Thursday, April 02, 2009

How can unions force any companies to do anything?

My wife and I are looking at buying a new car. Which means there's been a lot of stress, double guessing, going over how much we can afford, just what we want, and the like.

Actually, I should say what My Lovely Wife (MLW) wants. Because in the end, this is going to be *her* car as we replace her over 13 year old mini-van with what we hope will be a new Buick Enclave.

We were going things today, when she was talking about the expense, and I reminded her that we didn't have to buy this car.

"Yes we do!" she snapped back in (what I think) was mock exasperation.

I raised an eyebrow. Something easy to do if you have gigantic hampsters attached to your forehead like I do. "Really?" I said. "And just how am I forcing you to buy this car?"

"By - by showing it to me in the first place!" she sputtered out. She started wagging her finger at me. "By tempting me into buying this car!"

"Tempting isn't forcing," I reminded her.

"It certainly is!"

I think we're getting that car tomorrow.

Later on, I was struck by a comment someone made regarding the whole GM/Chrysler fiasco, how the companies might have to go into bankruptcy if they don't come up with better plans for how they're going to be viable in the future.

"It's all the unions fault!" Someone said.

"How's that? They just made contracts with GM and Chrysler."

"They made them agree to those contracts! Then when the companies couldn't pay, now they're going out of business!"

OK - no. They didn't. Nobody "forced" anybody to agree to any contracts.

Let's look at it from an individual standpoint. I've seen something like this happen in the workplace. You'll have a weird computer system, maybe a legacy server that nobody knows how to program - except for this one guy in the company. Let's call him Bob.

Bob starts out making $50,000 a year. Then, one day, he comes into work and asks for a raise.

Bob: I think I should be making $100,000 a year.

Bossman: I think you need your head examined.

Bob: Either I get $100,000 a year - or I quit. And nobody else knows how to run the Jobatron 2000. And without that, the company doesn't run.

Now, Bossman has a problem. He could let Bob quit, but if he does, then he'll have to either find a new manager for the Jobatron 2000. Who knows how much that'll cost, or how long it will take. Or, he could meet Bob's demand. Or offer Bob less money. Or figure out a way to get rid of the Jobatron 2000.

Either way, Bob isn't forcing anyone to do anything. He feels his skills have a value on the market (in this case, Bossman's business running), and he's going to maximize his return on his particular skills.

It's capitalism at work. Bossman has a demand (Bob's skills). Bob has a demand (Bossman's money). The two work out an exchange at the best rate they can. If Bossman winds up paying too much money for Bob's skills with the Jobatron 2000, then he made a bad deal. If Bossman winds up losing his company by paying Bob too much, then he's a pretty piss poor negotiator.

Now the Union side

Let's look at Carl. Carl, well, doesn't really have that many skills. It turns out the company has a whole fleet of Jobatron 100's - 100 of them, to be exact, each run by a different employee. They don't take much knowledge to run - unlike Bob, who went to school for 4 years just to learn how to run the Jobatron 2000, Carl learned it on the job. Took about a week or so.

Carl's making $30,000 a year. And he walks in to Bossman's office.

Carl: Hey, I heard you just started paying Bob $75,000 a year.

Bossman: Yeah - kind of had to. Either that, or shell out a million bucks for the Jobatron 3000, which doesn't need Bob's skills.

Carl: Sucks to be you. Hey, I want a raise too. I want $60,000 a year.

The wheels in Bossman's head turn. He could pay Carl $60,000 a year - but why? He's got 100 employees all on Jobatron 100's. He could just go out and hire himself someone else off the street, train them, and within a week they'd be doing Carl's work for him. Might cost him $1000 in lost time while the work Carl would have been doing is spent training the new person.

Carl's thrown out of the office. Of course, Carl has a choice. Nobody is *forcing* him to keep his job. He can quit. He can ask for maybe a smaller raise. Or he can just shut up and go on.

Nobody has forced anybody to do anything.

Of course, Bossman didn't count on Lisa. Lisa, just like Carl, works on the Jobatron 100's. She makes the same amount as Carl, and wants more. Of course, she also knows that if she just goes in and asks for more money, Bossman will toss her out as well.

So instead, she goes to Carl, and Nancy, and every other of the 100 Jobatron 100 workers. They all make an agreement to get a raise together. And now, the situation goes like this.

Bossman: What's up, Lisa?

Lisa: We'd like a raise.

Bossman: Who's we?

Lisa: Every worker on the Jobatron 100. We all want a 5% raise. And if we don't get it, we're all quitting.

Once again, Bossman has a choice. He could let them all quit. But he probably knows that to find 100 workers, then train them all from scratch, then find out who's the good workers or the bad workers, get rid of the bad ones, replace them with new ones, and on and on.

Suddenly, he's looking at a lot of money. But is it worth paying the employees another 5% just to keep them? Maybe it would be better to offer them 2% and see if they'll take it. Or fire them all. Or fire only Lisa as the troublemaker. Of course, if everybody stands with Lisa then that could be bad.

Decisions, decisions, decisions. But no matter what, *nobody* is forcing Bossman to do *anything*.

In a nutshell, that's how a union works. Perhaps Lisa and her new "union" can opt to ask for health care, or pension plans, or something.

Nobody forced GM or Chrysler to accept anything. They could have fired all of the people who wanted to unionize. They could have shut down the plan - Wal-Mart does that all the time. Any time a store goes union, they close the whole damn store. They might lose a million dollars they spend building the store - but that's certainly their right.

GM made some bad decisions. They decided to go for short term gains by paying union members less in favor of giving them better pension plans in the future, and some would say that's why they're in trouble now. Or the health care plan that's super expensive. Or - any number of things.

But trying to blame all of GM's bad negotiations on the unions isn't the fault of the union. Nobody *made* GM agree to the terms.


Courtney Schoenfeld said...

Just a quick note. You do not have hamsters for eyebrows. At least you HAVE eyebrows. I am practically bald.

John Hummel said...

But - you're a pretty girl. Your eyebrows are fine.

My eyebrows are great for doing Sean Connery impersonations. Like when I say "I'm Sean Connery. Drop 'yer panties."


It worked when I was single. I don't think I've tried it for years.