Collective bargaining, unnecessarily high wages stifle business success, profit
Unions have played an important role in American history, especially in the early 1900s when large companies often took advantage of workers. At that point in time, unions were crucial in establishing workers’ rights. Unions helped magnify legislation that reformed hazardous and unhealthy work places. However, in recent years businesses in certain industries, like the car and aerospace industry, have struggled to maintain the balance among unions, management and collective bargaining.
If recent history is an indicator, then the Boeing Company should do everything it can to avoid having an International Association of Machinists and Aerospace Workers (IAMAW) presence at its new plant in Charleston, S.C. Just take a look at the 2008 car industry meltdown, in which the auto companies had little flexibility to cut benefits or wages when the recession began. This was because the union contracts required certain pay, vacation and retiree benefits. They were stuck paying benefits they could only afford during a booming economy.
Unions negotiate wages higher than non-union wages. High wages negotiated by unions create a situation that handcuffs businesses because they are now obligated to pay higher wages and future pensions. This creates a situation in which businesses have higher future expenses so they cannot commit to hiring more employees, and then they end up stuck paying for benefits they cannot afford. Businesses don’t want to end up like ArcelorMittal, one of the largest steel companies in the U.S., which is begging the union workers to take a 36-percent pay cut. The company said the global recession has hurt sales and that they need to lower wages and benefits to remain profitable. It’s just one example of many of a company struggling to remain profitable due to the high union costs.
Unionized businesses also have trouble firing employees due to collective bargaining agreements. This can create an environment where, even if an employee’s performance is problematic, it becomes difficult to fire him or her. It lowers the incentive to perform at a high level because the employee realizes his or her job is safe. Just look at teachers unions. In major cities, only one out of 1,000 teachers is fired due to performance reasons. Look at Chicago from 2005 to 2008, when one in four kids close to graduation did not meet the expectations of the state’s standardized test, yet only 0.1 percent of teachers were dismissed for performance reasons.
Teachers may not have full control over their students’ performance, but they certainly have a large impact.
If the Charleston plant unionizes, then IAMAW would gain significant control and power over both Boeing plants in the U.S. The freedom to hire and fire, to establish wages commensurate with the present economy and to determine sustainable benefits packages that is so critical to Boeing’s and other major manufacturers’ future success would be jeopardized.
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