This story about Mercury Marine is one of the more fascinating events that has come out of our economic crisis. The players in it are die-hard labor unionists, misled workers, a major company, and two cities desperate for jobs.
Let me first state my position on labor unions: these organizations today exist only because of government legislation, are founded on socialist principles, have become corrupt in not only their ideals but, as has been shown many times, are legally and morally corrupt, and have done a disservice to their members by reducing employment opportunities. It is no coincidence that union membership has plummeted over the years. In 2008 union membership was 12.4 percent of the workforce, down from 20.1 percent in 1983 and down from about 33 percent in 1945.
I will further state that modern unions have never existed for the benefit of workers. During the bad old days when corrupt corporations harnessed the coercive power of corrupt governments to defeat unionization, unions served a purpose. This was not laissez-faire capitalism by the way. The National Labor Relations Act (1935) shifted the balance of coercive power in favor of the unions. If you disagree with this perspective you can stop reading this now because you won’t like the outcome of this story.
As Joe Barrett of The Wall Street Journal wrote Friday:
FOND DU LAC, Wis. — As union workers at a Mercury Marine outboard-engine plant here vote on a contentious new contract, the fates of two cities hang in the balance.
This city of 43,000 on the southern tip of Lake Winnebago stands to lose many of Mercury’s nearly 2,000 union and other jobs if workers reject the contract for a second time in less than two weeks. More than 800 miles away, Stillwater, Okla., a town of about the same size, is waiting to see if it will pick up many of those jobs or lose most of the 385 jobs at Mercury’s plant there.
“It’s an emotional time for both communities,” says Tim Lakin, Fond du Lac’s city council president.
In an added twist, the battle in Wisconsin is being led by workers who acted without the backing of their own union in a desperate attempt to save their jobs.
Let’s set the scene:
Mercury is Fond du Lac’s largest employer and has produced outboard motors there for nearly 70 years. Mercury’s jobs are critical in a city where unemployment hit 11.4 percent in July, up from 5.4 percent a year ago, according to the Wisconsin Department of Workforce Development.
The Machinists union representing the Mercury workers misjudged the company badly. The company wanted steep concessions in wages, work rules and greater worker contributions for health benefits, among other things. The union recommended against it and the members voted the proposal down. The same night as the vote, the company announced it was moving 850 jobs in Fond du Lac to its nonunion plant in Stillwater. Another 900 jobs were on the block.
The workers and the union were stunned. Stillwater was elated. A couple of workers, independent of their union, started working the phones and gathering signatures to have another election, but there were flaws in the petitions. So they tried again, got the signatures, but the vote couldn’t be done in time to meet the deadline.
The company agreed to allow the union to stage another vote, and, miracle of miracles, the members voted in favor of the deal offered by Mercury.
The revamped agreement repeals 2 percent pay raises in each of the last two years of the contract, which was to expire in 2012, freezing wages for seven years. It boosts health-care costs, changes work rules and cuts pay 30 percent for new hires and laid-off union members called back, the company and union said.
Mercury Marine, the world’s largest maker of boat and recreational marine engines, said it has to eliminate production capacity because of the economic downturn and a shrinking market for recreational boats and motors.
Without the concessions, the company said it would have shifted work to Stillwater. That plant has 380 manufacturing jobs.
Steve Kirchhoff, 50, has worked at the Fond du Lac plant for 16 years, and he anguished over his vote Friday, refusing to divulge it because he’s a union representative. He called the vote a choice between deciding to amputate your legs or behead yourself. “Cut your legs off, you got a chance to live,” he said. “Cut your head off, you’re dead.”
The only winner was the company, he said. “They extorted Stillwater,” he added. “They extorted Fond du Lac. They extorted us.”
This article reveals several things about unions:
» Workers will act in their own self interest, even if their union leaders are clueless.
» Unions are misrepresenting membership benefits to workers. While most workers understand this (see falling union membership, above), the position of the Machinists union here would have reduced jobs for its members.
» Remember, companies do not dictate the cost of labor (wages), consumers do so in their everyday market decisions in buying products. All things being equal, consumers will buy the lower-cost product. If the cost of union labor exceeds the market price for labor, then unions will cause manufacturers to leave, quit, or go belly up. Ask GM about this.
» Most ardent members of unions and their leadership fail to understand basic economics, and, for the most part, their ideas are the leftover failed concepts of the socialist labor movement of years ago.
Steve Kirchhoff, the union representative in the Mercury dispute, has it all wrong. Kirchhoff is focusing on the negative. He apparently fails to see that Fond du Lac still has jobs.
— Jeff Harding is a principal of Montecito Realty Investors LLC. A student of economics, he has a strong affinity for free-market economics. This commentary originally appeared on his blog, The Daily Capitalist.