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The Daily Capitalist: Unions vs. Workers
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.
» wrote on 09.07.09 @ 04:23 AM
Hi Jeff,
Unions do get out of control, but businesses do too. American businesses have shipped American jobs over seas to make a few more dollars profit. Solid American family Businesses like Stanley Tools struggled to compete, but finally gave in. Many solid American companies have failed as competitors flood the market with “bargains” made by cheap, often abused labor. China has learned much faster than Japan to make good products, often with American exported know-how.
So what do we have today? Many good paying American jobs gone, unemployment, families working many jobs and still not making ends meet. We have Wall Street capitalists making billions for their “wise” leadership. Where Jeff, is that money coming from?
That is money that American workers could have been paid, enabled families to send their kids to college without going deep into debt and consider retirement. Those American dreams are gone for many Americans whose good jobs have been shipped overseas for a couple more bucks profit. And how about Portland Power? Enron (remember Kenny Boy Lay) bought them, gutted their workers pension plan and left those workers without their hard-earned pensions?
Henry Ford was reviled by his competition for paying his workers enough money to buy a home, send their kids to college and BUY FORD CARS. Henry was far from being a communist, but he did understand giving his work force a decent shake might be profitable. And The Ford Company today is surviving.
» wrote on 09.07.09 @ 07:44 AM
As the old saying goes, “Most companies that end up with a union deserve it.” Our own News-Press seems to be a case in point.
Also, Mr. Harding, I can’t help but wonder if your “strong affinity for free-market economics” hasn’t been severely tested since the Wall Street meltdown. Most economists seem to agree that the markets require some degree (and in some cases, a lot) of regulation to function ethically and efficiently. Your response?
[Noozhawk’s note: How about writing one?]
» wrote on 09.07.09 @ 09:45 AM
The first two commenters here sum up the problem with unions, the attitude that all business is greedy and evil and must be fought every step of the way. The example of Ford by Ron is good. It typifies something most leftist still don’t get, choice. Ford CHOSE to pay what he did. The leftist mentality is “if I think its good then you have to do it”. The response, of course, is “stick it in your ear!” And thus goes the battle. Those who fight to demand and those who fight to chose.
» wrote on 09.07.09 @ 10:01 AM
The unions are chasing million of jobs to other countries—Go Union Go broke- America’s new slogan…Go union Go broke—Auto-Airlines-Mining-Steel—Government-travel-trains—Manufacturing-shipping—all broke because of unions—they ONCE had a place 100 years ago—now we have government agencies protecting the workers—Too many—
» wrote on 09.07.09 @ 11:56 AM
We should lower our minimum wage to below what the Chinese pay so those jobs will come back to America. We could then get people to work for a couple bucks a day if they are really willing to work.
It is the CEO’s who risked their inheritances that have made America great. They deserve the hundred or thousand times what their workers get. Jobs are created building mansions, yachts and executive jets.
It gives our children something to aspire to.
» wrote on 09.07.09 @ 12:55 PM
To Ron Dexter,
I hope you are kidding with your last comment? Presently, if an individual works for minimum wage for 40 hours per week they qualify as being below the poverty line and can receive food stamps. There is something wrong with the government subsidizing big businesses like Walmart. People hold up free enterprize businesses such as Walmart that create all of these jobs but what they do not realize that a good percentage of their employees receive no benefits and need food stamps to get by. These people turn around and can only afford to shop at places like Walmart so it becomes a self-fulfilling prophecy.
» wrote on 09.07.09 @ 07:53 PM
**IRONY ALERT**
The Socialists are at it again. Like Friday the 13th movies, just when you killed the guy with the goalie mask and turn your back you get it in the back. Damn their outmoded ideas. I just hope we can keep them out of the classroom next week.
**IRONY ALERT OFF**
Oh speaking of outmoded ideas: Paul Krugman has some nominees in the New York Times Magazine Sept. 6, 09. The Chicago School is up for best semi-original screenplay.
» wrote on 09.07.09 @ 10:30 PM
The unions must realize we must be competitive, and break the union strangle hold of corruption—Lawyers and unions are destroying America..we all know that—
» wrote on 09.09.09 @ 08:55 PM
The corruption amongst investors like Jeff Harding far exceeds that of the unions.
$23.7 trillion is how much guys like Jeff Harding extorted from the taxpayer during the financial crisis of the past year.
Jeff Harding isn’t even honest enough to post all of his financial transactions so we can see how much he benefitted from the taxpayer bailouts of AIG, Citigroup, etc.
He has no standing to judge any financial or economic corruption. When guys like him wear orange jumpsuits and have cellmates named Spike this will be a better country.
» wrote on 09.14.09 @ 11:36 AM
Publius: Sigh ... And what’s with the name? Do you claim to represent the public?
To Ron, AN50, and others: Thanks for your comments. I will say that American businesses didn’t “ship jobs overseas.” They just failed to compete against more aggressive companies with lower wages.
I guess I would have to ask: would you voluntarily pay more for goods made in the USA? Whose ox do you gore? The consumer for saving money or the worker whose wages were too high? And, if it’s the worker, what about the poor consumer?
We’ve been “exporting jobs” for about 25 years, yet employment, wages, and GDP has been growing during that period. (Yes, Publius, there have been ups and downs, thank you.)
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