What role for unions in NC?

I appeared on WUNC-FM's "The State of Things" today, along with Jeff Hirsch, associate dean at the UNC-CH law school.  The first ten minutes of the clip is an interview with Keith Ludlum, who led the battle to organize employees at Smithfield Foods.  Jeff and I engage at 10:20.  By the way, I am a labor economist not a labor lawyer!

Interesting point that emerged from the discussion is that once Smithfield was organized by the United Food and Commercial Workers Union, the plant remained economically viable.  In fact Smithfield as a whole did so well that it was bought out by a Chinese company.  One has to ask what was the ROI on all of the money Smithfield spent to keep the union out.

Another blow to the UAW

The last 40 years have been pretty tough for the American Big 3 automakers and the United Auto Workers.  First came Japanese imports, followed by outsourcing and Japanese and European transplants.  Once the Big 3 and UAW had a monopoly chokehold on the auto consumer; now their market share is well below 50%.

The UAW's only hope for survival is to organize the transplants.  They had a golden opportunity with the Volkswagen plant in Chattanooga.  Volkswagen offered no resistance to the UAW; in fact, they gave it an open mike to promote itself.  But just like a Road Runner cartoon, the outcome in Chattanooga was the same as in other big union organizing campaigns -- the workers chose to remain nonunion (WSJ report here).

In retrospect, the outcome is no real surprise.  VW workers were earning almost as much as their Big 3 counterparts (new hires at VW actually make more than their Big 3 counterparts), so why pay union dues?  Also for better or worse, the UAW has earned an anti-management reputation and receives much of the blame for the demise of the Big 3.  (Aside: making lousy cars also played a role.)  Bottom line: the VW workers weren't buying what the UAW was selling.

Feds to Boeing: we'll tell you where to build new plants

Whenever the Presidency changes hands, so to does the composition of a wide range of regulatory agencies and boards.  Democrats now call the shots at the National Labor Relations Board, which has historically administered union elections and adjudicated claims of unfair labor practices by either companies or unions.  Section 8 of the National Labor Relations Act identifies these unfair practices by employers as follows:

Employer interference, restraint, or coercion directed against union or collective activity (Section 8(a)(1))
Employer domination of unions (Section 8(a)(2))
Employer discrimination against employees who take part in union or collective activities (Section 8(a)(3)
Employer retaliation for filing unfair-labor-practice charges or cooperating with the NLRB (Section 8(a)(4))
Employer refusal to bargain in good faith with union representatives (Section 8(a)(5))

What did Boeing do to get in trouble?  Fire union organizers? Refuse to negotiate a new contract?  Nope.  NYT and WSJ report that Boeing had the audacity to open a plant in South Carolina to produce three more 787 Dreamliner planes per month.  The Machinists union protested to the NLRB, which issued an unfair labor practice complaint this week that, if enforced, would require Boeing to move this new capacity back to Washington state.

Never before has the NLRB or, for that matter any federal agency that I am aware of, questioned a corporate plant location decision.  The NLRB claims the move to SC interferes with workers' right to strike.  Some inconvenient truths:

1. The Machinists union has full rights to organize the South Carolina workers once the plant opens; they can have the right to strike -- if they want it
2. Unionized Boeing employment in Washington state has actually increased by 2000 since the decision to open the new capacity in SC
3. Boeing endured a 58 day strike in 2008, leading them to shift new capacity to a different location
4. If the Machinists and NLRB get their way, Boeing will open its next new plant overseas and the US will lose one of the few key manufacturing industries where it still holds a comparative advantage

Boeing has hired 1000 new workers for the SC plant which is scheduled to open in July.   Boeing called the NLRB action "legally frivolous" and a "radical departure" from legal precedent.

More union unrest -- this time it's on the gridiron

Yesterday the NFL and its players union broke off talks, the union dissolved itself and the owners locked out the players.  A few observations:

• The dissolution of the union is a bargaining ploy that will allow 10 players (including Tom Brady, Peyton Manning and Drew Brees according to NYT) to sue the NFL for antitrust violations.   Antitrust cases and possible appeals can take 5 to 10 years to be litigated.  I doubt the owners are worried about this. 
• Today's WSJ says that the average career of an NFL player is 3.5 years.  The players are not likely to support a season-ending strike.  
• The owners are offering less money and a longer season.  The league is enjoying record-high levels of fan support and revenue.  The players know that better offers will eventually be made. 

Strikes rarely make economic sense because they prevent both sides from enjoying gains from contracting with each other.  Also strikes in the US are quite rare; we are not France or Argentina.  Panthers fans beware -- I bet the regular season starts on schedule.   

First Tunisia, then Egypt, now Wisconsin

Government workers are the last bastion of union strength in the US.  In a previous post I noted that this was likely to be a challenging year for public employees and this week's events in Madison are probably just the tip of the proverbial iceberg.  I never would have guessed that the first confrontation would happen in Wisconsin, which was the first state to allow public employees the right to bargain collectively in 1959.  But the scenario in Wisconsin mirrors what we are likely to see in many other states: a governor who is serious about the state budget and newly elected legislators who owe their support to the various Tea Parties. 

The situation in Wisconsin is not without irony.  Historically, unions organized low to middle income workers in production occupations and often had to take extreme steps such as strikes or sit-ins to obtain company recognition.  In this case we see mostly upper middle income types (according to one blogger, the average Wisconsin teacher makes $78k in salary and benefits for 9 months work whereas the average Wisconsin household makes $52k in money income excluding benefits) conducting sickouts and sit-ins to maintain their relatively privileged position.  Somehow I do not think this is going to play well with the median independent voter.

Another tasty tidbit: WSJ and other outlets report that President Obama has called the proposed changes in pay, benefits and collective bargaining rights an "assault on unions."  However, federal employees have very limited collective bargaining rights; they cannot bargain over pay and benefits.

Economic research (including a paper I wrote with NCSU colleague Bob Clark years ago on pensions) has shown that unions put a premium on seniority because they are politically dominated by their most senior members.  When bad budget times hit, unions resist pay and benefit cuts and (by default) encourage layoffs because this insulates the most senior members from any economic adjustment.  This is exactly what is happening in Wisconsin right now.  Governor Walker has said repeatedly that massive layoffs are the only alternative to pay and benefit cuts.  Problem is in the public sector, most workers are in education and public safety, so layoffs mean degraded service in those two areas.   

Some of Walker's proposals are a bit over the top (e.g., annual certification elections for unions), but these may be bargaining chips for a final showdown.

International test scores

Lots of attention given to the poor showing of the US and the high marks received by China in the latest round of high school test results for 65 countries.  The US scores in math, science, and reading were all near the global average, whereas the scores from Shanghai were the world's highest on each dimension.  Of course, Shanghai is the wealthiest city in China and these results are likely to be much higher than those for China overall (remember China is still primarily rural).  Korea, Finland and Singapore were also consistently near the top. 

One finding of this study that deserves further attention is the results for Canada, which placed between 6th and 10th place, again well ahead of the US.  Many commentators blame teachers unions for the poor performance of the US in this type of exercise, while ignoring the fact that a number of states (including North Carolina) are nonunion and manage to have lousy test scores.  Another fact that some countries seem to do just fine (e.g., Finland) even though they have teacher unions.  The Canadian system of higher education shares some similarities, including teacher unions, with the US.  Why are the Canadians accomplishing so much more?  My guess -- and it is just a guess -- lower poverty rates and higher expectations of students. 

Are cities and states ready to take on unions?

Most state and local governments are facing a ticking time bomb: labor costs that are out of line with reality, often because of collective bargaining agreements. Yesterday's WSJ points out that employees of state and local governments make $39.60 per hour in wages and benefits versus $27.42 for the private sector. (Aside: My NC State colleague Lee Craig is quoted in the article.) Such raw figures need to be adjusted for differences in education, training, and experience. Most studies that make such adjustments find the wage difference to be fairly narrow but the benefit difference remains quite substantial. Cities are now facing hard choices: scale back medical care and pension promises or cut back employment and public services. Will public employee unions renegotiate their contracts so that they can avoid layoffs, or will they follow the model of their private sector counterparts (e.g., UAW, USW) and price themselves out of existence? Stay tuned.

Need tires soon? Buy now before tariff kicks in!

Today's NYT reports that the US has imposed a tariff of 35 percent on Chinese tire imports. It goes into effect September 26. The article gloats about how this is a great victory for the United Steelworkers Union. Absolutely no mention on the impact on consumers or tire retailers (who opposed the tariff). And will it really save any jobs? Unlikely for two reasons: (1) China is not the only country that exports tires to the US and (2) US tire manufacturers will continue to outsource jobs to other countries.

Rent Seeking 101

There has been a lot of discussion about the proposal to allow unions to organize workplaces through signature campaigns. Getting much less notice is legislation that would make it easier for unions to organize FedEx. FedEx is currently covered by the Railway Labor Act which dictates that any union representation election would have to be nationwide. Last month the US House of Representatives approved a bill that is worded in such a way that union elections at FedEx would be governed by the National Labor Relations Act. NLRA allows for local elections, which could mean that FedEx drivers or package handlers in any city could unionize on their own. FedEx fears that this would allow unions to cherry pick a few key locations and thereby gain leverage over the entire FedEx network.

There are two key players pushing the legislation: unions representing transportation workers and FedEx's main rival UPS. FedEx and UPS execs have been working the halls of Capitol Hill to make their case. FedEx has threatened to cancel an order with Boeing worth billions of dollars, creating a split in the union movement on the merits of the House bill. More union jobs at FedEx would mean fewer union jobs in already-unionized Boeing. Then we have the spectacle, described in yesterday's WSJ, of the American Conservative Union (a so-called think tank) offering to write op-eds in support of FedEx if in return FedEx would donate funds to support ACU "grass roots efforts." When FedEx decided not to accept ACU's proposition, ACU sent out a letter denouncing FedEx's rhetoric -- FedEx has called the bill a UPS "bailout."

Just another day at the office in Washington, DC. My advice to FedEx customers: try to lock in today's shipping rates for as long as they will let you.