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  • Morning Bell: How Big Labor Hurts You

    Earlier this month, Service Employee International Union President Andy Stern told the Las Vegas Sun, “We spent a fortune to elect Barack Obama — $60.7 million to be exact — and we’re proud of it.” Stern should be proud of his $60.7 million investment. There is a good chance that thanks to the Obama administration, big labor will succeed in passing legislation that has the potential to reverse big labor’s decades long decline. And that will mean less jobs and a slower economic recovery for all of us.

    Proponents of big labor argue that unions “give workers a stronger voice so that they can get a fair share of the economic growth they help create.” But that “fair share” does not descend like manna from the heavens. It has to come from somewhere. And that somewhere is the unionized firm’s bottom line. Studies typically find that unionized companies earn profits between 10 percent and 15 percent lower than those of comparable non-union firms. But big labor’s effect on the economy does not end there:

    Unions Compress Worker’s Wages: Unions want employees to view the union–not their individual achievements–as the source of their economic gains (without the union, workers wouldn’t get “fair share”). As a result, union contracts typically base pay and promotions on seniority or detailed union job classifications. Unions rarely allow employers to base pay on individual performance or promote workers on the basis of individual ability. Consequently, union contracts suppress the wages of more productive workers and raise the wages of the less competent. They may raise the overall wages of workers as a whole, but mostly unions just redistribute wealth between workers.

    Unions Kill Jobs: By eating up 10 to 15 percent of a firms profit, unions both make undertaking new investments less worthwhile and reduce the money that firms have available for new investments. Over time, this makes unionized firms less competitive. Consider the manufacturing industry. Most Americans take it as fact that manufacturing jobs have decreased over the past 30 years. However, that is not fully accurate. Unionized manufacturing jobs fell by 75 percent between 1977 and 2008. Non-union manufacturing employment increased by 6 percent over that time. In the aggregate, only unionized manufacturing jobs have disappeared from the economy. This pattern holds across many industries. Union jobs have disappeared especially quickly in industries where unions win the highest relative wages.

    Unions Slow Economic Recovery By raising their member’s overall compensation, unions reduce business investment and the overall number of jobs in an industry. Economists have found that states with more union members took considerably longer than those with fewer union members to recover from the 1982 and 1991 recessions.

    Heritage fellow James Sherk writes:

    Unions are labor cartels. Cartels work by restricting the supply of what they produce so that consumers will have to pay higher prices for it. OPEC, the best-known cartel, attempts to raise the price of oil by cutting oil production. As labor cartels, unions attempt to monopolize the labor supplied to a company or an industry in order to force employers to pay higher wages. In this respect, they function like any other cartel and have the same effects on the economy. Cartels benefit their members in the short run and harm the overall economy.

    Quick Hits:

    • The White House unveiled their own news network yesterday, after keeping the press from covering a game of pickup basketball. ABC News dubbed it “OTV” and wondered if “Obama White House officials think their media coverage isn’t flattering enough?”
    • California Governor Arnold Schwarzenegger has proposed borrowing $2 billion from local municipal governments to make up for budget shortfalls; which would leave many cities without cash to pay first responders or keep libraries and parks open.
    • Reversing his earlier position, Governor Arnold Schwarzenegger also promised not to attempt any more tax increases after California voters overwhelmingly voted against tax hikes, saying California “will live within its means.”
    • Fox News reports that the White House is preparing to move GM into a bankruptcy plan as soon as next week, where GM could collect just under $30 billion in additional taxpayer dollars.
    • Politico reports that Congressional Democrats and former Vice President Dick Cheney have put President Obama on the defensive for the first time in his presidency.
    Posted in Ongoing Priorities [slideshow_deploy]

    16 Responses to Morning Bell: How Big Labor Hurts You

    1. Jonathan Seid, Willi says:

      I live in a right to work state. A union will not represent me. It will represent the union. Of course the union will deny what I see and believe. It's the way of progressive politics. From day one, it's about deceiving the citizen with pretty phrases and sophisticated marketing. Those citizens who are unionized deserve all the problems they signed up for. And that includes the crime and corruption and the near worthlessness of their organization. The bought and paid for union members have to stay with the one they brought to the dance. Having a $60-million dollar man in their pocket gives them room to breathe for a spell. Most citizens who aren't union don't want to be. It will take a bit longer to bankrupt them now.

    2. Russ in Cleveland TN says:

      Thank God that He gave us men like Dick Chaney to lead in times of trouble. Our safety after 911 was due in large part to the firm stand He and President Bush stepped to the plate and let the Terrorists know that America would not tolerate anymore of their destructive actions but would pursue them to their destruction.

    3. Steve -- Fort Myers, says:

      I disagree with your logic and conclsions on big labor. The growth of America's middle class can be directly correlated to the growth of unions. During this period of union growth, the standard of living in America reached its peak. Everybody benefitted as wages increased, profits were acceptable, the stock market was relatively stable, companies grew and America was in its most prosperous time. We were in that fabled rising tide that lifts all boats.

      The last 40 years have witnessed the decline of the unions and a subsequent decline in the middle class and our general standard of living. Corporations and the landed elite would like nothing more than the total abandonment of unions so they can further dimish the wages, prospects and future welfare of the American people. If they were not so condescending and greedy, they would recognize that in destroying the working man, they are destroying themselves.

      Today's recession is proof of the failure of an economic system that has abandoned the concept of the living wage. And guess what, America can not escape this recession by giving hundreds of billions of dollars to failed banks, manipulative financial instituitions and weak corporations. Rather, our politicians should prioritize the return of jobs, factories and industries to the United States. Americans must once again produce for their own needs! Rescind the free trade agreements, let unions advance the cause of the working man and restore the ability of Americans to properly consume by paying them a living wage.

      In this manner, we will assure the American economy led by the American people can escape this recession and pave the road for renewed growth and prosperity in our country.

    4. Van says:

      Well stated: Unions Compress Worker’s Wages: Unions want employees to view the union–not their individual achievements–as the source of their economic gains (without the union, workers wouldn’t get “fair share”). As a result, union contracts typically base pay and promotions on seniority or detailed union job classifications. Unions rarely allow employers to base pay on individual performance or promote workers on the basis of individual ability. Consequently, union contracts suppress the wages of more productive workers and raise the wages of the less competent. They may raise the overall wages of workers as a whole, but mostly unions just redistribute wealth between workers.

      However, why do the CEO's in America get paid 455 times more than the average worker. Seems to be "distribution of the wealth" to a select few doesn't it. American CEO's are the highest paid in the world – of ALL companies. Greed !

    5. David Sayers, NC says:

      Komrades,unions ,to me anyway,is just another kommie plot. Like the ACLU it's the job of union leadership to stick it to the company that employs the worker,doesn't matter if that worker wanted to join or not. Everything a union does drives up cost,thats a fact. When you see union workers protesting no matter if it's in the U.S. or Europe,you always see the signs that say "SAVE OUR JOBS" or something similar but the fact is it's not their jobs,it's the companys'. The company allows that worker to show up and get the pay check. Chairman Obama and the unions have been bossom komrades for a long time. Obama has been bought and paid for and the unions will start raking it in. How long will this strong arming last? I once sold union made products and every time there was was a union/company dispute,the products that came in were all sabotaged in one way or the other. Oh yes, these guys were a real piece of work. Thats my two cents komrades,hope you have a great Momorial Day and please remember why we celebrate it.

    6. Dean Gilchrist - Oca says:

      I agree wholeheartedly! The unions need reforming. To them, the issues are mostly black or white. In this particular article the Heritage Foundation seems to have the same problem.

    7. Dean Gilchrist - Oca says:

      I'm waiting to see your "moderation" Did you moderate the komrades and kommies comments?

    8. Anthony , Brooklyn , says:

      In the early years of this country , The unions did help the american worker this is true. Up until the late 1960's all was well. However from about the time of the 1970's to today , the unions have become overbearing and unreasonable.

      Truly they now protect mostly inept workers, But we cannot blame the people ( workers ) the unions reinforce their mind set that their jobs are protected even if they are lazy and incompetent.

      Of course there are some very good people who are unionized, but the sad truth is that most are not.

      Unfortunatly , the general working class here in this country does not understand that living in a world economy as we now do , competition is so tough that american companies really cannot compete with foreign companies.Everything made in america is more expensive. Look at the auto industry as an example.

      America should return to producing for our own needs , this is very true. We actually don't make anything here ourselves anymore – TV's japan ,copiers korea , cars german ,I even heard that the US Army buys bullets from china , stop and think about the things around you and see what is made in america these days ?

      If you start a company and hire 1 person at $10.00 per hour you also have to match their SS payment every week Plus kick in for Payroll taxes

      plus pay for medical , plus pay for unemployment ,plus pay for disability insurance , and possibly kick in for their 410k – so that 1 person you hired at $ 10.00 per hour now cost you $ 17.00 per our , regardless of their skills.

      If you add to this a union – then you also have to kick in another 30% for union benefits , now you are over $ 20.00 per hour.

      What due the unions do with this money , nothing for you ! What they do is spend 60 Million dollars to get someone elected into the white house who will help continue this rediculous cycle. By the way that 60 Million was union members money !

      This is a country of free enterprise , if there are some company owners who actually do make a very good living it is a miracle !

    9. Jeffrey in Scottdale says:

      Very cogent presentation. I think the cartel argument is very original and puts the whole issue of unions and their adverse impact to our, and the global economy, into a perspicuous framework that should be clear and understandable to the common man. This checkmates any "straw man" counter arguments to the point one has to either say "I think the idea of union labor cartels is a good thing, or, I think the idea of union labor cartels ultimately damages the economy and individual families because of their current monopolistic impact." I should think a reasonable person would come to the conclusion that unions have a place in the economy as one labor choice, but should not be the only labor choice.

    10. ella quinn kinston n says:

      Thank god for a man like dick chenny who still stands up for our country.

    11. Pingback: » Financial News Update - 05/22/09 NoisyRoom.net: “Extremism in the defense of liberty is no vice. Moderation in the face of tyranny is no virtue.” Barry Goldwater

    12. jonah Tazewell VA. says:

      I paid union dues for thirty five years, twenty seven of those were forced on me by a closed shop, in that time I observed the absolute destruction of the motivated worker, who appreciated

      his job, and the elevation of workers who were incompetent and lazy because the lazy worker buddied up with the dues hungry hypocrites who were in charge of the union.

      Yes, I agree that the unions were the major factor in raising the standard of living for the workers, but that was in the beginning of their rise to power. Like all power the temptation for corruption is to much to resist, and the worker begins to be exploited again but this time not by the company.

      We have laws in place now that protect the worker and unions are redundant and should be regulated sternly by the same laws that regulate the company.

    13. jc, central texas says:

      Does any one in Washington listen to you people??

    14. Holly Brown, NC says:

      Is there anyone in our government who has not been brainwashed by Obama? Republican, Conservative, what have you – who can do anything to take this moment to challenge Obama? I love America, but I don't want to see it go down the toilet just because noone has the guts to stand up to the almighty Obama. If I had the money I would challenge him, but I'm not a politician. What can I do???

      Thanks – just a concerned citizen who obviously doesn't mean much to this country this day and time.

      Holly

    15. luhut tp.sinaga,Indo says:

      all of the Obama program must be concent or focus on the callected the global economic that mean take care also the small country and looking the minoritas sociaty live in that pure country

      Thanks

    16. Pingback: Expectations define reality | Amerika: New Right, Conservationist, Traditionalist, Deep Ecology and Conservative Thought

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