In their checkered history, unions have bargained for safer workplaces, hours that allow members to have a life outside work and compensation that represents a ‘living wage.’ When WWII came along following the depression, President FDR established regulatory organizations to put people back to work and regulate the flow of Lend Lease and our own equipment for war. One of the actions taken was freezing wages, especially in war plants. By so doing, the President was putting pressure on all parties to control costs of guns and equipment that were rolling off production lines in factories all over the nation.
However, in the face of wage controls, food and other essentials cost more, prompting unions and companies to create new paths of compensation called fringe benefits. These consisted of paid vacations, sick leave, compensatory time, healthcare and retirement benefits, In addition to increased wages, retirement benefits and family healthcare became a part of contract packages.
Rising in membership and negotiating power, abuses began to creep in. The overwhelming threat to employers was (is) the strike. Union leaders usually pick times and places that offer advantages for their cause. When corporate sales are brisk and the company is profitable, new contract negotiations take on aggressive characteristics.
Walter Reuther in 1951 introduced the concept of ‘jobs banks.’ Two of the leading jobs banks were in Pontiac and Flint Michigan where GM had production plants. The unemployed workers simply had to stand by and receive full pay and answer the phone when and if a call to return to work came in.
The challenge here is that all costs (salary, wages, healthcare, retirement benefits, travel expenses, vacations, sick leave, bonuses) MUST be paid for by the added value created by persons doing the work. Social Security and other government benefits are simply a Ponzi Scheme. Employed workers are covering the costs of now retired workers. The flaws in that scheme are bewildering. Here are some samples.
With advancing technology, fewer workers are required to produce the same output in many areas of production. Robotic welding is commonly used, CNC machines (Computer Numerically Controlled), bar codes, computerized accounting and inventory control; the list is endless. Couples are getting married later in life and producing fewer children. Couples who are gay produce no children as far as we know. Fewer able-bodied men and women are participating in the workforce, preferring instead to live off the plethora of benefits doled out by a multitude of government agencies. The result is that fewer people are available for funding the needs of retirees. The current system in most countries is unsustainable.
The Mercatus Institute at George Mason University has produced a chart showing the changes of the number of people available to fund benefits for retired workers. In 1945, 41.9 workers paid for their predecessor’s benefits. In just 5 years, the number had fallen to 16.5 workers. In 2010, the number became 2.9 workers and that was the end of the trail. According to government actuaries the bare minimum for sustaining Social Security is three workers to one retiree.
There are some scary numbers that we should know about. Total government unfunded liabilities total $129 trillion, comprised of Social Security Liabilities of $17 trillion, Prescription Drug Program amounting to $25.5 trillion and Medicare liabilities of $89.9 trillion. That adds up to $1.1 million per taxpayer and our President, Congress and government officials just keep printing money and handing out the dough.
Labor unions, both public and private have been at the vanguard of benefits. Union leaders disregard the association of productivity with pay and benefits. In their minds, all big (and small) business people hoard money. Stockholders and bondholders, the capital risk-takers, are opportunists. Most union leaders and government officials in an unwitting conspiracy consider managers and other business and government officials as ‘the enemy’ rather than the employer.
In order to have a sustainable system of long-term benefits, there must be an indelible shift with a link between productivity and pay and benefits. If this does not happen, unions will be history.
Dick Baynton
