Big Labor: the Good & the Bad

Being that yesterday was labor day, I would like to discuss the topic of labor. Regular readers of this blog know that I am a strong supporter of the free markets, however, I do understand the need for labor unions, primarily in industrial and lower wage industries. Let's face it, a battle between a rich corporation and an individual worker is not really a fair fight, particularly in situations where the employee has limited options for alternative employment. This is especially true in rural areas where a single large employer, be it a coal mine or an auto parts factory, can dominate the local economy. Workers can only hope to make an impact if they unionize. There is little doubt that the Labor movement has done a lot for the American worker, particularly when it comes to such basic worker rights as health care, paid time off etc.

However, very much like big business, when left unchecked labor unions can turn into an economic and political nightmare. Let me give you just a couple of examples to demonstrate my point: A friend of mine used to work for General Electric. He tells me that if he needed to move a computer monitor from one office to another, he would have to wait for the designated union employee to do the job, and he was not permitted to make the move himself. When there was no choice he resorted to posting lookouts at both ends of the corridor to ensure that no labor union representative saw him doing the unthinkable... actually moving his own monitor?!

This week's Business Week had an article about the dismal state of the U.S. air transportation infrastructure. According to the article, the technology exists to vastly improve this infrastructure, however one of the reasons for the delay in implementing this technology (among many other reasons), is that air traffic controllers are fighting hard against the implementation of this new, more efficient technology for fear it may make some of them redundant. The fact that the technology is both safer and more efficient is, apparently, of little consequence to them.

I have to admit that my position on the labor movement is ambivalent. On the one hand, there clearly is a need for a balance of power between workers and employers. Without this balance there is little doubt that employers would take advantage of their power (in certain industries) to drive down employment cost and boost the bottom line. On the other hand, I am firmly and completely against work rules and contract terms that prevent companies from operating more efficiently. That is, if the port of Oakland can install technology to more cost-effectively and quickly load and unload ships, it should be able to do so, regardless of whether some people may lose their jobs as a result. If my friend wants to move his computer monitor to the next office on his own, he should be allowed to do so.

This is not a selfish consumerist argument. It is an economic argument: in the long run, efficiency and progress will always triumph. By trying to prevent, for example, the adoption of a new technology that might make some union members redundant, the union is only giving business an incentive to undermine the union, or even worse, if the union is too successful they may even make their firm uncompetitive in the global market place, thereby threatening the very existence of their company. Think I am exaggerating? For years auto companies have been moving plants from Detroit to the Southern U.S. Labor busting is one of the main reasons for this trend. Unions in Detroit have been so successful in pushing for their aggressive labor agenda that auto companies are simply moving away. In fact, as they teach it in business school, one of the main reasons GM started its Saturn brand and built its auto plants in the South is its attempt to move away from the constrictive unions it deals with in Detroit.

Bottom line: keep the unions fighting the battles that they must fight: minimum wage increases, paid vacation and health care, non-discrimination battles. Let management make decisions that impact the efficiency and competitiveness of the business. While unions may see some short term gains by fighting to stave off efficiency and technology, in the long run they are only undermining their own cause.

Someone once told me that the only reason we have cars in the U.S. today is that horses and ponies did not have their own labor union. It's a joke. Well, mostly anyways.