Labor Costs and Red Ink

As a labor relations attorney who regularly negotiates union contracts on behalf of employers, I was surprised and somewhat skeptical when union announced after the 9/11 terrorist attacks that they would work with corporate American to ensure profitability during a period of national catastrophe. Sadly, my skepticism turned out to be an accurate assessment, for unions had merely been paying lip service to patriotic expectations. Since shortly after 9/11, unions have once again begun making unworkable demands and, in some cases, even threats that, if successful, could cripple numerous American companies, particularly those in such essential industries as airlines.

Labor costs are some of the highest expenses that corporate American faces. And without more cooperation from unions, some companies will be spilling red ink over their bottom lines.

Many manufacturing companies, for example, have watched their market stagnate, and they cannot afford to meet union demands for higher salaries and more expensive fringe benefits, including greater contributions to retirement plans. Recently General Electric, for example, faced a union sponsored national strike that demanded the company make greater contributions to medical insurance payments, which would have amounted to many millions of dollars that the company could ill afford. As a result of the union's action, GE's rate of production dramatically slowed and its workers lost wages; yet union leaders lost nothing. There are far better options than those initiated by the union against GE. There invariable exists a common ground on which both management and labor can come together because of their shared interests. What happened to GE, unfortunately, has happened and will continue to happen to numerous other companies as well.

While unions are generally perceived as working on behalf of their members, they do very little to contribute to the economic well being of the nation as a whole. Unions are business unto themselves; they extract dues from member who are their profit centers. Unions do not manufacture goods or offer essential services to the public, yet in many cases they have managed to intertwine themselves so thoroughly into the fabric of much of corporate America, that they cannot be easily removed without destroying the entire fabric. Indeed, in many industries, unions are so much part of the operating system that they exert life and death control. To counter that power, many workers have sought to decertify their unions for fear that their unions could no longer achieve their goals.

As everyone knows, the terrorist attacks of 9/11 caused a significant downturn in the economy; everything from transportation to manufacturing, from hotels and restaurants to retail sales has suffered. Wherever one looks, profits are down, the stock market is down, and pension funds are down.

Unlike the 1990s, companies are struggling to survive and need all the help they can get. It is certainly not the time for unions to burden companies with increasingly onerous labor costs. In such dire circumstances, one would turn their patriotism into reasonable policies that would preserve the jobs of their members. While unions did make some concession, they were often too little and too late, such as at United Airlines and US Air. At other airlines, the situation was also dire: Northwest Airlines lost hundreds of millions of dollars as a result of higher fuel and labor costs. And a strike at one of Deltas subsidiaries cost the carrier $4-million a day! The operating deficits caused by fulfilling union demands are, unfortunately, prefaces to too many corporate obituaries.

In the world of manufacturing, the number of manufactured goods has been stagnating for some time. Yet, union demands continue to grow. Since manufacturers are suffering from stagnating profits and revenues, how then can they be expected to increase wages and benefits, while also ensuring that no workers will be laid off? In a world of such demands, there is no relation between cause and effect, between profits and salaries, between realistic goals and pie-in-the-sky goals.

One would have thought that unions had learned from previous experiences:

The history of the labor movement is filled with unions' missed opportunities to cooperate with management in order to achieve shared goals. One need only glance back at earlier recessions to evaluate the role of unions in the demise of Braniff, Pan Am, and Eastern airlines. Bankruptcies soared and unions often did not make any effort to improve difficult economic situations until it was too late. In the steel industry, one company after another (such as Bethlehem Steel) declared bankruptcy and formerly well-paid steel workers joined the unemployment lines. Indeed, one can cite chapter and verse of union demands that had grown shrill and unrealistic, of strikes and slowdowns that sounded death knells for companies. Unions had initiated lose-lose scenarios; with their eyes closed to the future, they had choreographed their own dances of death.

It was no wonder that union membership steadily declined, and that manufacturers opened factories in third world countries where labor is comparatively cheap. Other companies moved from heavily unionized mid-western and mid-Atlantic states to less unionized right-to-work state in the United States.

Yet, for many other companies in a wide array of industries, labor costs now are the foremost obstacle profitability. If those companies are to survive and be self-supporting, they must now be given the opportunity to reach reasonable and balanced agreement with the unions representing their workers.

No union should be permitted to close down a company, especially when the economy of the country is in such precarious straits as a result of being attacked and facing war. To keep the country strong, it is essential that workers do not lose their jobs, and unions play an instrumental role in saving those jobs.

Unions may make patriotic statements, but if their actions are not consistent with their words, they are simply undermining the stability and growth of companies that not only employ millions of workers, but whose success will benefit all Americans and keep American competitive.

As I wrote in my book, Everybody wins!, "I have dedicated my professional life to clearing the air between the protagonists in the management-labor field, not taking the easy, complacent, unproductive stances that others may have seen fit to take. And I would like to carry on the challenge, not just in this country but abroad, too. The challenge, it's obvious to me, has only just begun and it's far too early for anyone to be complacent." There's just too much as stake, and too little time left to achieve it.

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