May 30, 2003 -- Professor M. Schiller: Unions Destroy America
As unnatural monopolies of labor resources, unions have become one of the single largest sources of problems in America today. Where once their not-so-subtle methods of prehistoric intimidation remained largely localized, they now hold entire regions, if not the entire country, hostage with demands so outrageous that even Saddam Hussein would blush. Their coercively antiquated labor practices promote inefficiency that impedes economic growth with high wages and low productivity thus resulting in higher unemployment and inflation rates.
With wages 26% higher than their non-union counterparts, one would come to expect a higher level of productivity. The fact remains, however, that union workers, while paid more, are actually less productive, not only in terms of capital resources expended but by most any other measure, as well. In a perfectly competitive labor market where the equilibrium point of supply and demand is allowed to occur naturally without the threat of sabotage, the roughly $12 billion that union workers are collectively paid each week could provide jobs for another 4.2 million people (so much for the little guy, I guess, whose cause they falsely claim to champion). Not only would this cut the unemployment rate in half, from 6.0% to 3.1%, but the transactions velocity of money would increase as more of this $12 billion would circulate throughout the economy each week, "a good thing" as Martha is fond of saying. Economists have estimated that for every 10% increase in wages unions receive, the other 87% of the working population has its wage rates reduced by some 4 percent. This unjust enrichment amounts to nothing more than a redistribution of wealth not as the result of any noted level of achievement or competency, but rather through extortion whereby their monopolistic rent-seeking behavior comes at the expense of society in the guise of higher costs and increased inflation.
Okun's Law states that for every percentage point that the actual rate of unemployment is above the natural rate of unemployment, society loses two percent in potential GDP. With an economy valued at over $10.4 trillion, and assuming an NRU of 4.5%, the existence of unions is costing us over $151 billion. Let's see, what can $151 billion buy these days? Well, for starters, you can finance the People’s Republic of California, or the smallest twenty-two states collectively, for one year. You can also run New York City, whose budget alone is larger than 44 individual states, for 32 years. Europe has long suffered with high unemployment and low productivity because of restrictive covenants in labor union contracts that severely limit firings thus discouraging firms from employing workers.
With humble beginnings founded on once noble intentions, unions have long since rendered themselves irrelevant what with the proliferation of federal and state agencies, and labor regulations that exist to protect employees today. Union workers have also become increasingly disenchanted with seeing their hard-earned, and mandatory, dues wasted on undeserving union officials with high six-figure incomes, their cronies with no-show jobs, and the posh lifestyle enjoyed at their expense (does the term ”high-maintenance” come to mind? How about “prima donna?”), not to mention the rights they've relinquished simply by joining a union - they can no longer negotiate directly with their employer, nor are they recognized for superior effort. When union officials demand to see-the-books, “management” graciously complies, but when the same transparency is asked of them, they cry foul claiming the Federally mandated LM-2 form, unchanged since 1959, is an inconvenience (try telling the IRS that filing tax returns is an inconvenience). Far from being a meritocracy, the argumentative "us-against-them" debate is perpetuated in order to protect their unnatural fiefdoms while always accompanied by the much played-out theme song “Gimme, Gimme, Gimme.” Rather than bowing out gracefully, this self-righteous justification is aimed at preventing their inevitable implosion surely destined to end not with a bang, but with a whimper much like the old Soviet Union.
Examples of union waste, fraud, inefficacy, criminal activity and greed abound almost daily. The FBI raid earlier this year on the personal homes of officials of the corrupt Washington, D.C.'s teachers union was merely the tip of the iceberg. United Airlines was forced into bankruptcy by its unions. Last year's dockworkers' strike on the Left-Coast crippled businesses nationwide while New York City's threatened transit strike would have cost the Big Apple upwards of $500 million a day in lost business. And for what, you ask? The longshoremen, who make $106,000 per year, by the way, felt threatened by barcodes. This "new" technology threatened to take away their preciously imprecise and time-consuming practice of manual-entry ledger bookkeeping (politely called “job security,” we see this for what it really is: “milking-it”). The NYC transit workers, with average annual salaries of $50,000, tried to extort a 26% pay increase over 3 years before "settling" for 11%, this in an era where inflation is essentially non-existent and the city is broke (in fact, it’s been deflation, and not inflation, that has been rearing its ugly head, again, recently). Are we going to see an 11% increase in productivity from them? Don't hold your breath, and don't even get me started on Gotham's infamous UFT (Union of Failed Teachers) where they claim the $13 billion operating budget of the NYC Board of Education, larger than 20 individual states mind you, is still not enough to educate our children (in some areas, upwards of 90% of students are not proficient in English and math - nothing like throwing good money after bad, huh?). Every time the communications workers man the picket lines, phone cables are mysteriously cut resulting in people dying from 911 calls not being able to get through. The musicians union recently struck in order to force Broadway producers to hire a minimum number of musicians, whether they are needed or not. And so on, and so on, and so on. With an unparalleled belligerence, these professional protestors have perfected the not-so-fine art of in-your-face unaccountability not unlike the petulance of small children who don’t get their way. How did it ever get to the point where the workers get to tell the boss what to do?
Make no mistake, unions destroy America. They have done more damage to this country than Osama Bin Laden could ever dream of inflicting. The recent Baghdad-style pillaging of the U.N. cafeteria by its diplomats pales in comparison to the looting of America by the unions over the years. By their very nature, unions are socialist organizations and, according to Marxist Theory, the last step before communism. That, in and of itself, makes unions un-American and, therefore, enemies of our free-market capitalist way of life (oh, and weren’t they spotted protesting hand-in-hand with the limousine-liberals from Hollywood against “Bush’s War for Oil?” Where are they now now that we’ve liberated Iraq?). To counter Karl Marx, renowned Nobel Laureate Milton Friedman quoted "To each according to what he and the instruments he owns produces" in his book Capitalism and Freedom. In a civilized society, there's simply no place for unions. Fortunately, the rate of union participation has steadily been on the decline for decades. Unfortunately, however, it's not happening fast enough. America is successful not because of unions, but despite them. It's time we take our country back from these domestic terrorists, by any means necessary.
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Professor M. Schiller is a Wall Street money manager and an Adjunct Professor. A former U.S. Marine, he paid his own way through college and continues to educate himself in order to succeed and be a contributing and productive member of society, despite growing up in a union family. He does NOT accept people who belong to unions as clients.
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