Washington DC is about to give us all an object lesson on why private sector unions in “industries too large to fail” are a danger to all of us. But first, some background:
Perhaps you are one of those who sees unions as the little guys all organizing in order to demand better pay and working conditions from evil corporate employers who hold all the cards. And, it may seem to you that it really doesn’t affect you if you’re not working for that employer, or a member of that union. You may look on with a certain degree of disinterest, thinking that whatever happens in that particular industry is not going to matter to you.
If you know just a bit more about the situation, you may realize that unions almost always support Democrats. So if you’re Republican, you may not much like the unions. The converse will be true for Democrats.
Some other considerations:
When an entire industry is unionized, everyone pays more for the products of that industry. This is because the unions have the ability to completely shut the industry down (via strikes, work slowdowns, etc.), so employers’ leverage is reduced. They pay what they must to stay in business, and pass the cost on to consumers. Employers have no particular incentive to hold prices down, since all have similar labor costs.
It’s different if an industry is only partly unionized. In that case, the non-unionized employers have a competitive advantage over the unionized ones, so there is pressure on the unionized ones to keep costs down. Unions that are TOO successful in only partially unionized industries will simply cause an employer to go out of business, or to make some other accomodation like reducing work force, in order to keep prices competitive with non-unionized employers. So, paradoxically, in this case a successful union reduces the number of jobs available.
This is one way the presence and success of unions affects consumers. Employers set prices, wherever they can, to account for the cost of labor. Industries that are totally unionized have higher prices than industries that aren’t.
We’re about to experience another way that really successful unions can affect us, if they are in large enough industries. In the current “bailout everybody” mood in Washington DC, Detroit automakers are saying they must have tens of billions in cash from the taxpayers in order to both stay in business and pay the retirement benefits and healthcare for retirees.
Wrap your head around this: the unions were so successful in demanding benefits from the Detroit automakers that the cost of those benefits now threatens the very existence of the companies. So the rest of us, who already have been paying inflated costs for cars because labor costs were high, will now pay yet again for the same cars, in the form of taxpayer money to bail out car companies that were taken to the cleaners by unions.
The lesson: the next time you read about a “private sector” union wringing some concession or benefit increase, and especially a retirement benefit promise, from a major industry that is “too big to be allowed to fail”, you should cringe. Then get out your checkbook and prepare to pay, first in the form of higher prices, and later in the form of tax payer funded bailouts.
Other commentary on the possible Detroit bailout here.
