Bryan Clapper: Union support at all-time lowPublished 9:50am Monday, September 14, 2009
According to Gallup, 48 percent of Americans polled say they support labor unions, a number that has fallen nine points in just the last year, and down from 65 percent earlier this decade.
In the 1950s, that number was as high as 75 percent.
Unlike a lot of people who share many of my political views, I’m not entirely opposed to the concept of labor unions, I just believe they’re redundant and overly powerful.
In the exceptional case, rather than the rule, they can be more beneficial than harmful, but are mostly unnecessary in this country at this point in time.
What used to be a necessary protection for workers in small towns where a major employer was the only option besides moving has now been rendered unnecessary, due to FMLA laws, the minimum wage and laws that make it increasingly difficult to terminate bad employees in many states.
After the cost of an employee reaches that perfect balance between personal sustainability and corporate profit, the impact of a union is to throw that balance out of whack. A basic principle of economics holds that the more expensive it is to do something, the less people will do of it. The same holds true for keeping employees: The less profitable it is to do, the less companies will do it.
Boil it down to something simple: Pretend you’re one of two bakeries in town. You can produce 100 loaves of bread each day, the same capacity as the other bakery in town. You have two bakers whom you pay $10 an hour each. Your salary expense for your two bakers is $800 a week plus payroll taxes.
Your cost per loaf is roughly 50 cents before labor, meaning that your total cost for the week to produce 500 loaves of bread is $1,050. You need to make a profit (let’s say 10 percent), and pay your rent and taxes, so you charge $4 per loaf of bread. This leaves you with a profit of $200 per week. The other bakery in town also charges $4 per loaf, and their bread is – let’s be honest – just as good as yours.
Now your two bakers organize and form a mini union. They demand that you pay them $11 per hour and health insurance, which will cost you $100 per week per person. Do the math: Your total labor cost (including benefits) is now $1,080 plus payroll taxes. Even without the normal increases of dry goods, your profit is now gone completely, and in fact you’ve become a money-losing business.
In order to stay in business, you’ll need to raise the price of your bread, or produce and sell more of it.
But with a limited market, you can’t afford to add a third baker to in turn produce more bread, and the other bakery in town is still profitable selling $4 loaves of bread that are just as good. You could use cheaper flour or less yeast, but then the other bakery in town will be producing a superior product for the same price.
What are your options? You could eliminate one of the bakers and do the second baking shift yourself. That would work, except that the union is threatening to strike if you reduce total worker hours.
Or, if you’re smart, you’ll eliminate both union workers and hire non-union workers who will do the job you want at your generous $10 an hour wage.
Perhaps more Americans are becoming aware that, on a much larger scale, the labor unions of today are putting large manufacturers in a similar predicament: A salary-to-revenue ratio that is unsustainable for a company competing with others making identical products more cheaply creates an unfavorable environment for business. The only course is to make an inferior product or put workers out on the street.
It’s no surprise, then, that support for unions historically falls as unemployment increases. When forces outside the logical and organic process known as the free market interfere, such as labor unions and big government, an increased unemployment rate is one of the chief byproducts.
Unions aren’t designed to create new jobs, they’re designed to protect existing jobs.
But once those existing jobs start to fall by the wayside and companies and their brands are irreparably hurt, who do they really benefit?
Bryan Clapper is Leader Publications general manager.
E-mail him at email@example.com.