It was fully expected that the United Auto Workers union would open the bidding on a new Big 3 labor contract with exorbitant demands. But those of Shawn Fain, the UAW’s newly-elected militant union boss, go beyond that to pure lunacy. At some point, of course, this strike will end when a compromise is reached. If the Big 3 give too much, it’ll be a path to Bankruptcy 2.1.
Workers, unionized or not, are certainly an essential part of the factors of land, labor, capital, entrepreneurs, management, and genius that create and run businesses in our free enterprise economy. But the auto industry, or any other, doesn’t exist solely for the benefit of its workers, who are free to come and go as they wish. In reality, the overriding task of auto makers is to satisfy the needs of consumers and shareholders who are also free to come and go.
In the 19th century, Karl Marx’s ignorance of fundamental economics driven by his communist ideology ignored the synergy of all these factors to rationalize his dogmatic claim that capitalism exploits workers. This same mentality is echoed today by his modern disciples like Bernie Sanders, Elizabeth Warren, and Shawn Fain.
The mechanization of agriculture during the industrial Revolution massively increased agricultural productivity as the number of farm workers plunged with horsepower replacing horses, driving down prices for consumers.
Henry Ford’s ingenuity in 1903 harnessed the technological innovation of the fractional horsepower motor to power assembly lines for the mass production of autos, taking worker productivity to levels unimaginable to Marx and his ilk. This enabled Ford’s workers to buy the cars they were making.
Productivity reduces prices, raising the standard of living for consumers. Union leaders hate productivity because it decreases the number of jobs and dues collections from their members, ignoring the new jobs created in supportive fields in an expanding economy.
The most absurd of UAW initial demands included a 32-hour work week at a 46% higher wage over four years than their workers now get for 40 hours. On top of that were increased benefits for retirees, automatic cost of living increases, a new defined-benefit pension plan, and the right to strike over closures in unneeded plants. By the fourth year of the contract, Big 3 labor costs would increase by 60%, pushed forward in higher prices to consumers driving up inflation. Combining wages and benefits, hourly labor costs would rise to almost $150 an hour, up from $64 currently.
At the peak of its power in 1979, the UAW boasted 1.5 million members. When negotiations on a new contract reached an impasse, the union’s strategy was to stage a massive strike on one of the Big 3 at a time, pressuring it to capitulate while its competitors were still operating and profiting. It worked. The others soon followed suit on similar terms. The near-monopoly labor power of the UAW pushed car prices up and quality down paving the way for imported foreign cars to cut into Big 3 market share and profits. We’ve seen how the teacher unions’ monopoly and political power have undermined the quality of public education in this country.
That UAW strategy stopped working with the onset of the US Great Recession of 2007-2008 when the housing bubble burst, mortgage-backed securities collapsed, and investment banks failed foreshadowing the 2009 bankruptcies of GM and Chrysler, crushed under the weight of unsustainable, extravagant labor costs in union contracts. For the companies to emerge from bankruptcy, the UAW had no choice but to renegotiate their contracts or lose all the union jobs. Now, the UAW is demanding that those unsustainable conditions be restored.
But the Big 3 (with Stellantis as the new Fiat-Chrysler hybrid) and the UAW aren’t what they used to be. UAW Big 3 membership is down to 146,000 workers from its 1979 peak of 1.5 million nationally as 20 non-union assembly plants are flourishing in states with right to work laws.
Competitors like Toyota, Honda, Nissan, Tesla, Volkswagen, Subaru and others are producing almost 50% of all American-built cars sold in the US, up from less than 10% just 20 years ago. Soaring car prices driven by greedy UAW demands would shift even more market share from the Big 3 to their non-union competitors. To avoid another bankruptcy, the Big 3 would have to replace more workers with robotic technology. The auto industry as a whole now employs more than 250,000 robots on its production lines, none of which take vacations, get overtime pay, or go on strike.
President Biden, who bills himself as the most pro-union president ever, actually joined a UAW picket line at a General Motors warehouse in Michigan last Tuesday to give a pep talk to union strikers. This was the first time a sitting American president has ever done such a thing. (Keep in mind, the U.S. Department of Labor isn’t the “Department of Union Labor,” and union members are only six percent of the private sector workforce.) Congressional Democrats are also solidly behind the union’s crazy demands. Yet another example of Bidenomics at work.
Longtime KOA radio talk host and columnist for the Denver Post and Rocky Mountain News Mike Rosen now writes for CompleteColorado.com.
