Defending unions
Posted by on

There are times when facts are set aside in arguments about issues. Particularly when it comes to discussing unions, opponents often lean on anecdotes and overstate a union's influence in something bad. There's a good example of this in an Los Angeles Times "Point-Counterpoint" piece that ran yesterday.

The piece centers around Detroit automakers and the role the UAW played in their demise. First are the typical "higher wages, not flexible enough" arguments. Then the counterpoint, which actually uses facts, including these...

Labor costs are less than 10% of the cost of a car; the other 90% goes toward research and development of new product lines, parts, advertising, marketing and management overhead. Surely this 90% is more likely to be a source of poor competitiveness, especially because, according to data from the latest Harbour Report, an annual study of manufacturing efficiency, nine out of the 10 most efficient auto assembly plants in North America are union plants, represented by either the UAW or the Canadian Auto Workers. In addition, one of Toyota's successful assembly plants in California is unionized.

That alone is probably enough to slow a union basher. Then you get to this...

Executive compensation is perhaps a more meaningful barometer of demonstrated priorities and cost structures. According to the Securities and Exchange Commission, in 2007, Ford's chief executive, Alan Mulally, was compensated $21.67 million, when in the same year Ford recorded losses of $2.72 billion. GM's chief, Rick Wagoner, earned $15.7 million in compensation in 2007, while the company posted losses of $38.7 billion. In contrast, Toyota's top executive, Hiroshi Okuda, earned only $903,000. Thus, the prevailing management philosophy at the Big Three (and too many other U.S. companies), which divorces compensation from business performance, is a more likely culprit of the industry's troubles than the UAW.