Unions have had a very important role in shaping the US and our laws over the past hundred years. I have read stories about how working in Chicago meat packing plants a century ago was as hazardous as enduring the trenches in World War I.
Ideas seem to recycle and ebb-flow in long term patterns. Labor is having its moment. Wages are going up and organized labor is once again popular for most American’s. I fundamentally agree with your point that the demands of unions make companies less competitive in the long term, but the short term matters for a lot of our non-office workers. Especially when we consider the last twenty years in wage stagnation and outsourcing/automation.
The UAW demands on the big three auto manufacturers would make U.S. autos less competitive (especially when we consider the rise of China in the EV space). Management can put in incentives in deals with labor to better align outcomes. If they don’t then they are doomed and in medium term lots of the factories these unions represent will close/move.
Overall, American’s are positive on unions for now. When the negative unintended consequences become clear the pendulum will swing back.
'Labor Unions are job killers' my deceased dad always used to say. The UAW is going to price US labor so hi that all the automakers will flee once again to Mexico and other more friendly countries.
I agree but don't have the fortitude to speak up. I've been cowed by the progressive cancel culture. Back in the mid 90's I attended a Bank of America annual shareholder meeting with a prepared question about executive compensation. Due to limited parking, I arrive a couple of minutes late and was shown to a satellite room with a monitor. I never got a chance to ask my question. My activism has been extinguished.
From my understanding of labor unions, they started as apprenticeship guilds for their members. In those guilds, they were provided training in how to perform employment-related tasks (jobs). In this, they provided a useful societal function. They also provided employers with a list of members available to work in their factories. With their collecting of union dues, they provided safety net programs that employers didn't provide, until they started forcing those programs onto the employers through their government lobbying activities.
If they stopped with providing these social safety net programs, that may have been good for members of their guild. By using the government to inflict these programs upon all employers, it raised the costs for everyone. It's fine to provide a clean house, but is it necessary to force everyone to meet your standards for a clean house?
I don't know what the best solution would be here, but there has to be a balance that doesn't result in one party being the host to the other party's parasite. I write this from the perspective of the child of a manager in the domestic steel industry for 50 years. While he usually kept his work at the office, he did begin to open up with the problems he was seeing near the end of this career. And these opinions are not complete; I don't have the desire to analyze every part of the problem in under an hour, and I might still get people criticizing this because I didn't uncover every piece of rot.
I tend to agree with all of your points, but think you should have focused on the massive increasing gap between management and worker pay and benefits. This is certainly one reason why worker pay has been flat for decades. Th Boards of companies are responsible for these trends, but unless the legal structure and interlocking “ old boy’s and girl’s” clubs changes, nothing will improve.
I have agreed with your sentiments for 50 years. But I think many CEOs are way overpaid. Your examples are correct. Problem is CEO incentives are not aligned with shareholders or employees. I think a wonderful CEO pay system is that of Warren Buffet and Berkshire. All aligned. Because of the exorbitant pay given to CEOs no matter how terrible their decisions resentment builds. Optics matter. If the CEOs tied their compensation to a multiple of the workers that would help. If their incentive options were offered at the current stock price so they could only benefit if the actual stock price went up there would be alignment with shareholders. If CEOs lost money when they made bad decisions, there would be more accountability. Upper management at the big 3 automakers might offer to cut their salaries and give the difference to the workers. Unions are being unreasonable and short sighted but that is not new. CEOs are often arrogant, entitled, and think they are worth much more than they are. Compromise usually requires both sides to give up something.
But take some other examples where corporate greed needs to be countered by an effective union. How about railroads where unimpeded capitalism has created health and safety issues not only for workers but also for the general public. Unions are serving an important role in improving conditions and forcing the government to act.
A number of very good points made here. And while some I vehemently agree with, some I reluctantly agree with, and others I flat out disagree with, at a high-level I think you are directionally correct. But as is often the case, more nuance surrounds nearly all of them.
If I were to address one item I generally disagree with you on, it would be in how you characterize the consequences and regulations that companies/employers may universally experience in a free market.
You say "If companies treat their employees poorly, they will not be able to attract good talent, resulting in lower profitability and, eventually, going out of business. This is how the free market deals with bad employers."
At the beginning of your article you made a reference to the Chicago meat packing plants and credited the unions/organized labor for changing those conditions (at least I think that is what you were inferring). I'm no historian but I think its safe to assume those meat packing plants, steel plants, and nearly any "industrial revolution" era industry, had awful conditions for a VERY long time and up to and until unions forced their hands and the hands of government to regulate them, nothing changed. My argument/point, and there is admittedly no way to prove this, is that had labor never organized and/or government never heard them, its certainly plausible that the conditions that existed 100+ years ago would still exist today and those companies most certainly would NOT have gone out of business in any reasonable timeframe unless their products and business model (not related to labor practices), forced them to. I think it is safe to say that there are countries today that have fewer regulations, less organized labor and similar working conditions in similar industries (and produce cheap goods). I should also add that I think that your statement in a white collar and vocationally trained jobs environment has much more validity than it does in what we generally consider unskilled jobs.
So in my opinion, organized labor and some regulations still have a place in a civilized and humane society (this is where the nuance comes in). Have the unions that you referenced, and many others you haven't, as they generally behave today, exhausted their primary and positive purpose? Yes, I generally think so. Do we have any number of regulations that need to be tweaked, rewritten, removed? Yes, an exhaustive list exists (On that note, why is sunsetting a program or regulations so difficult?).
And with that, let it be know that I always enjoy your essays and I'm shocked I actually commented and opened myself up to ridicule :-).
Excellent article and points that are so true. As someone who used to be a teacher it was always frustrating to have a portion of my pay automatically deducted and sent to the teacher’s union. The only thing that accomplished was enabling the union to be more involved in political donations and not allowing any district to remove any teacher regardless of how bad a teacher they were, what they said or even what they did. We see this on an exponential scale today and yet public education is getting worse. You are right that free markets are the answer and education is no different. Free to choose is always better and yields better results. Unions have become a tool of government where, as Milton Friedman said, we have a system that increasingly taxes work and subsidizes nonwork.
Vitally, I suggest you grab a book entitled "End Times", by Peter Turchin, and read it as soon as possible. You might want to re-think in part your position on unions.
I simply don’t believe that laissez faire works as a free market any better than it did in the 19th and 20th centuries. As I read through most of this, I kept thinking "what about executive pay?" until you began to address it, so I’ll skip that issue. There is another major corporate inequity, and that is the obsession with stock buybacks to boost shareholder value. Those amounts pale in comparison with executive compensation. Essentially, companies are telling workers that their income takes a back seat to that of passive shareholders who do little or nothing for the returns they expect while being rewarded by Boards of Directors. Surely, when workers participate as investors through stock purchase plans, they do benefit. However, they would be better served if a significant portion of buyback funds would be allocated to salaries and benefits.
Do some unions' demands go beyond reason? Although most of your examples are satirical and unrealistic (i.e. “laughable”), there are certainly many examples of unreasonable demands. I recall working at IBM in the 80's where I frequently would be part of a trade show exhibit. I remember clearly at a show in Chicago getting myself into hot water when I attempted to move an electrical cord from one extension to another and being reprimanded by a union worker who said that only union electricians at the show could do that. Ridiculous and definitely over the top, IMHO.
When the unions stick to their core goals of fair compensation in its various forms, and safety in the workplace, their value is enormous. Most companies cut those corners for the sake of profits, growth, and shareholder value. Employees need to share more directly from profitability than is currently the norm. I agree that unions should not have a say in how a company operates unless that operation conflicts with the union's core mission. If port workers are concerned about preserving jobs, there should be an agreement to not interfere with those implementations as long as the workers share in some of the savings that the port enjoys from automation. That will add costs and make the ports somewhat less competitive in the short term, but through attrition the port's costs will go down over time.
The two Hollywood strikes are relevant to the creative arts in general with regard to sharing in profitability. AI represents a huge threat, originating from the fact that AI companies are essentially stealing creative work at a breakneck pace. AI engines are scanning and collecting any and all text, images, artwork, photos, films... for no compensation! The Writers and Actors guilds rightly need to push back on that. In fact, I think they should be targeting Google, Microsoft, Facebook and other AI platforms instead of the studios. Think of what you heard from those companies during these strikes... Crickets!
In summary, I believe that there is opportunity to forge labor agreements that limit frivolous union demands while increasing overall worker compensation through more equitable distribution of profits. To do that, companies must lessen their focus on stock price (i.e., via buybacks) and honor the need for workers to be comfortably compensated in return for their contributions to profitability. This probably is at odds with IMA’s goals for its clients to some extent. What is Mr. Buffet’s approach to this?
Most excellent point on Stock Buybacks. An awful practice. Perhaps any stock buyback should coincide with a 1 to 1 employee compensation bonus package. So if a corporation has excess profits and they want to use a 50 million in capital to buy back stock, than 25 million of the excess profits should got to the stock buy back and 25 million to employee bonus compensation.
I'm doubtful that Labor leadership would arrive at the behaviors described in the summary. I disagree with the sweeping statement that 'most companies cut corners'. My observation is that Safety is known to be a 'keystone habit' for companies and that 'quality pays'. Of course many exceptions exist in companies and definitely individuals can fall prey to making that choice. A challenge of free markets is that some competitors take a short term view that will likely prove to be unsustainable and other firms are forced to follow suit to some degree or lose market share. The weak Board structures and emphasis on quarterly results are often lamented. Good thing we have the Government and Organized Labor in the mix that addresses that, right?
On the other hand, striving for authentic innovation and great, engaging relations and culture in the business is a winner! Whatever stands in the way of this is regrettable. Yes, there have to be rules to play by and regulation and enforcements. Though no amount of heavy handed, bureaucratic regulation will promote prosperity as will not a zero sum game mindset. I do like the culture for gainsharing at high levels throughout the organization.
Everything you said in this is true. However, the root of this problem is historical and economic ignorance in the US and most of the West. There may be past examples where societies and cultures reached the point where we are, and pulled out of it, but I am unaware of one example that did. And I am a pretty well read student of history.
Therefore, I believe, strongly, that we are simply a late stage republic where the elites are getting "theirs" by looting the treasury and other institutions.
As for Colorado, I suggest, IN THE STRONGEST POSSIBLE TERMS, that Vitaliy, you have a bug out plan for your family and firm. Anyone paying the slightest attention to what has been going on in the Centennial State since we foolishly voted for all mail balloting, is to watch what is passed into law in California and wait two or four years for it to show up here.
Want an example? CAFE and pollution standards on cars and trucks. A few years ago, our elected reps and bureaucrats decreed that whatever California enacts in that area, we will, without debate or a vote, AUTOMATICALLY enact here. There are MANY other examples.
Get thee to a red state and try to live free while you can.
“Over the last hundred years, however, the union has evolved from being a stimulant that boosts the immune system of the economy (a cause for good) to being a cancer that is slowly euthanizing industries that become engulfed by it.”
I can’t think of an industry that is unionized that is at the forefront of innovation and creativity.
I would suggest that, in a broad sense, many companies have thrived under various forms of union representation. Examples such as German car makers and cutting edge technology innovators such as NASA come to mind.
Fantastic article, Vitaliy. Well said on the unions and CEO pay.
Ideas seem to recycle and ebb-flow in long term patterns. Labor is having its moment. Wages are going up and organized labor is once again popular for most American’s. I fundamentally agree with your point that the demands of unions make companies less competitive in the long term, but the short term matters for a lot of our non-office workers. Especially when we consider the last twenty years in wage stagnation and outsourcing/automation.
The UAW demands on the big three auto manufacturers would make U.S. autos less competitive (especially when we consider the rise of China in the EV space). Management can put in incentives in deals with labor to better align outcomes. If they don’t then they are doomed and in medium term lots of the factories these unions represent will close/move.
Overall, American’s are positive on unions for now. When the negative unintended consequences become clear the pendulum will swing back.
Atlas Will Shrug!
'Labor Unions are job killers' my deceased dad always used to say. The UAW is going to price US labor so hi that all the automakers will flee once again to Mexico and other more friendly countries.
I agree but don't have the fortitude to speak up. I've been cowed by the progressive cancel culture. Back in the mid 90's I attended a Bank of America annual shareholder meeting with a prepared question about executive compensation. Due to limited parking, I arrive a couple of minutes late and was shown to a satellite room with a monitor. I never got a chance to ask my question. My activism has been extinguished.
From my understanding of labor unions, they started as apprenticeship guilds for their members. In those guilds, they were provided training in how to perform employment-related tasks (jobs). In this, they provided a useful societal function. They also provided employers with a list of members available to work in their factories. With their collecting of union dues, they provided safety net programs that employers didn't provide, until they started forcing those programs onto the employers through their government lobbying activities.
If they stopped with providing these social safety net programs, that may have been good for members of their guild. By using the government to inflict these programs upon all employers, it raised the costs for everyone. It's fine to provide a clean house, but is it necessary to force everyone to meet your standards for a clean house?
I don't know what the best solution would be here, but there has to be a balance that doesn't result in one party being the host to the other party's parasite. I write this from the perspective of the child of a manager in the domestic steel industry for 50 years. While he usually kept his work at the office, he did begin to open up with the problems he was seeing near the end of this career. And these opinions are not complete; I don't have the desire to analyze every part of the problem in under an hour, and I might still get people criticizing this because I didn't uncover every piece of rot.
I tend to agree with all of your points, but think you should have focused on the massive increasing gap between management and worker pay and benefits. This is certainly one reason why worker pay has been flat for decades. Th Boards of companies are responsible for these trends, but unless the legal structure and interlocking “ old boy’s and girl’s” clubs changes, nothing will improve.
I have agreed with your sentiments for 50 years. But I think many CEOs are way overpaid. Your examples are correct. Problem is CEO incentives are not aligned with shareholders or employees. I think a wonderful CEO pay system is that of Warren Buffet and Berkshire. All aligned. Because of the exorbitant pay given to CEOs no matter how terrible their decisions resentment builds. Optics matter. If the CEOs tied their compensation to a multiple of the workers that would help. If their incentive options were offered at the current stock price so they could only benefit if the actual stock price went up there would be alignment with shareholders. If CEOs lost money when they made bad decisions, there would be more accountability. Upper management at the big 3 automakers might offer to cut their salaries and give the difference to the workers. Unions are being unreasonable and short sighted but that is not new. CEOs are often arrogant, entitled, and think they are worth much more than they are. Compromise usually requires both sides to give up something.
But take some other examples where corporate greed needs to be countered by an effective union. How about railroads where unimpeded capitalism has created health and safety issues not only for workers but also for the general public. Unions are serving an important role in improving conditions and forcing the government to act.
A number of very good points made here. And while some I vehemently agree with, some I reluctantly agree with, and others I flat out disagree with, at a high-level I think you are directionally correct. But as is often the case, more nuance surrounds nearly all of them.
If I were to address one item I generally disagree with you on, it would be in how you characterize the consequences and regulations that companies/employers may universally experience in a free market.
You say "If companies treat their employees poorly, they will not be able to attract good talent, resulting in lower profitability and, eventually, going out of business. This is how the free market deals with bad employers."
At the beginning of your article you made a reference to the Chicago meat packing plants and credited the unions/organized labor for changing those conditions (at least I think that is what you were inferring). I'm no historian but I think its safe to assume those meat packing plants, steel plants, and nearly any "industrial revolution" era industry, had awful conditions for a VERY long time and up to and until unions forced their hands and the hands of government to regulate them, nothing changed. My argument/point, and there is admittedly no way to prove this, is that had labor never organized and/or government never heard them, its certainly plausible that the conditions that existed 100+ years ago would still exist today and those companies most certainly would NOT have gone out of business in any reasonable timeframe unless their products and business model (not related to labor practices), forced them to. I think it is safe to say that there are countries today that have fewer regulations, less organized labor and similar working conditions in similar industries (and produce cheap goods). I should also add that I think that your statement in a white collar and vocationally trained jobs environment has much more validity than it does in what we generally consider unskilled jobs.
So in my opinion, organized labor and some regulations still have a place in a civilized and humane society (this is where the nuance comes in). Have the unions that you referenced, and many others you haven't, as they generally behave today, exhausted their primary and positive purpose? Yes, I generally think so. Do we have any number of regulations that need to be tweaked, rewritten, removed? Yes, an exhaustive list exists (On that note, why is sunsetting a program or regulations so difficult?).
And with that, let it be know that I always enjoy your essays and I'm shocked I actually commented and opened myself up to ridicule :-).
Excellent article and points that are so true. As someone who used to be a teacher it was always frustrating to have a portion of my pay automatically deducted and sent to the teacher’s union. The only thing that accomplished was enabling the union to be more involved in political donations and not allowing any district to remove any teacher regardless of how bad a teacher they were, what they said or even what they did. We see this on an exponential scale today and yet public education is getting worse. You are right that free markets are the answer and education is no different. Free to choose is always better and yields better results. Unions have become a tool of government where, as Milton Friedman said, we have a system that increasingly taxes work and subsidizes nonwork.
You have expressed some very legitimate points and you definitely will get some push back but not from me!
Vitally, I suggest you grab a book entitled "End Times", by Peter Turchin, and read it as soon as possible. You might want to re-think in part your position on unions.
Best regards,
steve mclaughlin
I simply don’t believe that laissez faire works as a free market any better than it did in the 19th and 20th centuries. As I read through most of this, I kept thinking "what about executive pay?" until you began to address it, so I’ll skip that issue. There is another major corporate inequity, and that is the obsession with stock buybacks to boost shareholder value. Those amounts pale in comparison with executive compensation. Essentially, companies are telling workers that their income takes a back seat to that of passive shareholders who do little or nothing for the returns they expect while being rewarded by Boards of Directors. Surely, when workers participate as investors through stock purchase plans, they do benefit. However, they would be better served if a significant portion of buyback funds would be allocated to salaries and benefits.
Do some unions' demands go beyond reason? Although most of your examples are satirical and unrealistic (i.e. “laughable”), there are certainly many examples of unreasonable demands. I recall working at IBM in the 80's where I frequently would be part of a trade show exhibit. I remember clearly at a show in Chicago getting myself into hot water when I attempted to move an electrical cord from one extension to another and being reprimanded by a union worker who said that only union electricians at the show could do that. Ridiculous and definitely over the top, IMHO.
When the unions stick to their core goals of fair compensation in its various forms, and safety in the workplace, their value is enormous. Most companies cut those corners for the sake of profits, growth, and shareholder value. Employees need to share more directly from profitability than is currently the norm. I agree that unions should not have a say in how a company operates unless that operation conflicts with the union's core mission. If port workers are concerned about preserving jobs, there should be an agreement to not interfere with those implementations as long as the workers share in some of the savings that the port enjoys from automation. That will add costs and make the ports somewhat less competitive in the short term, but through attrition the port's costs will go down over time.
The two Hollywood strikes are relevant to the creative arts in general with regard to sharing in profitability. AI represents a huge threat, originating from the fact that AI companies are essentially stealing creative work at a breakneck pace. AI engines are scanning and collecting any and all text, images, artwork, photos, films... for no compensation! The Writers and Actors guilds rightly need to push back on that. In fact, I think they should be targeting Google, Microsoft, Facebook and other AI platforms instead of the studios. Think of what you heard from those companies during these strikes... Crickets!
In summary, I believe that there is opportunity to forge labor agreements that limit frivolous union demands while increasing overall worker compensation through more equitable distribution of profits. To do that, companies must lessen their focus on stock price (i.e., via buybacks) and honor the need for workers to be comfortably compensated in return for their contributions to profitability. This probably is at odds with IMA’s goals for its clients to some extent. What is Mr. Buffet’s approach to this?
Most excellent point on Stock Buybacks. An awful practice. Perhaps any stock buyback should coincide with a 1 to 1 employee compensation bonus package. So if a corporation has excess profits and they want to use a 50 million in capital to buy back stock, than 25 million of the excess profits should got to the stock buy back and 25 million to employee bonus compensation.
I'm doubtful that Labor leadership would arrive at the behaviors described in the summary. I disagree with the sweeping statement that 'most companies cut corners'. My observation is that Safety is known to be a 'keystone habit' for companies and that 'quality pays'. Of course many exceptions exist in companies and definitely individuals can fall prey to making that choice. A challenge of free markets is that some competitors take a short term view that will likely prove to be unsustainable and other firms are forced to follow suit to some degree or lose market share. The weak Board structures and emphasis on quarterly results are often lamented. Good thing we have the Government and Organized Labor in the mix that addresses that, right?
On the other hand, striving for authentic innovation and great, engaging relations and culture in the business is a winner! Whatever stands in the way of this is regrettable. Yes, there have to be rules to play by and regulation and enforcements. Though no amount of heavy handed, bureaucratic regulation will promote prosperity as will not a zero sum game mindset. I do like the culture for gainsharing at high levels throughout the organization.
Everything you said in this is true. However, the root of this problem is historical and economic ignorance in the US and most of the West. There may be past examples where societies and cultures reached the point where we are, and pulled out of it, but I am unaware of one example that did. And I am a pretty well read student of history.
Therefore, I believe, strongly, that we are simply a late stage republic where the elites are getting "theirs" by looting the treasury and other institutions.
As for Colorado, I suggest, IN THE STRONGEST POSSIBLE TERMS, that Vitaliy, you have a bug out plan for your family and firm. Anyone paying the slightest attention to what has been going on in the Centennial State since we foolishly voted for all mail balloting, is to watch what is passed into law in California and wait two or four years for it to show up here.
Want an example? CAFE and pollution standards on cars and trucks. A few years ago, our elected reps and bureaucrats decreed that whatever California enacts in that area, we will, without debate or a vote, AUTOMATICALLY enact here. There are MANY other examples.
Get thee to a red state and try to live free while you can.
“Over the last hundred years, however, the union has evolved from being a stimulant that boosts the immune system of the economy (a cause for good) to being a cancer that is slowly euthanizing industries that become engulfed by it.”
I can’t think of an industry that is unionized that is at the forefront of innovation and creativity.
I would suggest that, in a broad sense, many companies have thrived under various forms of union representation. Examples such as German car makers and cutting edge technology innovators such as NASA come to mind.