The Drawbacks of Labor Unions

While unions are important, history has shown them to have inherent drawbacks. George Reisman, Ph.D., Professor Emeritus of Economics at Pepperdine University in his 2006 article provides a detailed explanation of why GM would be thriving without the existence of the UAW union. His points have been summarized below.

DRAWBACK 1: Unions limit quality of product/work by protecting unproductive, underproductive or useless workers. For example, GM was known for Monday morning automobiles. This refers to workers arriving intoxicated, late or not at all on Monday mornings and lowering the quality of the product they work on. What’s worse is that GM had to pay $140,000 ransom just to fire bad workers suspected of theft. Also, GM was forced to pay 2300 employees at the Oklahoma City plant full salary and benefits for doing, quite literally, nothing. These employees may have been good workers, but in this particular instance, they were useless. Similarly, I have heard eyewitness accounts of some Government of Ontario workers protected by the Ontario Public Service Union (OPSEU) who make over $80,000 CAD a year and show up to work for an average of three hours a day. Keep in mind that these people are being paid with taxpayer dollars.

DRAWBACK 2: Unions set productivity to that of the weakest worker which has a negative effect on the company and stronger workers. Combine this with periodically increased wages and workers have no need to excel. Innovation is, thus, restricted. A lack of innovation hurts the company almost as much as bad employees do.

DRAWBACK 3: Unions sometimes work deals for their members that are detrimental to the company. GM pays Wisconsin employees $72 per hour. One merit of unions is that they are checks against CEO overpay, but this is going towards the opposite extreme. GM pays healthcare obligations that amount to $1600 per vehicle that they make. This amounts to GM losing $1200 per vehicle produced.

DRAWBACK 4: Unions force employees to pay a portion of their paycheque as mandatory union dues which the union then spends as its leadership sees fit. Governor Chris Christie of New Jersey eloquently summarizes this drawback in his June 6, 2010 speech against the state teachers’ union. When people are forced to join unions and unions decide to strike, all members will not agree with the decision. It means that members that did not even want to strike have to deal with the consequent temporary pay cut. They have to picket for a cause that they do not believe in. If they want to work, they have to deal with harassment from their fellow members.

GM has been demonized for outsourcing its manufacturing to developing nations, but it only makes sense to leave an environment hostile to your business’s success for a more profitable one. The unfortunate result is the abysmal wages of manufacturing sector workers in developing nations.

Unions are important, but they should not take on a totally adversarial role in their dealings with management. The unions and management of GM could have worked together to create a situation that would be beneficial for both parties. Maybe that would have meant that GM workers would not have received increased wages as often as they would have liked, but that would be a better situation than no job at all.

The Bible instructs us to show no partiality in judging (Deuteronomy 1: 16-17, Proverb 24: 23). The post entitled, “The Merits of Labor Unions” in conjunction with this one has shown both sides of the case of labor unions so that readers can judge them fairly.

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