Why Unions Are Bad For Companies, Employees and Customers

If you have ever read my blog you know that I am no fan of unions. They may have had their place in the past but not in today's world. I have mentioned in my blogs on EFCA (Employee Free Choice Act) that unions cost a company. Not just in direct costs, but in indirect costs as well. Slowed work process, lessened productivity, poorer employee relations, and more have been cited as the costs associated with unionism. A study by the Heritage Foundation puts a bit more concreteness to this argument. What Unions Do: How Labor Unions Affect Jobs and the Economy can be read by clicking the title.

This study finds:

• "Unions function as labor cartels. A labor cartel restricts the number of workers in a company or industry to drive up the remaining workers' wages..... Companies pass on those higher wages to consumers through higher prices, and often they also earn lower profits. Economic research finds that unions benefit their members but hurt consumers generally, and especially workers who are denied job opportunities.


• The average union member earns more than the average non-union worker. However, that does not mean that expanding union membership will raise wages: Few workers who join a union today get a pay raise. ....The economy has become more competitive over the past generation. Companies have less power to pass price increases on to consumers without going out of business. Consequently, unions do not negotiate higher wages for many newly organized workers. These days, unions win higher wages for employees only at companies with competitive advantages that allow them to pay higher wages, such as successful research and development (R&D) projects or capital investments.


• Unions effectively tax these investments by negotiating higher wages for their members, thus lowering profits. Unionized companies respond to this union tax by reducing investment. Less investment makes unionized companies less competitive.


• Economists consistently find that unions decrease the number of jobs available in the economy. The vast majority of manufacturing jobs lost over the past three decades have been among union members--non-union manufacturing employment has risen. Research also shows that widespread unionization delays recovery from economic downturns.


• Some unions win higher wages for their members, though many do not. But with these higher wages, unions bring less investment, fewer jobs, higher prices, and smaller 401(k) plans for everyone else.


• Economic theory consequently suggests that unions raise the wages of their members at the cost of lower profits and fewer jobs, that lower profits cause businesses to invest less, and that unions have a smaller effect in competitive markets (where a union cannot obtain a monopoly).


• .....union contracts compress wages: They suppress the wages of more productive workers and raise the wages of the less competent. Unions redistribute wealth between workers. Everyone gets the same seniority-based raise regardless of how much or little he contributes, and this reduces wage inequality in unionized companies... But this increased equality comes at a cost to employers. Often, the best workers will not work under union contracts that put a cap on their wages, so union firms have difficulty attracting and retaining top employees.


• Studies typically find that unionized companies earn profits between 10 percent and 15 percent lower than those of comparable non-union firms."

Much more can be read in this study. If you truly want to know the costs, ALL THE COSTS, that are associated with unions read the article. It talks about how unions have cost GM and the US.

Probably the item I find the most disagreeable is this following statement on individualism. It is why I have never belonged to a union, it goes against how I was raised.

"Final union contracts typically give workers group identities instead of treating them as individuals. Unions do not have the resources to monitor each worker's performance and tailor the contract accordingly. Even if they could, they would not want to do so. Unions want employees to view the union--not their individual achievements--as the source of their economic gains. As a result, union contracts typically base pay and promotions on seniority or detailed union job classifications. Unions rarely allow employers to base pay on individual performance or promote workers on the basis of individual ability."

Just does not suit me.

The Economy Is Affecting Everyone's Retirement

The stockmarket fall, the large numbers of layoffs, the dimishing values of our 401(k)s and pension plans is causing a lot of aging workers to put off their retirements. Certainly my wife and I have felt that way as have alot of our friends. (Yes we are Baby Boomers).

But I did not realize how widespread the effect was until I saw this headline in today's Wall Street Journal Online:

Lawmakers Pressure NASA to Delay Shuttle's Retirement

I guess it has gotten pretty bad when even the aging space shuttles can't retire.

HOPE YOU AT LEAST SMILED. HAVE A GOOD WEEKEND!

Tidbits for the Middle of January

Listening to the radio this morning I picked up several tidbits of information for the day.

First, according to SHRM (yes they made the radio news) 5% of companies are taking tomorrow's inauguration day as a holiday. That is more than the number of companies that gave off election day.

Second, according to radio show host Clark Howard, over 51% of workers dread getting up and going to their job. They hate their work. His advice, quit and find something you look forward to rising to each morning. From an HR perspective look at your folks and realize half of them don't want to be there. What are you going to do about it?

Third, according to "experts" today is the most depressing day of the year and may be the most depressing day of the the decade. Reasons:

• Winter weather (well only in the northern hemisphere)


• Christmas credit woes


• Blown New Year's resolutions


• Job fears


• Mounting debt


• The economic crisis

Well this is not going to apply to everyone, so this is hyperbole, but it makes good news. It is sort of like your horoscope. If it applies it is amazing, if it doesn't you ignore it. Just realize that the 51% of your employees that hate being at work may feel this way.

The Value of That College Degree: Despite Economy Grads Doing Better

Everyone knows that the economy is tough right now. The U.S. DOL put out the report on jobless claims today and it shows that jobless claims rose (as reported in Yahoo! Finance news) reversing previous declines. Despite that the NACE reported that companies are hiring more graduates that in 2007 and, as reported on BLR.com they are finding higher starting wages. Take a look at these:

• Civil engineering graduates: 6.4 % increase over 2007; average offer of $51,632
• Mechanical engineering grads: 5.3% increase; offer of $57,009
• Business administration/management: 5.1% increase; average offer of $45,915
• Marketing: 4.7% increase; offer of $42, 053
• Economics majors grads: 4.2% increase; offer of $50,507
• Accounting graduates: 2.9%; average offer of $48,085
• Electrical engineering grads: 2.9%; offer of $56,910
• Finance grads: 2.8% increase; offer of $48,547

Leading the way:

• Computer science graduates: 13.1%; offer of $60,416
• Liberal Arts graduates: 2.6%; offer of $36,419

Now, all things being equal, I would just as soon have the salary offered the computer science types, but all of them are decent. It would be nice if HR folks got the higher levels, but many people come into HR from the liberal arts area. It is much better to come to HR from business admin.

If you have been laid off maybe going back to school might be the best option. There is some monetary value to having a college to degree. It would be interesting however to contrast this with trade positions such as HVAC, plumbers, etc. What are entry level wages for those positions after training in the trade? Anyone have those numbers.

Worried Workers: What Bothers Your Employees?

An article in Staffing.org, on new Social Contracts, indicates that workers born in the 1980's are very, very unsettled. According to Staffing.org's reading of a Time/Rockefeller poll:

• 49% of them say America was a better place to live in the 1990s


• 46% say America is a lot less financially secure now than a decade ago.

Additionally, "...35% of them think they will have to change jobs 2-3 times in the next 10 years." And as you are well aware, what people think is the reality you have to live with. So you may want to pay attention to your Gen Y workers and anticipate some turnover.

In a broader sampling of workers the poll also found:

• 35% of Hispanics are very worried about losing their job in the next year


• 54% of Americans say they have inadequate savings to handle a personal crisis like losing a job


• 71% would rather have a job that guarantees health care and provides a pension than one that pays more

So, to quote a famous musical "There is trouble in River City." (Anyone know which one?) In these troubling times people are concerned about jobs and security, but many anticipate having to change jobs.

So how does this alter the "social contract" with employees that your company enters into with employment? Do you have the opportunity to trade salary for security? Or is the insecurity caused by the economy, such as increased commuting costs, still make a monetary "contract" primary to people. What does a company have to offer to get the best and then retain them without emptying the corporate pocketbook?

A challenge for HR for sure!

Sign of the Times? Union Activity Rising?

As the U.S. economy slides employees feel the pressure on their pocketbook. So what do they do about it. They cut corners, they reduce the "extra" spending. But eventually they start looking for more money. One way of doing that is looking for a different job, though that may be problematic and a bit unsettling for many. A second way for getting more money is to try to get it from their current employer. They look for bigger raises or they look for "cost of living" increases. Ann Bares, in Compensation Force warns against this with the statement "Experts warn (and I would second this warning) of the pitfalls associated with simply increasing base pay (in the form of a "cost of living" increase) to address these rising costs. What happens if gas prices continue to increase indefinitely, and you've set a precedent for covering the cost? And why increase pay to address fuel costs but not rising healthcare expenses? Again, potentially dangerous and slippery territory to step into." She offers some alternatives to COLAs so read her article.

Another way employees may try to get more money is to seek third party representation. And unions are selling it. Rising prices, job cuts, fear and a union friendly Congress are all leading to what may be an uptick in union activity. Atlanta, Georgia (where I work) has not exactly been a hotbed of union activity in the past. But union radio ads have been on the rise, and just last week in one day I saw two union picket lines where wages seemed to be the issue.

So beware! Be on your guard. Pay attention to signs of union activity in your workplace. Unless of course you want a union. I believe that as the economy worsens this activity will increase. And if we end up with a Democrat administration we will likely see union friendly legislation passed (See my previous post on the Employee Free Choice Act and Kris Dunn's post When "The Sopranos" Force an Employee To Sign a Union Card...) which will facilitate union organization. Clean up your "house", train your supervisors, put them on guard about accepting any union cards, otherwise you will get something you don't want. There is a big cost associated with unions (look at the auto companies.. are they doing well right now?) and in tough economic times do you want any more costs to handle?

"Survey Says": Well I Am Not Quite Sure!

Surveys come out everyday. We are a survey happy society (at least in the US). Seems sometimes we can only operate if we know what everyone else is doing. So here goes...

A Hay Survey on the slowing economy reports that nearly 1/3 of the CEO's and HR executives polled reported that they were freezing or considering freezing wages, especially for executives, management and professional groups. They also report others are going to implement changes or plan changes to their healthcare benefits (27 percent), retirement/pension benefits (20 percent), and training and development programs (28 percent). At the same time many express that retaining or motivating high performers during the economic downturn is a major concern. (DUH!) So some are looking at changing high performer retention programs.

A survey by conducted by BlessingWhite asked the question "Assuming you have a choice, do you plan to remain with your organization through the 2008 year?" They asked this of North Americans, Europeans and Asians, with the majority of responses coming from North America. They found that North Americans were more likely to stay than Europeans and Asians and that gender had little to do with it. This was a poll conducted in December 2007 and January 2008. They did find "Only 7% of employees from North America said there is "no way" they plan to remain with their current employer, compared with 11% of Europeans and 8% overall. Overall in 2006, 6% or respondents said there was "no way" they planned to stay put." So there was a slight increade in discontent and North Americans were definately more likley to stay.

A third survey, conducted by the National Association of Colleges and Employers (NACE), found that nearly 54 percent of employers plan on offering signing bonuses to new college graduates whom they want to hire this year, up from 47 percent in 2007. "Among respondents who plan to offer a bonus to all entry-level college hires, the average signing bonus is $4,450, up 25 percent from last year's average of $3,568. However, two-thirds of those using bonuses expect to offer them to just selected candidates, and average bonus offers vary according to a number of factors, including the candidate's degree and degree level, NACE notes."

And the last poll, conducted by Compensation.BLR.com, HR managers don't see cutbacks coming despite the much ballyhooed recession. "When asked "Does your company plan to grow in size in 2008?," 63 percent responded "Yes, we expect to hire additional staff." Meanwhile, 24 percent responded "No, we expect the size of our workforce to stay the same." Only 14 percent responded "No, we may even cut back on staff this year."

So, what do we have here? A mixed bag for sure.

• CEO's and HR executives freezing salaries, while offering hiring bonuses to new hires. That is certain to make your current workforce unhappy.


• North Americans not really deciding to go anywhere, but now that they have read that bosses are freezing salaries and college kids are getting bonuses maybe that will change.


• HR is hiring additional staff. Are you offering them bonuses or are you getting the experienced employees from the companies that are freezing salaries?


• If you want to hire perhaps you need to take a look at Europeans and Asians, they seem to be more restless than Americans and might not be put off by salaries being frozen.


• Why are HR departments and CEOs not using the same figures? Not that CEOs and HR not connecting is unusual.


• It would be interesting to know what companies are doing to keep the "high performers" given the salary freezes and benefit cuts.

So let's do our own survey. Please participate in the poll to the left in the column.

Thanks, I will let you know the results in about 10 days.

Summer Jobs Will Be Hard to Find, Plus No Work Ethic

According to an article in the Atlanta Business Chronicle teens will have a tough time finding summer jobs this year as a result of the current economic situation. In a survey, conducted by SnagAJob.com, teens will have fewer opportunities and more competition for summer jobs. Many of the jobs that will be available will go to teens who worked last year in the same position. Shawn Boyer, CEO of SnagAJob.com, says there will be jobs but teens need to get started early on looking for those jobs.

An interesting comment in the survey said that over half of the over 1000 managers surveyed felt that teens today do not have the work ethic that previous generations have had. Well that is not a new complaint about Gen Y.

I wonder however, if it is not so much a comment about work ethic as it is engagement. In this era where teens live in a short-attention span world work just may not be interesting enough to hold a teen's attention. If you are constantly bombarded by stimulation from music, TV, phones, etc. is stuffing fries in a bag really going to be that interesting? And if it is not interesting do you really want to do it? Not me.

Performance Appraisal: "Your Performance is Going to be Terrible"

Imagine taking an employee aside and saying "All signs point to the fact that you are probably going to falter in your performance. You are going to be flat and it may take sometime for you to recover." Then you publish it in his email everyday and you let everyone else in the company know what kind of expectation you have for that employee. What would you expect that employee to do? FAIL! And then you would say, see I knew he was a poor employee.

Well that is what is happening to the economy today. Everyday we hear how bad it is GOING to be. So what happens? Everyone starts acting like that is what is happening. And then the prognosticators say "See we told you so."

Isn't that called Self-fulfilling prophecy? I don't know about you, but it angers me. And it certainly does not do alot for the confidence of your employees.