In Support of Unions

I hope you all had a good Labor Day weekend (well, those of you who are in countries that have Labor Day this past weekend, anyways).  Plenty of BBQing?  Lamenting the end of summer?  Hopefully most members of your household weren't sick, forcing you to sleep in the guest bedroom to avoid being stricken by the plague, and later to avoid all the coughing and nose-blowing?  Good, good.  Definitely none of that here, either.  Nope.

Of course, that's not all that Labor Day is about.  It's also about "the social and economic achievements of American workers", and came about primarily due to the labor movement in the 1800s (both for being proposed by union members, and as a means of mollifying workers after the disastrous end to the Pullman strike that involved people getting shot by the government).  It seems an appropriate time, therefore, to talk about unions.  (Yes, yes, verging on politics again, but this is another one of those things that really shouldn't be political.)

In the interests of full disclosure, I am a union member, because the position I hold at my current employer, who shall remain nameless but is a rather large, and formerly-locally-headquartered, aerospace company, is designated as one that is union-represented, in large part because of my engineering degree. 

Would I chose to be a union member if it were entirely up to me?  An interesting question.  Back when I first started, I probably would have said no, being concerned with the dues (which are actually extremely minimal), or not really had an answer either way.  And I'll admit it's a bit nerve-racking during negotiations.  But overall, at this point, yes, I'm glad to be a union member.

"But why?" I can hear you asking.  (And if you're not, I'm just going to ignore that and use this as my segue anyways.  Deal with it.)

Well, first of all, let's get the usual criticisms of unions out of the way:

The Bad:

Unions are resistant to change

This is true.  There's good reason for it; the unions are supposed to represent their workers, and have negotiated with companies for a defined contract.  If the companies want to alter the deal (and just pray they don't alter it any further), the union's job is to evaluate the proposed changes, and negotiate how to address those changes and to propose offsetting changes.  That's, like, literally their job (well, one of them).

Additionally, if circumstances are changing due to poor management decisions, it seems perfectly fair to me for unions to resist changes that unduly punish workers for problems that they didn't cause, and often have done their best to fix or avoid in the first place.

Can unions be overly resistant to any changes to the contract?  Can they take a very long time to respond to changes?  Sure, sometimes this responsibility can be taken to an extreme.  But the base reason for it is still valid.

It's hard to fire union workers

Also true, but again, there's a reason for this, too.  Most non-represented workers are employed at-will, which means they can be terminated for any reason whatsoever (or no reason at all).  There are some legal exceptions to that (age, gender, sexual orientation, etc.), obviously, but proving them can be extraordinarily difficult and expensive.  The union's goal is to make sure that its represented workers are actually fired for valid reasons (especially since there's a long history of employers firing anyone who looks like they might cause some trouble by trying to organize a union or something).

Can this be taken so far that it's nearly impossible to fire represented workers?  Of course it can, but it's worth remembering that the procedures for this are usually defined in the contract, which the company agrees to, so this isn't completely on the union.  And given the choice between it being too easy and too hard to fire someone, it's easy to see why unions come down on the side that they do.

Union workers are all lazy

This one I really don't get.  Can I speak categorically for all union workers?  Of course not.  Are there some represented workers who slack off, knowing that it'll be nearly impossible to fire them?  I'm sure there are.  However, in my personal experience (my organization, and even my immediate group, are both a mix of represented and non-represented workers), union workers work just as hard as the non-represented workers.  We're all out to do our jobs and make our projects as successful as they can be.

Unions limit the ability of businesses to be competitive

In general, this seems to boil down to three main areas: resistance to changing circumstances (discussed above), costing too much, and limiting a business' flexibility.

As far as costing too much... there are a few answers to that.  First, it's worth remembering, again, that this is generally defined by the contract, which is agreed to by both the union and the company.  If the company wants to pay people less, then they can risk a strike if the represented workers don't agree to it.  We'll talk more about this in a bit.  Second, turnover is generally reduced the more stable and well-compensated a job is, which has its own cost savings in training and knowledge transfer.  And third, employees who aren't in terror that their jobs or benefits will be arbitrarily and unilaterally altered or taken away are happier employees.  Happier employees tend to be more engaged employees.  And more engaged employees tend to be more productive and innovative employees, which ultimately carries cost benefits with it as well.

On the flexibility side, this usually means replacing represented workers with non-represented workers, or simply moving work to areas that are less hospitable to unions.  When it comes to replacement, I think unions will happily cop to the charge that they don't want their members replaced.  Again, that's, like, their job.  And my employer has demonstrated that relocation isn't really that much of a problem unless you make the mistake of saying on the record that it's being done in response to legally-protected collective actions (like strikes).

And finally...

Unions are living in the past

To some extent, this is the one I agree with the most.  I'm sure you heard many times this past weekend that unions are to thank for the holiday, for the weekend, for 40-hour work weeks, for paid vacation and sick leave, etc.  That's all true, and it's good to remember, but my opinion is that it gets bandied about too much.  Most workers get those things now, so what have unions done lately?

We'll get to that in a minute, but first, I just want to address a few of the really strange union criticisms I see now and then:

If you don't like your job/salary/benefits, just go get another job.

First of all, easier said than done in this economy.  (I won't talk politics here... I won't talk politics here... I won't talk politics here...) Second of all, why should I?  Why should a business get to unilaterally set my compensation and working conditions?  Why can't I try to improve conditions where I am, rather than just up and leaving for a new job?  If I'm valuable to the company, they should be on board for that, right?

Well, then, negotiate for yourself! Why do you need a union to do it for you?

Not everyone is good at negotiating for themselves.  And second, while that may work at a smaller business, a large employer, like mine, has all the leverage when it comes to individual jobs, and no interest in negotiating individually.  Collective action not only helps those who can't or won't negotiate for themselves, but it also gives the workers additional leverage.  (Plus, it spares the company from having to do all of those individual negotiations.  Surely that's worth something, too.)

Hey, I don't get all these benefits in my job.  Why should you get all these cushy perks?

If you don't like your benefits, then just go get another job, right?  Or, alternatively, get yourself a union!  Then maybe you can have these benefits, too.  Just because you've chosen not to take advantage of the opportunity to gain some leverage doesn't mean I should give up mine, after all.

Okay, so now that we've gotten all of the negative stuff out of the way, let's talk about the good that unions do.

The Good:

In addition to some of the counters mentioned above in the discussion of the negatives, it ultimately comes down to giving the average worker some protection and leverage against the whims of their employer.  But let's look at a couple concrete cases.

(Note that everything I'm going to talk about here, when it applies to my employer, is public information.  I won't be saying anything that's proprietary or otherwise not public.  I also won't be providing links, but it should be easy enough to Google some for yourself if you want to verify what I'm saying.)

Protection from arbitrary changes to benefits

In the past few years, my employer has unilaterally changed the health-care and retirement benefits for non-represented workers.  This was done in the name of cutting costs to be more "competitive".  The main point, however, is that these non-represented workers had no say in these changes when they were made; the company was free to do whatever they wanted.  Additionally, workers had little or no forewarning of these changes, making it difficult to plan ahead.

One of the most egregious examples, though, were the changes to the continuing education program that the company ran.  Prior to the changes, the company would pay for just about any courses you wanted to take, from law degrees, to cooking classes, to getting a pilot's license.  After the changes, the company would really only pay for programs that related to your job or advanced your career, and even there they weren't necessarily 100% covered.

To be clear, the content of the changes wasn't objectionable.  The program prior to the changes was ridiculously generous, and I don't fault the company at all for wanting to rein things in a bit and make sure that they're spending their money on programs that benefit them, too.  That's perfectly reasonable, and I have no issues with that.

The problem was that this was handled in a completely ham-handed fashion.  The company simply said, just a couple months in advance, that these changes would be happening at the beginning of the new year.  And that's not at the beginning of a new school year, but a calendar year.  For anyone in the middle of getting a degree, this potentially left them out in the cold with a partially-completed degree that they'd started with the understanding that the company would pay for it, but which they'd now have to pay out of pocket for if they wanted to finish it.

This actually happened to someone in my vanpool.  He was a couple years into getting a law degree when this edict came down.  Now, one of the things to understand about this program is that, even prior to the changes, it didn't necessary cover all of your costs.  For degrees that weren't directly related to your job (like this one), there were limits to the amount that the company could cover before it became subject to federal taxes. 

Therefore, this guy was two years into paying thousands of dollars, out of pocket, in taxes alone, to get this degree.  And now the company wasn't going to cover any of it.  What was he supposed to do?  Quit the program and send those thousands of dollars down the drain?  Pay his own way for the rest of the degree?  Sure, plenty of other people have to pay their own way, but most of them don't start programs with the understanding that the company would cover it, only to have the rug pulled out from under them partway through.

This is where the union came in.  For those employees who were represented, the union made the case that this program was part of the benefits defined in the contract, and therefore couldn't be unilaterally altered by the company.  While the changes still ultimately stood, the union was able to soften the landing for the people who suddenly found themselves up a creek (a creek consisting of mixed metaphors, no doubt).  The non-represented folks were flat out of luck.

Leverage to balance the company's power

Here's another example.  During the last round of negotiations, one of the points of contention was the raise pool, i.e., the amount of money allotted for raises.  The company wanted a pool worth an average of a 2% raise, and the union wanted 5% (which was consistent with the previous contract signed at the end of 2008.  As you might recall, the economy was currently going in the tank then, so this wasn't a contract the company foolishly signed thinking the golden times would go on forever).

The company's position was that they simply couldn't be competitive with a 5% raise pool.  And on the surface, it's a fair point.  Based on the numbers that the union provided, by the fourth year of the contract, the difference in the average salary, based on 2% or 5% annual raises, would be over $14,500 (the miracle of compounding in action!), for a total cost of over $335 million.  And remember, that's just the difference between the two proposed raise pools.  (It's also in the fourth and last year of the contract; the difference would be smaller in the previous years.  For example, in the first year of the contract, the difference would only be about $76 million.  "Only".)

I'm not going to lie, $335 million is a big chunk of change, so the competitiveness argument makes some sense.  Except for what happened next.  Later that year, the board of directors approved an increase in the quarterly dividend from $0.485/share to $0.73/share.  Multiplying this across a full year gives a cost of over $700 million just for the increase alone. 

In other words, shortly after the company argued that it couldn't afford to spend an extra $814 million across four years (the total difference between the two proposed raise pools across the four years of the contract) on its employees, it decided that it could afford to give away at least $700 million per year to the shareholders.  I say "at least" because the dividend has only been going up for the last 10 years (in fact, it's 3x what it was 10 years ago, and I leave it to the reader to figure out what happened in approximately that time frame), so it's likely that the dividend will increase even more during the next few years of the contract.

As you can imagine, things like this don't elicit a strong feeling of trust in what the company says regarding its costs.

Unfortunately, non-represented workers aren't immune to the company's desire to cut the raise pools, which means they do get smaller raises, and can't do anything about it.

In a similar vein, shortly after the company argued that the pension plans were an unbearable expense and started working to get rid of them for all employees, they announced a $10 billion stock buyback program.  Instead of spending it on the employees, the company has decided to give it away to the shareholders.

Now, don't get me wrong; I don't object to dividends or stock buyback programs in general; one of the reasons for a company to exist is to disburse some of its profits to its owners; i.e, the shareholders.  (Note that it's not the only reason, or even the primary reason; it is not legally required, nor is it in most corporations' charters that they have to maximize shareholder returns, which is an ubiquitous misunderstanding, and is important enough it probably shouldn't be in a parenthetical.)  However, the egregiousness of both the size and timing of these two announcements is just... wrong, and would seem to indicate the lack of regard that the company has for its employees.

To get to the ultimate point, though, because retirement benefits and raise pools are part of the union contract with the company, any changes are subject to negotiation, and the union can act to counter the company's desire to maximize profit and shareholder returns on the backs of the workers.

The Future:

For the sake of argument, let's say that we decide it's desirable to not let unions die out.  What should the future look like?

More unions

If you accept the proposition that unions are worthwhile, then naturally we need more of them.  There's a common misconception that unions are only for blue-collar workers and public employees, but that white-collar workers can't have, or don't need, unions.  First of all, it's perfectly possible for white-collar employees to have a union, as evidenced by mine. 

Second, I'd argue that white-collar workers are reaching a point where they need unions just as much, if not more, than blue-collar workers.  Gallup recently released some survey results showing that 50% of salaried workers reported working 50+ hours a week (granted, research has shown that there's some overestimating when self-reporting hours worked), surely in part because of the ridiculous rules that salaried employees are overtime-exempt, but also because they don't have unions to advocate for them against mandatory overtime, etc.

As unions become more pervasive, they'll also become more accepted, and companies will grow accustomed to working with them, rather than simply trying to stamp them out.  And that leads into my next point...

Works councils

In case you missed the news, the UAW recently tried to unionize the new VW plant that just opened in Tennessee.  Not only was VW actually supportive of this effort, but they actually wanted to go a step further and include the UAW in a works council, where the union would work together with management in determining policies, strategy, and the future of the company.

(In a rare foray into politics here, I think it's worth noting that certain Tennessean elected officials attempted to discourage unionization at the VW plant despite VW being in favor of it.  It's one thing to be anti-union and argue that the formation of a union chapter will hurt job creation or whatever, but to do it when the company itself is disagreeing with you is unlocking a new achievement in chutzpah.)

I bring these first two topics up together, along with the VW example, because there's something that ties them together, and that something is Germany.  In Germany, most workers belong to unions, and most companies have arrangements like a works council, where there are often labor representatives on the board of directors itself.  Remarkably, German industry has somehow avoided collapsing into the fiery chasm of uncompetitiveness so often predicted on our side of the ocean as a result of a fraction of this level of labor organization.  In other words, these are not pie-in-the-sky goals, but something that's successfully happening in the world today.  They can work.  There's empirical proof.

And finally...

A renewed respect for workers

In this country, there's a tendency to lionize CEOs and business owners.  However, "[n]inety percent of Americans work for someone else... Most of them not only will never own their own business, for most of them that isn't their dream. Their dream is to have a good job, with an income that will allow them to support their family."

Why aren't such people equally worthy of respect?  Aren't their contributions, their social and economic achievements, if you will, just as necessary, if not more so, to the success of businesses as those of the executives?

Of course they are.  This is why strikes, or even the threat of strikes, are successful.  It's why, despite the rhetoric, my employer quickly agreed to nearly everything the union wanted when the company's brand new flagship product was suddenly taken out of service due to defects that it realized it needed its represented members to fix.  Without the humble non-executive workers, things don't get made.  And in many areas, such as mine, skilled employees are not easy to replace, whatever the rhetoric may be.

Workers are not just expenses.  They're not just faceless resources.  They're people who can make or break the success of your company.  And treating them right can have all sorts of benefits.

One last example: Market Basket, a grocery chain on the East Coast.  In case you haven't seen the news, Market Basket is a company that pays its employees well, gives them good benefits, and still manages to turn a profit while having lower prices than Wal-mart.  Part of the reason?  Engaged employees and low turnover, which reduces training costs and increases customer satisfaction.  (Costco is similar, but I figure it's an overused example around here, plus they don't have the upcoming twist.)  Look, more empirical proof that you can treat employees well and still be successful as a company!

Unfortunately for Market Basket, the board of directors forced out the extremely popular CEO in the interests of cutting employee pay and benefits to increase profit.  This resulted in the employees essentially staging a massive strike, despite the fact that they're not unionized, to demand the return of the CEO (when's the last time you heard that?).  Not only were the stores not being resupplied or restocked, but the customers even joined in, refusing to shop at Market Basket while this was going on.  Market Basket began losing millions of dollars a day.

Ultimately, the former CEO was able to buy back a controlling share of the company and will be returning.  The stores are being restocked and reopened.  And this success was possible because of collective action by the employees.  Sure, they're not unionized, but they effectively acted as if they were.

Their lack of unionization helps me make one last point.  Many companies discourage unions on the grounds that they want to deal directly with the employees.  Supposedly this is better for the employees.  However, that's ultimately a decision for the employees to make.  If they don't trust the company or feel that the company is treating them well, they're likely to unionize anyways.  

However, in a case like Market Basket, there really isn't a reason for the employees to unionize.  The company is already voluntarily giving them everything they'd be getting if they unionized anyways, and they're clearly not afraid to take collective action, union or no.  What's the lesson?  If you don't want your employees to unionize, don't give them a reason to!  Give them decent wages and benefits and a reason to trust you.  Work with them, show them you actually have their best interests at heart and care about them personally (rather than simply as resources to be used), and you might be surprised what happens.

TL;DR: I don't even know how to sum this up.  How do you sum up 3800 words in a sentence? Um, unions have some areas they can improve on, but do good things and serve a good purpose, and have a role in the future.  There!

Alright, your turn.  Anyone part of a union: like or dislike?  Why?  Anyone not part of a union: do you want to be?  Why or why not?  Anyone happen to be in management opposite a union?  Let's keep it civil, but I think there's plenty of room for good discussion on the topic.

To those who made it all this way, I salute you.