Not Just Public Unions: Private Sector Unions Hurting Business

Posted: Aug 13, 2012 3:34 PM
Not Just Public Unions: Private Sector Unions Hurting Business
Once again, big labor has shown that it can’t play nice. On Wednesday, American Airlines’ Allied Pilots Association (ALPA) rejected a concessionary contract offered by management. The contract included pay raises and a 13.5 percent stake in the company, but that apparently was not enough.

Companies across the country have been forced to tighten their belts as profit margins disappeared during the recession, yet union workers have largely escaped any impact on their pay or benefits – even if that meant the company they worked for was put at a competitive disadvantage or even forced into bankruptcy.

This is nothing new—routinely, across all industries we have seen unions fight tooth and nail for implausible contracts, while scoffing at those deemed reasonable by most everyone but themselves. In Chicago, for example, Hyatt employees refused to accept the same terms as their counterparts at Hilton and Starwood, staging a weeklong strike in order to strong-arm their employer into making a deal that, frankly, didn’t make economic sense. Because of the significant amount of power union bosses have obtained, if Hyatt’s employees can’t compete, then Hyatt will be forced to disappear – and their employees will wish they had their jobs back.

It is no wonder why America’s support for unions is dissolving. According to a September 2011 survey by Gallup, 42 percent of Americans – an all-time high – want unions to have less influence. Moreover, most Americans believe union bosses look out for their own, but think labor unions do damage to the U.S. economy and actually hurt other workers who are not union members.

Currently, American Airline’s labor cost represents 28 percent of its revenue—the highest of any major carrier, and consequently American pays approximately $600 million more in wages than its competitors do. These figures capture the extreme competitive disadvantage American’s current labor contracts are responsible for. Other carriers have gone bankrupt and renegotiated contracts that are mutually beneficial to both labor and management. Having never gone bankrupt, American has held out as long as it could, and the carrier cannot move forward with its present labor cost structure.

The day after ALPA rejected the deal, the group’s president David Bates, considered by many to be an agreeable and pragmatic leader, was forced to resign because he had supported the deal that 61 percent of his pilots opposed. Bates felt that American Airline’s offer was the best possible option, and he appears to be right. After the vote, American requested that a federal bankruptcy judge allow it to revert to the contract terms of an April offer, which included smaller pay raises and no stake in the company.

Over the last three years, thousands of companies have been forced to freeze wages or reduce benefits – not because they wanted to, but because the economy dictated that they had to. Those companies with union employees have not been allowed that flexibility and it’s bankrupting America. It’s time for the ALPA and big labor to face America’s economic reality and make the concessions (i.e., smaller pay increases) that are necessary to keep America running.