9/25/2008

The cost of unions: when unions try to hold Boeings

Amber Gunn and Sonya Jones have a new piece on the costs of unions. The problem is that unions use their ability to shutdown a firm to extract higher compensation. The cost of that higher compensation is fewer jobs. Raise the wages, fewer people will be employed. Unions also have a much shorter time horizon than firms. Unions don't own the company and their workers only care about the company as long as they will be working there. Making firms pay more for workers than they are worth reduces the amount that firms are willing to invest. Boeing is in a tight battle with Airbus. We will see how much damage the current strike does to the company.

In these economically precarious times, it is difficult to imagine anyone getting a 13 percent raise, but that is exactly what Boeing machinists are demanding—and then some.

Tom Wroblewski, president of local District 751 of the International Association of Machinists and Aerospace Workers, asserted that Boeing will pay a price for not offering the union an acceptable contract and averting a strike. “Once you go out on strike, the price goes up,” he said. So much for negotiating.

“These members are not going to go out on strike and come back for the same thing that was on the table. The industry rate has been 9 to 13 percent. And we have always been the leaders in the industry,” said Wroblewski.

But that’s not all the machinists want. In addition to a pay increase, union members want better pensions and healthcare, and job security. The union wants to dictate to Boeing how many employees it will have and prohibit the company from subcontracting out work that could be done by its members, even if that is not in the best interest of Boeing. . . .

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2 Comments:

Anonymous Brent Crude said...

Anyone fancy flying in a jet that is "Made in China"?

9/26/2008 9:21 AM  
Anonymous cbar10@hotmail.com said...

"The cost of that higher compensation is fewer jobs."

Or smaller (meaning not scandalously huge) bonuses for management.

9/26/2008 12:02 PM  

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