue to increase salaries and benefits, much less pay out billions in benefits to people who no longer work for the company. But unions rarely demonstrate an understanding of this basic economic fact.

Even harder for unions to grasp is that there is no such thing as job security. Sure, a company can foolishly promise never to lay off workers, but it can't keep its promise if it doesn't make a profit. And unless productivity rises -- which means producing more with fewer workers -- profits will decline.

So what's a union to do? As the UAW's short-lived strikes against GM and Chrysler this fall demonstrate, trying to force employers to make concessions that are economically unfeasible doesn't work anymore.

Unions would be far better off abandoning their adversarial role and trying to become helpful partners with employers. It's in everyone's interest -- from the lowest-paid worker to the CEO -- that a company maximizes its profits.

But doing this would require unions to abandon outdated work rules, which prevent union members from doing jobs outside their specific category, working flexible schedules without demanding overtime or sitting on employer-employee committees except those sanctioned in collective bargaining. As a result, non-union companies often offer workers more individual choice.

In a non-union environment, a mother who wants to work a few extra hours one week in order to take time off to attend a school activity the next can do so without making it more expensive for the company through mandatory overtime pay rules. Similarly, unions prevent employers from rewarding the best hourly workers with bonuses and other special benefits outside the contract, and they won't allow penalizing, much less getting rid of, slackers. But a non-union company can reward innovation and industry among its workers.

The most constructive thing unions could do to help their current members is to ensure that those workers are more, not less, productive. But even a union's best efforts to hold onto its members' specific jobs won't stop capitalism's creative destruction engine. Some jobs in some industries will always be lost in order for other jobs to be created.

The UAW's new contract with GM promises to limit outsourcing of certain jobs and commits the company to hiring 3,000 temporary workers as permanent employees. The union hasn't yet made public the details of its deal with Chrysler, but it's a safe bet they've attempted a similar bargain there.

In the end, however, it will be the companies' profitability, not the union's efforts, that will keep good-paying jobs available for those workers.

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About The Author

Linda Chavez is chairman of the Center for Equal Opportunity and author of Betrayal: How Union Bosses Shake Down Their Members and Corrupt American Politics .

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©Creators Syndicate
Subject: Unions and politics
I have someone in my family that is in a union. Initially he was touting the union as the best thing for the worker and then he started having problems. He went to a meeting and was asked to display his voter registration card. This union requires the members to registter to vote. On paper they claim that they do not care what party you register under only that you have a card. My relative found out in short order that if you are registered as an independent or a democrat no problem and you have plenty of work. If you are registered as a Republican you do not get the hours.

Also, his local supports political measures to assist illegal aliens. He told me that this makes no sense because illegals take work from them and depress wages.

The public sector unions
Will eventually go the way of the auto workers unions because they are totally divorced from reality. Our city council has had to face a voter-initiative tax cap that passed with a huge majority and the unions grumble that they can't get raises. Our borough (like a county) has the same issue affecting the school district and many other service sectors. Recently, the voters initiated property tax relief and refused a sales tax to make up for the loss. What does this all add up to? Well, the voters are demanding that the cost of services comes down and that means "profits" are being squeezed. Eventually, the wages of some government workers will go down because the revenue stream is being curtailed. We've already seen it not go up and that's a good start.
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