As promised: Unions Can be a Good Thing or Not!

The September 5th issue of The Milwaukee Journal Sentinel reprinted an article by Dave Kansas from The Wall Street Journal. The article, “Unions Can be a Good Thing – or Not” points out some support for the stereotypes of big labor and just as often pokes some major holes in exactly that type of thinking. It does however support the premise that labor does need to re-invent its self to survive and prosper in the 21st Century…but that many of the nations and industries that are unionized are doing just very well thank you in the current recessionary environment.

Here’s a few salient points: “… four reasons labor unions can be good for investing — and one why they aren’t.

1 Heavily unionized countries are outperforming everyone else. This is true in the industrialized world, for the most part. The union-heavy countries, according to the OECD, are Sweden, Norway, Finland, Denmark and Iceland. The Nordics have union membership rates of more than 50%. Sweden and Finland are nearly 70%.

And how are these countries doing? Sweden expects growth of nearly 5% this year, and its central bank is tightening monetary policy to tamp down inflation concerns. Norway is growing and its unemployment rate is below 4%. Its central bank is raising rates, too. The story is similar in Finland and Denmark.

2 The German economic miracle. West Germany’s postwar growth, especially in the 1950s, was phenomenal. The unemployment rate went from 10% to about 1%. Industrial production per capita tripled by 1958.

West Germany’s postwar economic miracle coincided with the implementation of “co-determination,” a policy that gave workers substantial board representation and enabled trade unions to work with managers to craft corporate policy.

3 UPS vs. FedEx. UPS is heavily unionized. FedEx is not. Which has done better in the stock market over the past 12 months? UPS stock is up 20%; FedEx shares are up 15%.

Over five years, FedEx’s stock is slightly ahead. But it shows that in a straight-up comparison, the unionized company isn’t an automatic loser. UPS has a sometimes-fractious relationship with union members, but that hasn’t stopped the company from doing well in the marketplace.

4 Southwest Airlines. Southwest is heavily unionized. It’s also the most successful airline company in the country, from a profit perspective. It has the largest market capitalization in the sector. It has labor peace — top management frequently seeks out union input when making big decisions. And it seems to make money even when its peers, also mostly unionized, don’t

5 Detroit — the one reason unions may not be so good from an investment perspective. The unions that once helped build a solid middle class in large parts of Michigan and Ohio played a leading role, along with management, in the demise of Detroit as the car capital of the world.

Job banks where members got full pay to do no work. Overly rigid work rules. Overgenerous benefits. Hostile relations between workers and management. Just about everything to make a cash cow wither away.

But even GM is making a comeback of sorts. It has filed for an initial public offering, hoping to raise as much as $20 billion. The United Auto Workers union, which owns a chunk of GM through a benefits trust fund, has had to make concessions as part of GM’s bankruptcy and government rescue. Contract negotiations get under way next year and the UAW has already pledged not to strike during the talks.

So for Labor Day 2010, thank you organized labor for my forty hour week, eight hour day, safe working conditions, and benefits. But don’t stop now, continue to make the United States a good place to work and live!


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2 thoughts on “As promised: Unions Can be a Good Thing or Not!

  1. I understand that unions have a role in private enterprise. It can keep management in check, which is important where they’ve married their fortunes together. (I would suggest that profit sharing would be more effective, but those types of plans were not around when unions first began.) In any event, I get it.

    But is the rationale for unions in the public sector? Here’s a self described liberal’s argument against public sector unions:

    1. Thanks for the link Super ID, that was worth the time to read. Here’s my take. The writer hinges his entire argument on working for the public sector is public service. To me that doesn’t apply to the rank and file hourly wage guy/gal who fixes my street, patrols my neighborhood, puts out my fires or collects my garbage. They are at the mercy of ‘management’ just like someone working for GM or Harley Davidson. It’s still a job and very important ones at that.

      Yes, those elected officials and their staff people are engaged in public service…

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