Clueless Labor Leaders
In a speech to Jesse Jackson's Rainbow/PUSH Coalition, Change to Win coalition chair Anna Burger blamed two culprits for the collapse of unionized industries: “We've seen it first-hand as one American industry after another — first steel, then the airlines, now auto parts — has found itself in crisis as a result of either globalization or mismanagement, or both.” While both certainly create challenges for many businesses, there's a third element that Burger didn't mention: Union contracts that are out of control. Consider the following about each of these famously unionized industries:
In 1994, Forbes magazine wrote that after World War II, “U.S. steelworkers became the highest paid in the world and among the least productive.” One example of steelworkers' unusual economic situation: Starting in the 1960s, the benefits extended uniquely to steelworkers included a thirteen-week sabbatical every five years for senior workers. The result? “McDonald & Co. analyst Mark Parr estimates it costs unionized steelworkers $70 to $105 in labor to produce a ton of basic sheet steel vs. a nonunionized mill's labor costs of $15 or $20 per ton,” according to a 2001 Pittsburgh Post-Gazette report.
Under United Airlines' last pre-bankruptcy contract, the company's pilots flew an average of 36 hours per month, according to the Chicago Tribune. In the final quarter of 2002, when United finally declared bankruptcy, the only airlines operating profitably were AirTran, JetBlue, and Southwest, for whom the average pilot flew 54, 57, and 61 hours a month, respectively. Delta and Northwest — now both in bankruptcy — averaged only slightly better than United, at 41 and 42 hours per pilot, respectively, throughout 2002.
As a result of its United Auto Workers-brokered “job security“ agreement, in 2005 Delphi paid around 4,000 workers (almost 10 percent of its U.S. workforce) not to work. The Detroit News reports that this arrangement is projected to cost Delphi $630 million over the next four years. The problems facing Delphi — a spinoff from General Motors — reflect the challenges facing the entire U.S. auto industry. The Detroit Free Press reported that paying 1,100 Ford employees not to work cost the company $140 million annually. With the announcement in January that it will lay off 25,000 to 30,000 employees, Ford has set aside another $250 million dollars to buy out employees who would otherwise be paid to do no work. The News wrote: “By making it so expensive to keep paying idled workers, the UAW thought Detroit automakers would avoid layoffs. By discouraging layoffs, the union thought it could prevent outsourcing. That strategy has worked but at the expense of the domestic auto industry's long-term viability.” General Motors is not faring much better. With 5,000 workers in GM's jobs bank, The Wall Street Journal reports that the market puts odds of a GM bankruptcy at about 40 percent.