As we watch the governments of the US and Canada doing back flips to ‘save’ the big three some things are becoming obvious. The first is that there is hardly a word about the non-unionized companies in that sector. They are also very large employers. Are they in similarly disastrous conditions and we just don’t care, or is there something else? Is it possible, that the unworkable system of large unions ultimately makes companies and entire industries so uncompetitive they cannot compete nor really satisfy the demands of the marketplace? Rudimentary reading of economics books describes the effect of cartels on the market they serve. Invariably, prices go up and quality and level of service go down. That is why most sophisticated nations have laws against the establishment of these cartels (including Canada and the USA). For some reason over the years we have chosen to exempt labor from Cartel classification. This might have been reasonable in the distant past but not any more.
Strong central union cartels destroyed the domestic Steel industry, Bankrupted all the airlines, and now the domestic Automotive industry. It is fascinating that foreign owned manufacturers can build internationally competitive products in North America in non CAW/UAW plants but the legacy manufacturers can’t. The hallmark of these problems is the Big Union. The power of a union is disproportional in capital intensive industries. Large corporations with enormous capital investments are saddled with large cash flow obligations unrelated to labor costs. If there is a strike, the union forgoes revenue for a relatively short time before the company starts to run out of operating cash. In the airline industry this time frame is short since it can’t rely on sales from inventories to provide cash flow. That is why all the airlines that are unionized will fail. Labor costs of entrenched airlines grow until fares have to rise so high that new non-union carriers can enter the market.
The automotive industry is a somewhat different model. The company can prepare for potential strikes by building excess inventory prior to and during negotiations. Sale of this inventory during a strike provides cash flow. The unions are keenly aware of this strategy and institute work slow downs and quality issues to reduce the impact. The advent of foreign imports and domestic non union produced automobiles have highlighted the failure of the existing north american unionized auto industry model. If the large american manufacturers had dedicated unions rather than the UAW cartel, competitive disadvantages would put each union under pressure. They would be threatened with both short and long term loss of market share.
Insanity is repeating the same processes and expecting a different outcome. That is what the governments are doing now. It can’t and won’t work. Great enterprises require both capital and labor. There is no future for either without the other. We as a society need to grow up and deal with reality. Everything that the dynamics described above has taught us about the private sector must be used when reviewing the public sector. If there is no competition and no risk of general failure, unions will use coercive practices to continually increase their share of the taxpayers money. This will be done without regard to quality or level of service. In the public sector, we must foster competition. It is the only way to insure fairness to all parties. This is most important in our investment in the future. Our young people are our retirement account. It behooves us to make them as productive as humanly possible. Leaving this task to the teachers’ unions (Cartel) has not worked well. This is just as we would expect since all cartels ultimately end up the same way.
What must we do? First, we need to establish the right of any citizen to apply for and compete for all open employment opportunities. We have to guarantee the right to association and to non-association. If union membership is attractive, the employee joins and accepts the rules and strictures of the contract. If a person does not wish to belong, there can be NO coercion. The Non union employee has the right to negotiate with the employer without interference. Unions and their members infringing on these rights must be subject to sanction as if it were a human rights discrimination. Next, all levels of government must be forced to contract out to competitive bid most if not all of its services.
In the USA there are 22 ‘Right to Work’ states. Their State productivity and job creation exceed those states without this right by almost 2 to 1.