Sunday, November 15, 2009

Unions - Wrap Up

I have spent the last 9 weeks talking about unions - what unions are, advantages and disadvantages of unions and examples of how unions effect businesses and the economy. Unions claim they benefit workers by negotiating higher wages and benefits, better work conditions and protecting workers from unfair hiring, firing and promotion policies and practices. What the unions don't tell you is how they negatively effect employees, business and even taxpayers. The higher wages and benefits are given to everyone. It doesn't matter how good each person performs his job duties or how much effort he puts into his job. Individual accomplishments do not mean anything. In addition, individual workers cannot negotiate for their own benefit. The union negotiates for the group as a whole without regard for the needs of any individual.

Unions play a large role in politics in the United States. They have become large and powerful groups who use their power to influence laws and procedures to their benefit. One way unions have done this is through prevailing wage laws. I spent several weeks discussing Ohio prevailing wage law and issues associated with these laws. Union wages and benefits may be good for the employees of unionized companies; however, these wages make it more difficult for union companies to compete with non-union merit shops when bidding on public construction jobs. To "even the playing field" unions fought for prevailing wage laws which require all companies working on public construction work to pay union wages on that job. The problem with that is that union wages are much higher than market wages. What that means to taxpayers is that we are paying more than we should be on all public construction projects. Money we shouldn't be spending.

Recently, in the City of Dayton, we could see unions at work again. The Greater Dayton Regional Transit Authority took bids for the construction of its new transit center in downtown Dayton. This new plaza replaced all bus stops in a two block radius with the intention of eliminating bus congestion and reducing issues with unruly crowds at the old hub at 3rd and Main Street. This $9.6 million dollar project was an important one for RTA and downtown Dayton and was scheduled to be completed April 13, 2009. The project was not completed until the middle of August 2009.

The construction firm which won the bid was a union contractor. Even though the project was seriously behind schedule, union workers resisted working overtime hours or working on weekends to catch up. Of course there were numerous issues that contributed to the delays; however, in the construction business it is to be expected that unexpected things will come up during the project. Wouldn't we expect a company to take any steps possible to catch up and try to meet the contractual completion date? Well, union employees don't have to do that. Unions protect the employees from being forced to do anything that isn't in their contract. Even if we assume the management at that construction company wanted to work overtime to catch up - which is what they said - their hands were tied because their employees are represented by a union. They don't have complete control to run their company in a way necessary to meet their contractual deadlines. I am going to guess that if a non-union company had won that contract things would have been very different.

The bottom line is that I'm sure unions do have some benefits; however, the negative aspects of unions and how they effect businesses and the economy, far outweigh any benefits.


Sunday, November 8, 2009

Employee Free Choice Act

I have talked about various ways unions attempt to pressure others into doing what the unions want. The most recent example is the Employee Free Choice Act. Earlier this year this bill was introduced and it is still being considered by Congress. If the bill passes, it will change the current National Labor Relations Acts. Specifically, unions say it will make it easier for employees to form or join existing labor unions if that is what they choose to do and it will establish procedures for dealing with unfair labor practices during employee's attempts to organize.

Under the current system, any employee can begin the process of organizing by requesting blank cards from a union. What the union wants is to be certified by the National Labor Relations Board as the exclusive representative for the employees in that particular bargaining unit. If the employee, or group of employees, is able to get signatures on the cards from at least thirty percent of the workers, but normally closer to sixty percent of workers, the employer can request a secret ballot election be administered by the National Labor Relations Board. This is an important step because many employees are pressured into signing these blank cards. When a secret ballot is administered, each employee has the opportunity to vote how he or she really wants to vote. Only with a secret ballot can the employees be free from pressure from fellow employees or supporters of the union.

The Employee Free Choice Act actually takes away the free choice of the employees. In most circumstances, it would take away the rights of workers to have a private ballot election regarding unionizing. Considering the amount of pressure exerted on employees to vote for unions, this would give the unions an unfair advantage. The only way employees can get away from the extreme amounts of pressure is to have the final decision made by secret ballot. Taking this secrecy away gives the unions what they want.


Sunday, November 1, 2009

Unions Exert Influence Everywhere

For the last few weeks I have talked about how unions influence public improvement projects through prevailing wage laws and litigation in Ohio stemming from alleged violations of these laws. I mentioned before that not all public improvement projects require payment of prevailing wages. Public schools and hospitals are exempt. But once again, unions are not satisfied with that. Unions have put pressure on the Cincinnati Public School Board to change their policy regarding awarding contracts for their public improvement projects to require contractors to pay prevailing wages on all projects. The board did not unanimously agree that these changes were the right thing to do. In fact, the board did not have a super majority in favor of this change, which was required by their by-laws to change a policy.

Originally, the board voted but did not have the super majority vote; therefore, the board's attorney claimed the vote had failed. The supporters of the change, both unions and those on the board, found another way to get what they wanted. While one member, who happened to be an opponent of the policy change, was out of the country the board voted again - claiming they did not need the super majority vote after all. They claimed that vote was only required to pass emergency measures and this vote did not qualify. So they claim the vote passed, and now any contractor bidding on construction projects for Cincinnati Public Schools must pay prevailing wages (union wages) and abide by all of the aspects of Ohio's prevailing wage laws.

An official from the construction company overseeing Cincinnati School's construction work is quoted in a recent news article as saying these new requirements "could add up to $20 million to the $1.07 billion dollar project." Of course the unions claim this figure is incorrect and there would be no added cost. Now how can that be? Union wages are inflated well above market wage rates. If you pay union wages, which contractors working for Cincinnati Public Schools will now have to do, there will be an increased cost for the project as a whole. How can you pay higher wages but not see an increase in the cost of the project? How can the members of the Cincinnati School Board justify this increase in cost? In a time when schools don't have enough money and we are continuously hearing about schools closing, jobs being cut and school boards unable to balance their budgets, how can this school board approve a policy which will cost significantly more money?

It is interesting that all of this comes right before elections for the Cincinnati School Board are about to take place. Of course this has become an issue among candidates. It will be interesting to see what effect this has on votes. I can only hope that taxpayers have an opportunity to hear about this issue and truly understand what it means. One candidate in the race for Cincinnati's School Board was quoted as saying this new policy "is a sellout of the students, parents and taxpayers of the district in exchange for union campaign contributions and endorsements." This is not a surprise. Unions typically use political pressure to get what they want.


Sunday, October 25, 2009

More on Prevailing Wage

Last week I talked about prevailing wage - what it is and why unions support it. This is an important issue that is in the news quite a bit lately so I think it deserves a little more time. As I said before, unions push hard for prevailing wage to be required as often as possible. If a contract requires prevailing wage, unions have a much better chance of winning the contract because the non-union merit shops are forced to pay union wages. Unions say that prevailing wage laws are necessary to level the playing field because union shops always have to pay union rates but non-union shops do not. They say that in order to be competitive, requirements to pay prevailing wages are necessary. So, ok we have prevailing wage laws. But that isn't enough. Too many non-union companies were still coming in with lower bids and winning large construction contracts. So the unions hired attorneys to start suing non-union shops for alleged violations of the prevailing wage laws.

One thing you have to understand about Ohio's Prevailing Wage laws is that the law itself it very detailed and complicated. It is almost impossible for any company, union or non-union, to work a prevailing wage job and complete all of the necessary paperwork without any mistakes or violations. The mistakes can be in actual pay rates or they can be simply paperwork errors. In addition, the law says that if there are errors in what a company pays an employee, the company must not only pay the back pay, but also must pay a fine to both the employee and the State of Ohio. Well I guess that seems fair. If a company doesn't pay the correct wages they should have to correct it. So here is the problem - the law allows an "interested party" to file a complaint with the State of Ohio's Department of Commerce, who oversees prevailing wage, whenever they have reason to believe a company is violating the law. The Department of Commerce begins an investigation but if the investigation is not complete within 60 days, the interested party can file a lawsuit on the 61st day. Maybe the most devastating part of this is that the law also says that the losing party in that lawsuit is responsible for all attorney's fees for both sides.

The unions began suing and in many cases violations of only hundreds of dollars would end up costing the non-union defendants tens of thousands of dollars, mostly in attorney's fees. This was a serious issue for many of these smaller non-union companies. Unions were getting what they wanted - either forcing non-union companies to stop bidding on prevailing wage jobs or put the companies out of business all together. Last year a representative of non-union construction firms, Associated Builders and Contractors, Inc. Ohio Valley Chapter, began fighting back by filing lawsuits against union companies for the same violations of prevailing wage laws. A recent article in a Cincinnati newspaper discusses some of these lawsuits, 69 filed in Butler county and 19 filed in Hamilton county.

The unfortunate part of what the article calls "an escalating battle between construction unions and nonunion contractors" is the defendants are all individual companies in Ohio. Are these companies really the problem? No, they're not. However, this may be the only way to truly make a difference. Associated Builders and Contractor's goal is to get the law changed. Unfortunately, all previous attempts to get the legislature to make those changes have failed. Once again, union influence has prevented these changes. The hope now is that by fighting back it can gain the cooperation of the unions in lobbying the state legislature to make the needed revisions to the prevailing wage laws. At minimum they want to change the part of the law that requires the loser to pay all legal costs.

Sources: 3

Sunday, October 18, 2009

Unions and Prevailing Wage

Last week I talked about how unions effect the auto industry and how that influence effects all consumers. The auto industry is not the only place unions have exerted influence over wages. Many years ago, unions lobbied for the passage of prevailing wage laws in many states. Union firms were losing jobs to smaller minority companies who underbid the larger, union companies. The union companies could have lowered their costs but instead lobbied for the passage of prevailing wage laws. Ohio first enacted a prevailing wage law in 1931. These laws effect how public entities must choose who will complete construction projects paid for by the entity and how workers on that project will be paid.

A public entity is any state, city or local government, including state colleges and universities. If one of these entities undertakes any type of construction project, which exceeds a minimum monetary threshold, it must follow certain procedures for contracting that work. There are certain exemptions, such as public schools (K-12) and hospitals. First, the public entity must publicly advertise that they are accepting bids for the project. There is a specific date by which all bids must be received and then the sealed bids are opened and read publicly. The job is then normally awarded to the lowest or best bid. Because smaller, non-union companies are able to under bid union companies most of the time, non-union companies would be at an advantage in this bid process. Therefore, unions want prevailing wage laws which require all companies who are awarded jobs by public entities to pay at prevailing wage. Prevailing wages are based on the union pay rates in that area. The end result is that non-union companies must pay their workers the same, higher rates of pay as the unions.

Sounds great, right? Well that is what proponents of the prevailing wage laws would say. Their argument is that governments are the largest purchasers of construction work and if there is not a minimum wage required for these jobs the average wages of workers in that local market would be artificially lowered. Some would say this is just protection for workers and anything that pays workers better must be good. Also, supporters say that these laws result in better quality work. This is an interesting conclusion since the majority of private construction contracts are awarded to non-union companies. If their work was not as good as union companies it is unlikely this would be the case. Supporters also say that prevailing wage laws lead to long term cost savings. Considering that these laws actually force higher wages it is logical to conclude that it actually leads to higher construction costs. Once again the unions have exerted their influence to force a system which interferes with a free market and causes inflated costs. All of this is paid for by you, the taxpayers.


Sunday, October 11, 2009

How Unions Impact the Economy, Jobs and Wages

Unions say they benefit the workers. This may be true - they may help workers to obtain higher wages. Unfortunately unions' goals are essentially to redistribute the wealth between all of the workers. That means taking away from the more productive workers to give to the less productive workers. Great for the less competent, less desirable members of the workforce but not so great for those workers who work harder and do a better job. Unions take away the individual rewards for accomplishments. How would you feel if you went to work every day and put 110% effort into doing your job well and you were paid exactly the same as the person who gave 50% effort most of the time? How would you feel if all your hard work essentially meant nothing?

For all the good unions may do for workers as a group as far as wages, they actually harm the overall economy. Most economists compare unions to cartels because both work in a similar way. It's all about supply and demand. Unions restrict the number of workers available and force higher wages. This makes the unionized company less profitable which in turn lessens the number of jobs available. Unionized companies are also less competitive due to the higher cost of doing business. In fact, over the past thirty years or so most of the manufacturing jobs lost in the United States were at union companies. Non union manufacturing jobs have actually risen.

So who pays for the higher wages paid to union workers? You do! The higher wages reduce the profits of the union companies. Reduced profits lead to less demand for workers because the company has to cut costs. The company can also absorb the increased costs by passing the cost on to the buyer. So we pay more for the same product. A good example of how this works is the auto industry. The United Auto Workers Union (UAW) has forced the combined wages and benefits of union autoworkers to over $70 per hour. That doesn't include the cost of benefits for retired workers. The automakers are forced to deal with these union demands because if they do not pay what the union demands, the workers will strike. Of course all of this means we, as consumers, pay more for our cars. Higher prices to purchase a car leads to lower car sales - less demand - which in turn leads to job loss for the auto workers.

It is a vicious cycle which could be changed by allowing for normal business competition. Unions oppose trade and competition. Even in normal economic conditions unions have negative effects. The negative effects are compounded during times of economic recession and unions delay economic recovery during times of recession.


Saturday, October 3, 2009

Disadvantages of Labor Unions

Last time I talked about the advantages of labor unions. There are also disadvantages to labor unions, both to the employees and the employers. First, employees lose their individual voices. Employees give up their right to negotiate for themselves or to have their individual concerns and benefits recognized. Being part of a union means allowing the elected union leadership to negotiate for the group as a whole. Decisions for the group are made based on what is best for the majority, not necessarily by what is best for any individual employees. Majority rules. An example of when this may be a significant disadvantage to individual employees is when the majority votes to strike. A strike is never guaranteed to end positively for the employees. It can last an extended amount of time and the union may never get what they wanted from the employer. Also, employers are permitted by law to take the necessary steps to continue their business during the strike. Replacement employees can be hired and once the strike is over the union employees' jobs may not be available. A strike always has the potential to be financially devastating to the individual employees, even if that employee was not in favor of the strike.

Strikes are not the only financial disadvantage of trade unions. Unions cost employees money in several ways. All union employees pay dues to the unit in order to help financially support that union. In addition, unions can fine employees for conduct or activities the union views as detrimental to the union or it's membership. Examples of when an employee may be fined are crossing the picket line during a strike and exceeding productivity quotas. Unions view higher than average productivity as harmful to the other members of the union; therefore, the union establishes maximum production levels that union members must stay under.

Employees are not the only ones effected by unions. There are many disadvantages to the employer involved with a union also. The production quotas that union employees must maintain can have a negative effect on employers. There is no incentive for employees to work harder to gain promotions or pay increases. There is no such thing as individual recognition. All employees are viewed the same and treated the same. In fact, employers are limited by the union in their ability to discipline or terminate an employee. A combination of no incentives and potential union fines mean the employer can suffer from reduced productivity. Reduced productivity can mean the employer is less competitive which can lead to job losses. In addition, unions typically demand much higher pay rates, sometimes increasing at a rate higher than inflation. Reduced productivity, loss of ability to be competitive and higher pay rates can lead to layoffs or even cause the company to go out of business.