In the old days in America, there were mean company bosses who forced people to work overtime. People were not given paid sick leave, and were not given medical insurance. Workers had to work in dangerous and unpleasant conditions. Sounds like today’s China, but with a different accent.
The solution to this problem was the creation of unions. Unions hit their peak membership in 1954 with almost 35% of the labor force as members. Many felt this was “good” for American labor as it got people “fair” wages. I feel otherwise. I feel that unions helped particular groups of workers get higher than market value wages. They were able to do this by virtually holding expensive and immobile (not movable) infrastructure hostage. It would be too expensive to relocate, so companies were forced to negotiate with very angry, destructive and unreasonable unions. Throughout history, many union workers provoked many arguments and disputes with management, often when it was not useful or practical to do so. The Japanese philosophy of work is for management and labor to be in harmony. Americans wanted no such part of this harmony. So, what is the result of an unwillingness to develop harmony and balance?
The unions in America were strongest in the Northeast, Midwest and California. The Northeast lost a lot of manufacturing, but retained its economy by excelling in other sectors such as hi-tech. California also did well in hi-tech, but also in agriculture, movie business, and much more. But, the Midwest was not able to recover from a huge blow to its manufacturing sector. The fact was that the inflated union wages were just far more than what companies would have to pay down South or in foreign countries. So, many manufacturers with union contracts just packed up and left which meant a huge expense of creating new factories in new places.
Additionally, it seems that unions never really had the interests of workers as a whole at heart, but only some workers. Puerto Ricans and blacks were often left out of unions. Younger workers were not always given immediate membership in unions either. Since there were limited unionized jobs at above market rates, there were more people who wanted to be part of unions than there were jobs.
As with life, power seems to come and go, especially to those who abuse it. The workers in the Midwest abused their power by asking for more than a market wage. They were enjoying a lavish lifestyle while other workers doing similar work in America and overseas were working for peanuts. The result of this abuse of the power they created is evident if you drive through the Midwest and see all of the abandoned buildings.
On a brighter note, due to technological advances, and lower labor costs due to increased immigration, America can now once again compete with China for manufacturing. China’s increasing land and labor costs also make it easier for us to compete.
The bottom line is that unions never helped the American worker, but temporarily helped a few who had mafia type control of overpriced jobs. For the rest of the workers, their lives were horrible. I will say that our government did somewhat of a good job creating labor standards that protected workers from dangerous or abusive situations. On the other hand, the government made it so hard on businesses by forcing them to provide health insurance and other benefits that many companies are forced to go overseas where laws are more relaxed. The old story is told again, that when you push too hard, there is a devastating reaction. And that reaction is called outsourcing. But, it’s a blessing if you live in a country called India. So, look at it from the other side of the coin.
I think the point of this article besides how great outsourcing is (if you are in Asia) is that when you push markets out of balance by force, they will bounce back one way or another. And when that bouncing happens, it can be a disaster leaving bombed out buildings that used to be plants, millions unemployed, and worse! Until next time!