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September 22 2011

Guess Who Is The Big Loser in the GM UAW Deal?

Carrie L. Lukas

Yesterday, the Wall Street Journal described negotiation's between General Motors and the United Auto Workers, which made it all sound very reasonable, with the unions taking slower wage growth and more "profit sharing," while allowing GM to try to transition some higher paid union workers, for more younger, lower paid ones.

These may be a fine deal, but Mickey Kaus mentions the elephant-in-the-room issue ignored by the Wall Street Journal:

How about paying back the $15 billion first? I'm sure there are sophisticated arguments for why the UAW members shouldn't pay back the taxpayers who bailed their employer out of bankruptcy before they negotiate a deal that gives them each a $5,000 bonus. I just can't think of them right now. ... Just from a PR standpoint, repaying the debt would seem like a good idea. ...

Sure, as a going concern, GM has to pay to keep its employees from bolting to a competitor. But what are the odds that most of GM's UAW workers (i.e, the ones not in the $14-an-hour Tier Two) could find jobs anywhere near as good as the ones they now hold? Almost all their leverage comes from the Wagner Act's power to strike and not be fired. Without Wagner, they'd be free to quit, which they would not do. (Go ahead. Make GM's day.)

It's one thing to give workers power to negotiate above-market wages through collective bargaining-hey, let them squeeze the bosses for all the bosses can bear. It's another thing when they squeeze more than the bosses can bear, the bosses go broke, and ordinary citizens, many poorer than UAW members, have to make up the difference.  After that, why let the UAW continue to extract Wagner Act wages as if nothing happened? ...

I couldn't agree more. And, as Kaus later implies, there's something fishy about the whole situation. Can GM real afford to give all sorts of bonuses and raises to their employees? Weren't they about to go belly up just a year or so ago? Can the whole auto industry dynamics really have changed that much?

Somehow I doubt it. As I describe in this paper, high labor costs are one of the ways that unions make companies, and our economy, less competitive.

What I don't doubt is that taxpayers are going to have to continue to make good on the "deals" reached by the likes of GM and and UAW. And that makes taxpayers the true losers in this grand bargain.


 
Independent Women’s Forum’s mission is to improve the lives of Americans by increasing the number of women who value free markets and personal liberty. Sister organization of Independent Women’s Voice.
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