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Killing The Goose

Comment

Killing the goose that lays the golden egg is one of those old fairy tales for children which has a heavy message that a lot of adults should listen to. The labor unions which have driven the makers of Twinkies into bankruptcy, potentially destroying 18,500 jobs, could have learned a lot from that old children's fairy tale.

Many people think of labor unions as organizations to benefit workers, and think of employers who are opposed to unions as just people who don't want to pay their employees more money. But some employers have made it a point to pay their employees more than the union wages, just to keep them from joining a union.

Why would they do that, if it is just a question of not wanting to pay union wages? The Twinkies bankruptcy is a classic example of costs created by labor unions that are not confined to paychecks.

The work rules imposed in union contracts required the company that makes Twinkies, which also makes Wonder Bread, to deliver these two products to stores in separate trucks. Moreover, truck drivers were not allowed to load either of these products into their trucks. And the people who did load Twinkies into trucks were not allowed to load Wonder Bread, and vice versa.

All of this was obviously intended to create more jobs for the unions' members. But the needless additional costs that these make-work rules created ended up driving the company into bankruptcy, which can cost 18,500 jobs. The union is killing the goose that laid the golden egg.

Not only are there reasons for employers to pay their workers enough to keep them from joining unions, there are reasons why workers in the private sector have increasingly voted against joining unions. They have seen unions driving jobs away to non-union competitors at home or driving them overseas, whether with costly work rules or in other ways.

The old-time legendary labor leader John L. Lewis called so many strikes in the coal mines that many people switched to using oil instead, because they couldn't depend on coal deliveries. A professor of labor economics at the University of Chicago called John L.

Lewis "the world's greatest oil salesman."

There is no question that Lewis' United Mine Workers Union raised the pay and other benefits for coal miners. But the higher costs of producing coal not only led many consumers to switch to oil, these costs also led coal companies to substitute machinery for labor, reducing the number of miners.

By the 1960s, many coal-mining towns were almost ghost towns. But few people connected the dots back to the glory years of John L. Lewis. The United Mine Workers Union did not kill the goose that laid the golden eggs, but it created a situation where fewer of those golden eggs reached the miners.

It was much the same story in the automobile industry and the steel industry, where large pensions and costly work rules drove up the prices of finished products and drove down the number of jobs. There is a reason why there was a major decline in the proportion of private sector employees who joined unions. It was not just the number of union workers who ended up losing their jobs. Other workers saw the handwriting on the wall and refused to join unions.

There is also a reason why labor unions are flourishing among people who work for government. No matter how much these public sector unions drive up costs, government agencies do not go out of business. They simply go back to the taxpayers for more money.

Consumers in the private sector have the option of buying products and services from competing, non-union companies— from Toyota instead of General Motors, for example, even though most Toyotas sold in America are made in America. Consumers of other products can buy things made in non-union factories overseas.

But government agencies are monopolies. You cannot get your Social Security checks from anywhere except the Social Security Administration or your driver's license from anywhere but the DMV.

Is it surprising that government employees have seen their pay go up, even during the downturn, and their pensions rise to levels undreamed of in the private sector? None of this will kill the goose that lays the golden egg, so long as there are both current taxpayers and future taxpayers to pay off debts passed on to them.

Thomas Sowell is a senior fellow at the Hoover Institution, Stanford University, Stanford, CA 94305. His website is www.tsowell.com. To find out more about Thomas Sowell and read features by other Creators Syndicate columnists and cartoonists, visit the Creators Syndicate Web page at www.creators.com.

COPYRIGHT 2012 CREATORS.COM



Comments

3 Comments | Post Comment
The amount of increase in my public saftey pension over 20 years has been incredible. Mr. Sowell, as always, is correct once again.

At the time of retirement, there was no escalator clause, the pension was fixed. If you retired at 20 years, the amount received was something yet it was up to the individual to find something else to do.

The AFL-CIO is lead by communists, it is not hidden, it is out in the open. In the service, we fought communism. These bastards are destroying the country just like Abraham Lincoln stated in the 1838 Lyceum address.

Visit www.publicsafetyveterans.com
Comment: #1
Posted by: Louis A Mindes
Tue Nov 20, 2012 10:19 AM
"But some employers have made it a point to pay their employees more than the union wages, just to keep them from joining a union." Yeah, that happens all the time... on Bizarro world.

Private sector labor unions--which gave us the 8 hour workday and the 5 day work week, among other benefits--have been almost completely driven out of existence. Talk about whipping a dead horse...

As for Hostess, do ya think that they just might be having problems because their products 1) taste awful and 2) are unhealthy. Naw, that would the free market in action, not the union bugbear.
Comment: #2
Posted by: Geoffrey James
Tue Nov 20, 2012 12:54 PM
Hello Mr. Sowell. I read your column periodically; today I read the one entitled “Unions too often kill the goose that lays the golden egg”. I agree with most of what you have said in this article and especially the sections about how unions end up costing not only the employer but all of us in some way. Their intent is good but they have evolved into an entitlement group which just doesn't work. There are comments you made about government worker's pay that are inaccurate, at least in the broad sense, and I thought you should know about it. There is much more involved with government compensation.
There is more to the story about government worker's pay than you mention in the article and, frankly, your statement that government worker's pay has gone up even during the downturn is not true, at least not where I work. In 2009/2010, our pay was reduced by 9%+ for one year and we took furlough days as “compensation” for the pay cuts. For 2010/2011 and 2011/2012 we had, and still have now, 5% pay cuts. So, for three years now not only have we had no pay raises, we've had pay cuts while we watch the price of gas, electricity, food and most everything else rise. Now, we are civil service employees, expected to share in the pain and we have done that. Meanwhile we see raises going on in private industry, companies making good profits again and we still have pay cuts. Now, here is where it gets interesting from my perspective at least. Here is where governments who pay employees the way the one I work for does could in fact save lots of money and, at the same time, become better, faster, smarter and more efficient.
The pay scales are the real problem. You see, we have a problem getting smart, talented employees because of the low starting pay for professional staff. Clerical staff with 20+ years' experience with the city make more than professional staff with less than 5 years' experience. I've seen several good candidates turn down job offers from us because the pay is just too low. Why is that? The union pay scale is heavily weighted toward how long you have been with the government instead of toward the work you do. For example, I came to the government with 20+ years of financial management experience, granted most of it wasn't governmental work other than audit work I had done with two CPA firms after college. I took a job that was open to get started with them in late 2008 during the “Great Recession” and then when a higher level one came along I applied for and got that job. Now, there are 5 others in the city I work for with the same job title and we all do essentially the same work but for different city agencies with different functions. And, the other 5 people who do the same thing I do make as much as $30k more than me simply because they've been there so long. Same work, very different pay. You start out at the bottom when you arrive, that is the union pay scale that rewards warming a chair.
I have a staff of accountants under me, one who is 2nd in command. Because I came from outside the city, I start out at the bottom of the scale for my grade. My #2 guy who has been there for almost 30 years makes more money than I do simply because he has been there so long. I have all the responsibility and he makes more money because of the union pay scale. By the way, we have no choice but to pay union dues even if we don't join the union, they take the dues anyway. I refuse to join because it is unfair. I'm toward the end of my career but someone with more than 10 years to work probably would not have taken the job I did because they could get so much more money on the outside. Now, here is where it gets even more interesting.
Clerks, clerks who process payment documents and secretaries who have been with the city for 20 or more years make more money than professional accountants with 0-5 years' experience. We have secretaries making over $50k simply because they've been there so long! I'm not talking about so called executive secretaries such as for the mayor. These are your garden variety secretaries.
What is the real issue? It is not pay raises, it is the structure itself. The unions and government officials need to sit down and revamp the compensation package, reduce paid time off and ditch the salary plan and start over. The plan has to reward work done well vs. rewarding someone for just occupying a chair for many years. I see plenty of dead weight where I work. As everyone knows, unless the dead weight commits a crime or uses drugs on the job their job is safe with the union protecting them. The original purpose of unions, so I've read, was to protect workers from overbearing employers and poor working conditions. Perhaps that part of a union's purpose today is still valid but major changes need to take place to make governments more efficient with taxpayer dollars. There is much to be saved for taxpayer's in terms of dollars and quality of services if government jobs were sought out more by talented employees because compensation packages were more attractive and good, hard-work was rewarded similar to private industry.
Comment: #3
Posted by: Mike Richards
Sat Nov 24, 2012 12:05 PM
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